Friday, February 24, 2017

Today's Links

War-- “A violent struggle between hostile, independent, irreconcilable wills characterized by chaos, friction, and uncertainty." Clausewitz

1---This Rally in Stocks is Doomed: Goldman

Goldman shares have surged 58% since early October when it became clear to the markets that Trump had a chance. Some of its former executives are now dutifully holding down key positions in the Trump administration. Markets are expecting that all manner of goodies will rain down upon Goldman and the broader Wall Street community.

But Goldman’s analysts are worried about this market enthusiasm because those goodies may not show up, or show up late and in watered-down form once Congress gets through with them, if it gets through with them at all. And for any disappointment, there will be a price to pay...

But quick and substantive corporate tax reform is what the markets are counting on when they pushed the S&P index up 10% since the election. Now the efforts to deal with Obamacare may push corporate tax reform on the back burner

2--Trade growth slows to lowest level since global financial crisis; Relentless looting, fraud and manipulation lead to global slowdown

The World Bank report on trade followed the publication of its annual Global Economic Prospects report published last month.
That report painted a somewhat dismal picture of the world economy.

“Stalling global trade, weak investment and heightened political uncertainty have depressed world economic activity,” the report stated. Global growth was estimated to have fallen to 2.3 percent in 2016, the weakest performance since the global financial crisis and 0.1 percentage point below the forecast by the World Bank made in June 2016.

“Advanced economies continue to struggle with subdued growth and low inflation in a context of increasing uncertainty about policy direction, tepid investment, and sluggish productivity growth. Activity decelerated in the United States and, to a lesser degree in some other major economies.”
Advanced-economy growth was estimated to have slowed to 1.6 percent in 2016 with a small pick-up to a level of 1.8 percent expected in 2017.

The situation is no better in emerging market economies. While growth in these economies was expected to rise over 2017 and 2018, and could account for 60 percent of global growth in the coming year, the long-term outlook for these economies was “clouded by a number of factors.”

These include uncertainty about global trade prospects, advanced-economy economic policies, a weakening of potential output flowing from subdued investment and sluggish productivity growth.
The report noted that since 2010 investment growth in emerging market economies had slowed sharply. While the deceleration had been most pronounced in the largest of these markets and commodity-exporting countries, it had now spread to the rest with the result that investment growth was below its long-term average over the past quarter century, except during serious global downturns.

These economies, it pointed out, account for than more one third of global GDP and three-quarters of the world’s population and the world’s poor.

3--Robert Shiller: With stock valuations high, it’s time to reduce your holdings

4--Killer, kleptocrat, genius, spy: the many myths of Vladimir Putin

Vladimir Putin, you may have noticed, is everywhere. He has soldiers in Ukraine and Syria, troublemakers in the Baltics and Finland, and a hand in elections from the Czech Republic to France to the United States. And he is in the media. Not a day goes by without a big new article on “Putin’s Revenge”, “The Secret Source of Putin’s Evil”, or “10 Reasons Why Vladimir Putin Is a Terrible Human Being”....

Putin-as-evil-genius is, unquestionably, the primary theoretical view in the west of the Russian president, whether by his multitude of critics or his smattering of admirers. Those who take a more jaundiced view of Putin’s political, intellectual, and military capabilities – President Barack Obama, for one – are treated as naive, soft on Putin: the sort of people who play checkers, not chess. Meanwhile, most Russian observers of Putin tend to be surprised at the western awe of his overwhelming strategic prowess...

The first sight many Russians got of Vladimir Putin was on New Year’s Eve, 1999, when in a remarkable turn of events, a clearly ailing Boris Yeltsin, with six months left in his term, used his traditional televised end-of-year address to announce that he was resigning the presidency and handing the reins to his recently appointed, younger and more energetic prime minister

5--The absolute dominance of the U.S. economy, in one chart

6--The myth of Tal Afar  2007--  H.R. McMaster: The Warrior's-Eye View of Afghanistan--

The two-star general wrote the book on Vietnam and showed the way for the surge in Iraq. Now he's back from 20 months in Afghanistan—and says the war can be won (archive 2012--Afghanistan is still a mess)

See also--2006

Gen. McMaster really earned his renown applying the tenets of counterinsurgency strategy, or COIN, during the war in Iraq. As a colonel in 2005, he took responsibility for a place called Tal Afar. In that city of 200,000 people, the insurgents' "savagery reached such a level that they stuffed the corpses of children with explosives and tossed them into the streets in order to kill grieving parents attempting to retrieve the bodies of their young," wrote Tal Afar's mayor in 2006. "This was the situation of our city until God prepared and delivered unto them the courageous soldiers of the 3d Armored Cavalry Regiment."

