Former Iraqi Pilots Allegedly Training ISIS Fighters to Fly Captured Syrian Planes
The immense Islamic radical fighting force that “came out of nowhere” already has everything from tanks, anti-aircraft weapons, heavy artillery, and so forth. Ultimately they have all these weapons were provided to them courtesy of US tax payers, who paid for the equipment that was originally given to Iraq’s army only to be later captured by ISIS with astonishing ease.
The only military plaything ISIS hasn’t had at its disposal so far is an air force. However, even that may be about to change according to recent press reports:
“Islamic State group jihadists are being trained by Saddam Hussein’s former pilots to fly three fighter jets captured from the Syrian military, a monitoring group said Friday.
The planes, which are believed to be MiG-21 and MiG-23 jets, are capable of flying although it is unclear if they are equipped with missiles, according to the Syrian Observatory for Human Rights.
The jets were seized from Syrian military airports now under IS control in the northern provinces of Aleppo and Raqa, according to the Britain-based group, which has a wide network of sources inside the war-torn country.
It said that former Iraqi army officers who once served under Saddam were supervising the training at the military airport of Jarrah, east of the city of Aleppo. Witnesses have reported seeing planes flying at a low altitude to avoid detection by radar after taking off from Jarrah.
It comes as the United States and its allies carry out a wave of air strikes on IS positions in Syria and Iraq. The jihadists also control two other airports in Syria — Albu Kamal near the Iraqi border and Tabqa in Raqa province.
More Back-Pedaling – This Time by a “Hawk”
We already pointed out on Tuesday and again on Wednesday that numerous signs of back-pedaling by Fed officials recently emerged – no doubt in reaction to the sudden wobble in “risk” assets (what else could have been the motivation?). On Wednesday we asked rhetorically whether San Francisco Fed president John Williams was actually serious.
Enter St. Louis Fed president James Bullard on Thursday, who only a few weeks ago was talking about wanting to alter the FOMC statement toward indicating a more hawkish tone. Nothing but a less than 10% dip in the spoos to completely change a monetary bureaucrat’s views these days. According to the FT:
“From the transcript of St Louis Fed president James Bullard’s interview with Bloomberg Television:
“I also think that inflation expectations are dropping in the U.S. And that is something that a central bank cannot abide. We have to make sure that inflation and inflation expectations remain near our target. And for that reason I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data dependent. And we could go on pause on the taper at this juncture and wait until we see how the data shakes out into December. So… continue with QE at a very low level as we have it right now. And then assess our options going forward. …
My forecast is for rising inflation. That’s why I’m concerned about declining inflation expectations, the five-year TIPS in particular has declined below one and a half percent. The five-year forward is down from its previous levels. And the central bank has to guard against any expectations in the market that would suggest that the central bank is not going to hit its inflation target. So you have to be credible on your inflation target. So a simple – what I’m saying is that a simple step that we may be able to take or maybe the committee might consider at its October meeting would be to just take a pause on the taper, let more data accumulate and see how the U.S. is going to evolve over the rest of the year and into next year. …
I think you should quit numbering the QEs. I’ve been an advocate of having an open-ended program. I do think QE is our most powerful tool when the policy rate is at zero. And I think it’s far more powerful than forward guidance for instance. And I think we saw that during the taper tantrum of 2013. And therefore I think I’ve been for having an open-ended program that reacts to economic data. And so far we’ve been able to taper the program down on the face of really dramatically improving labor markets this year, but maybe this is a juncture where we’d want to invoke that clause about it being data dependent.”
The remarks follow the comments earlier this week by John Williams of the San Francisco Fed, who signaled his willingness to consider a new round of asset purchases if “a sustained, disinflationary forecast” emerges.”
The Dow ended the session down 173 points On Thursday, after falling more than 300 points during the day.
Press reports told us that investors were worried about weak US consumer sales and falling producer prices. Combined with falling crude oil prices, these make it look as though a European-style slump is coming to the whole world. But what did you expect?
It is autumn. The days dwindle down … life closes in on you. It comes as a shock. Like when you turn 60 and you suddenly realize that you are … alas … mortal.
You will not make an infinite amount of money in your lifetime; in fact, you’ve already made most of what you’re likely to make. You will not drink an infinite number of martinis… or have an infinite number of friends… or hear an infinite number of concerts.
Au contraire, the numbers in your life are limited… and probably already undergoing some shrinkage. Your height. Your savings. The years left to you … the number of times you’ll get sick or fall down drunk.
They’re all getting smaller. Then you have to think more carefully about what you’re going to do with the numbers you’ve got left.
(Photo credit: fmh)
Dear Investors, the Time to Leave your Brains at the Door has Come …
This is really too funny. The latest investment fad – which strikes us as a typical “late bubble” idea, we might add – is letting machines do your “investing” for you. And statistically speaking, it actually seems to be a good idea. Of course, it presumably only works as long as no grueling long term bear market intervenes, such as has happened in Japan. Or even worse, something like the 68 year long bear market in Europe following the peak of the South Seas and Mississippi bubbles in Britain and France.
“Investment advisers concerned about competition from cut-rate digital investment firms known as “robo-advisers” received an olive branch on Wednesday from Betterment LLC, one of the largest of the new competitors.
The New York-based firm, which uses questionnaires and algorithms to create portfolios of inexpensive exchange-traded funds for individual investors, said it is now offering the program to advisers who tout financial planning and investment skills to generally wealthy individuals.
Fidelity Investments, which provides brokerage services to clients of 3,000 independent advisers and has custody of their assets, is referring Registered Investment Advisers (RIAs) who want to test digital investing to Betterment. The mutual fund giant will receive a one-time asset-based fee for RIA clients or prospects referred to Betterment.
Advisers who have tested the program said it will allow them to accept younger, less wealthy people who they had previously ignored and perhaps appeal to traditional clients. Betterment says that it produces returns 4.30 percent higher than those achieved by the average do-it-yourself investor.”
The Bad News First – Greece is Crashing Again
We only recently reported on the ludicrous idea of Greek prime minister Antonis Samaras to pretend that the Greek government is suddenly not bankrupt anymore (see: “Greece Tries to Escape Bail-Out” for details). Note that non-performing bank loans in Greece stand at an estimated €90 billion, so it should also be kept in mind that the banking system remains de facto insolvent as well – in spite of having been bailed out once already.
It is probably getting more so in recent days – Greek stocks and bonds have essentially crashed, with government bond yields back at levels that normally indicate severe crisis conditions (in other words, they are way above the level that would allow for what is generally considered “sustainable” refinancing of the government’s debt). The Greek stock market meanwhile is very close to getting cut in half once again:
A Rebound Attempt
Here is a brief update on the action in the stock and bond markets. In Wednesday’s trading, the stock market initially declined sharply and the action was accompanied by a frenzy of short-covering in treasury notes across the maturity curve (see Tuesday’s comment on the outsized speculative net short position in 10 year notes. Similarly large speculative short positions are also extant in shorter maturities).
The “trigger events” were many – an overnight plunge in crude oil prices cemented the idea that a global economic slowdown is underway (which seems indeed to be the case) and this idea received further ammunition when a few US economic data were released. Producer prices fell and the Empire State manufacturing survey plunged by 21 points, way below expectations. Significantly, new orders declined sharply (for more details on the survey see Mish’s write-up).
Of course, we don’t believe that the stock market is weakening because punters have suddenly found out that there is economic weakness. As so often, the fundamental news follow the market and don’t lead it – what’s more, the very same news would likely have been ignored only a few weeks earlier, or even have been met with bullish spin. The real reason for stock market’s weakness is the declining growth momentum of the money supply and the impending end of “QE3”. This has already created a great many negative effects in “risk assets”, which were merely masked by the previous strength in popular cap-weighted indexes. Readers may also want to check the comments by Variant Perceptions on the recent decline in stock buybacks and the market’s reliance on multiple expansion. Both seem relevant data points, which we have previously discussed here as well.
It’s Actually a Good Idea …
Russian government spokesmen were slightly perplexed when Australia’s prime minister Tony Abbot announced that he intended to “shirt-front” Russia’s president Putin on occasion of an upcoming G 20 meeting in Brisbane. Abbott is a former amateur boxer, who actually once knocked out his treasurer, but he may not be aware that Putin has a black belt in Judo:
“Prime Minister Tony Abbott intends to have a one-on-one meeting with Putin on the sidelines of a summit of the world’s 20 biggest economies in Brisbane next month to demand Russian cooperation with a Dutch-led investigation into the shooting down of a Malaysia airliner in Ukraine by Russian-backed separatists with the loss of 298 lives in July.
Abbott told reporters on Monday he was “going to shirtfront Mr. Putin,” using an Australian Rules Football term for a head-on shoulder charge to an opponent’s chest aimed at knocking the opponent backward to the ground.
Abbott is an athletic 56-year-old former amateur boxer who famously punched his Treasurer Joe Hockey unconscious when they were both Sydney University students decades ago. Putin is a 62-year-old former KGB officer and judo black belt.
Alexander Odoevski, third secretary of the Russian Embassy in Canberra, described Abbott’s threat as unhelpful.
“We consider the recent statements tough talk; we consider it immature,” Odoevski told Australian Associated Press.
“Hopefully there’s no fight. Well, definitely we admire the Australian prime minister. He’s very fit, but the Russian president, he’s a professional judo wrestler,” Odoevski told Ten Network television.
Liquidity Dries Up
The Dow Transports managed a bounce on Tuesday. The Dow Industrials just couldn’t get in the mood. They ended the day with a small decline. From financial commentator Wolf Richter:
“80% of the stocks in the Russell 3000 [a good proxy for the entire US stock market] are 10% or more below their highs, according to Bloomberg. Many of them have gotten demolished. Some have gone bankrupt as the appetite for high-risk debt at these low yields is drying up.”