Gen. McMaster's troops fought in Tal Afar with the understanding that victory would not be achieved by using maximum violence to hunt and kill insurgents. Instead, the key tasks were to secure and improve life for the local population, establish reliable local government, and project determination and staying power.

Before long, President George W. Bush was citing Tal Afar as a model. It helped inspire the strategy shift that turned around the Iraq War under David Petraeus, Gen. McMaster's mentor and a fellow West Point graduate with a Ph.D. and a penchant for quoting theorists like Carl von Clausewitz (1780-1831), the Prussian officer who famously defined war as the continuation of politics by other means....

"What do the Taliban have to offer the Afghan people?" he asks. They are "a criminal organization, criminal because they engage in mass murder of innocent people, and criminal because they're also the largest narcotics-trafficking organization in the world. Are these virtuous religious people? No, these are murderous, nihilistic, irreligious people who we're fighting—we along with Afghans who are determined to not allow them to return."

Taliban groups, he adds, are increasingly seen by Afghans "as a tool of hostile foreign intelligence agencies. These are people who live in comfort in Pakistan and send their children to private schools while they destroy schools in Afghanistan." He notes, too, that indigenous Afghan fighters are wondering where their leadership is: "One of the maxims of military leadership is that you share the hardships of your troops, you lead from the front. Well they're leading from comfortable villas in Pakistan. So there's growing resentment, and this could be an opportunity to convince key communities inside of Afghanistan into joining the political process."

As a tool for this, Gen. McMaster praises the U.S. military's "village stability operations," which send small teams of Special Forces to live among Afghans in remote villages vulnerable to Taliban intimidation.

7--New Poll: Americans Crystal Clear: Foreign Policy Status Quo Not Working

Americans Still Believe Recent U.S. Foreign Policy Has Made Them Less Safe:
  • When asked if U.S. foreign policy over the last 15 years had made Americans more or less safe, a majority (51%) said less safe. Just 11% said more safe, while 27% said U.S. foreign policy had not affected their level of safety.

8--CIA-backed aid for Syrian rebels frozen after Islamist attack

9--Federal Reserves Eyes Aggressive Rate Increases-- Minutes suggest the Fed could consider raising its benchmark rate as soon as its next policy meeting in March

Fed Chairwoman Janet Yellen suggested the bank might raise rates as soon as March when she told Congress last week that an increase might come “at our upcoming meetings...

For now, markets still see a March increase as unlikely. Investors pegged the probability of a move next month at around 22% Wednesday afternoon, up from about 18% on Tuesday, according to CME Group data.....

President Donald Trump’s plans for tax cuts, new spending and deregulation have buoyed market hopes of faster economic growth and higher corporate profits. But Fed officials at the meeting underscored their uncertainty about the details and effects of the potential policy changes, according to the minutes.

If the White House’s fiscal policies send inflation surging and unemployment falling too low, officials might have to raise rates more than expected to prevent the economy from overheating, central-bank officials noted. On the other hand, a strengthening dollar could push inflation down and lead officials to raise rates less than anticipated, the minutes said.
Fed policy makers in December raised their benchmark federal-funds rate to a range of between 0.5% and 0.75% and penciled in three quarter-percentage-point increases this year. At their recent meeting, they left rates unchanged and saw little reason to change their plans for the year ahead....

The Fed’s growing readiness to raise rates partly reflects a firming economy, particularly in the weeks since the February statement. The latest jobs report, released Feb. 3, showed employers added 227,000 jobs last month while the labor-force participation rate—the share of adults holding or seeking jobs—ticked up to 62.9%. A measure of annual inflation also moved up to 2.5% in January, the largest increase since March 2012. A separate inflation measure that is preferred by the Fed has also been moving up but remains at 1.6%, still below the 2% target.

The minutes also showed Fed officials expect to start talking “at upcoming meetings” about when and how to begin shrinking the central bank’s large asset portfolio—a process that would likely push long-term rates higher.
The Fed boosted its portfolio, or balance sheet, since the crisis through three rounds of asset purchases aimed at bolstering the economy by lowering long-term rates. The central bank maintains the portfolio’s size—now at $4.5 trillion—by reinvesting the proceeds of maturing securities. When it comes time to shrink the balance sheet, the Fed plans to scale back its reinvestments, letting the maturing assets run off.

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