Whether this is the beginning of a major correction or not, we don’t know. We haven’t gotten the email.
But with the Fed ending QE this month, it seems likely that something will give. Zero interest rates and QE bailed out the financial sector, stabilized housing and helped send the S&P 500 up 130% from its March 2009 low. What will the end of QE do? We don’t know, but we’re eager to find out.
Japan and Europe are pumping out trillions of yen and euro in new credit. In the US, Janet Yellen hopes and prays this will be enough to hold off trouble worldwide. Without substantial global liquidity, the US stock market is likely to keep going down.
Does it Qualify as a “Black Swan”?
A friend recently asked us whether the massive Ebola outbreak in West Africa could be regarded as a “black swan” in the sense of Nassim Taleb’s definition of the term. After thinking it over, we concluded that yes, it can definitely be characterized as one. Evidently, something is very different about this year’s outbreak compared to previous ones, and a number of unexpected developments have occurred. Chief among them is that a hitherto firmly held belief had to be abandoned. It was thought that the very thing that that makes the illness rather terrifying, namely its high mortality rate, helped in containing outbreaks.
We can definitely state that the current outbreak is anything but “well contained”. Below is a statistical table that shows all Ebola outbreaks since the discovery of the disease in 1976. Note that this graphic is already dated by now – the 2014 event has literally “gone off the chart” in the meantime. Even so, this graphic gives a good impression of how small the previous incidences of Ebola outbreaks were by comparison.
From a statistical viewpoint, the 2014 outbreak definitely must be regarded as a “black swan” – it was hitherto held to be impossible for the illness to propagate in such fashion (source: news.au.com)
You Can’t Be Serious …
Yesterday we came across this brief note on Marketwatch about an interview San Francisco Fed president John Williams gave to Reuters. We already pointed out in our market update on Monday that a whiff of back-pedaling by Fed officials was in the air, but it is getting utterly ridiculous now:
“San Francisco Fed President John Williams said that more bond buying could be needed if the economy faltered, according to a report. “If we really get a sustained, disinflationary forecast … then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider,” Williams told Reuters.
Williams said he’s “worried” the European Central Bank response will be as timely and aggressive as needed. Williams told the publication he still expects the first rate hike in the middle of 2015. The Fed is expected to announce it will stop bond purchases at its October meetings.”
Say what? The ECB “won’t be as aggressive as needed”? A planned € 1 trillion ECB balance sheet expansion is not enough? We would also like to know – needed for what?
In the make-believe world of these ivory tower bureaucrats the economy can be “improved” by printing money, but in the real world it is actually severely undermined. If an economy is seen to be recovering in tandem with money printing, it is doing so in spite, and not because of it. In fact, chances are that the observed “recovery” is naught but an inflationary illusion anyway.
San Francisco Fed president John Williams
(Photo credit: Tony Avelar | Bloomberg | Getty Images)
The Market’s Knockout Punch Is Still to Come
The Fed’s EZ money policies will either succeed or fail. Either way, it will be a disaster. If they succeed, interest rates will rise … and America’s debt-addicted economy will get the shakes.
If they fail, the Fed will double down with further acts of reckless improvisation – including bigger doses of credit – until the whole thing blows up.
But let’s give credit where it is due. The recent employment numbers speak a kind of success. In spite of the Fed’s policies, the US economy is not only still alive … but also it’s getting back on its feet.
If this is so, it is good news for the people who have finally found meaningful employment. As for the future of the US economy, it is a disaster.
SPX Slices Through 200-dma
On Monday, the stock market tried to put together a rally all day long – then it fell completely apart in the final hour of trading. In the process, the S&P 500 index sliced through its 200 day moving average for the first time since late 2012 – without even making a pit stop. The intra-day action can be seen below:
New England is stunning this time of year. Just what you’d expect. The leaves turn brown, yellow and red, putting on their best outfits and strutting their stuff in the cool autumn air.
Autumn, especially in New England, is the loveliest time of the year. The sun barely clears the tops of the trees, even at noon. The light, filtered through the colored leaves, gives the earth the rich and heavy air of a funeral parlor.
Perhaps that is why there are market crashes in the fall. Investors feel the approach of death. The stock market fell hard on Thursday … and then kept falling on Friday. Before the week was over, investors were worried.
Articles that might be of interest for you:
- More on Gold Sentiment
- Climate “Deniers” Must Be Jailed or Killed
- Perception vs. Reality at the Fed
- Weidmann's Unheil: The Euro Zone Crisis Isn't Over
- Global Climate Hysteria
- Is the Stock Market Finally Ready to Fall?
- The Wrong Idea About Inflation
- What CNBC Isn’t Telling You About the End of QE
- A Monetary Cancer Metastasizes in Europe
- Larry Summers Discovers the Free Lunch