Addison Wiggin – February 23, 2012
- Echoes of 2003 in the imperial debate: Hemingway’s “great fallacy of war” stalks the land again
- “This could end badly”: A borrower so broke it needs a bridge loan… but it can still line up 100-year financing at only 4.9%
- Ray Blanco on a sector poised to grow 18-fold by 2016
- Liquid assets accepted at high-end pawnbrokers… Readers react to a radio version of The 5… and more!
“The Iranian nation has never pursued and will never pursue nuclear weapons,” declared Iran’s supreme leader, Ayatollah Khamenei, yesterday.
“The Islamic Republic, logically, religiously and theoretically, considers the possession of nuclear weapons a grave sin and believes the proliferation of such weapons is senseless, destructive and dangerous.”
Heh.
“No one buys Iran’s claim that its nuclear program is for peaceful purposes,” declared CNN’s Erin Burnett last week, speaking authoritatively on behalf of the pundit class in the U.S.
Sigh. We’ve seen this movie before.
“The debate surrounding the invasion of Iraq,” we wrote in the first edition of Empire of Debt, “was an imperial debate — about means and methods, not about right and wrong or national interest.”
“No one from either major political party bothered to suggest that the United States had no business nosing around in other peoples’ business.”
“Both parties recognized that Iraq was not a matter of national interest — it was a matter of imperial interest. No sparrow falls anywhere in the world without triggering a monitoring device in the Pentagon.”
This time, at least, there’s a variation on the theme.
In 2003, you heard nary a word about whether Iraq really had weapons of mass destruction… or whether an invasion might turn out to be something other than a sprint to victory.
This time around — while you wouldn’t know it by listening to knuckleheads like Burnett — there’s considerable skepticism even among the imperial classes about whether Iran aims to produce a nuclear weapon… or whether a military attack on Iran would work out well.
“Tehran has not made a decision to proceed with developing a nuclear weapon,” said Defense Secretary Leon Panetta to Congress a week ago today, trying to stifle the first question. A National Intelligence Estimate issued by the Obama administration last year affirmed a similar report issued by the Bush administration in 2007: Iran stopped pursuit of a nuclear weapon in 2003.
Darn it.
As for the second question, “Both the American and Israeli governments,” writes Peter Beinart at The Daily Beast, “boast military and intelligence agencies charged with answering [the question of whether military attack would be wise]. With striking consistency, the people who run, or ran, those agencies are warning — loudly — against an attack.”
What’s wrong with these people?
Mr. Beinart was among a cadre of “liberal hawks” who gave the Iraq war a good name nine years ago. Now he’s turned into a wuss. Among the warnings he cites:
- Lt. Gen. Ronald Burgess, director of the Defense Intelligence Agency, told Congress last week, “the agency assesses Iran is unlikely to initiate or provoke a conflict”
- Director of National Intelligence James Clapper — who oversees 16 U.S. intelligence agencies — estimates a U.S or Israeli attack would set back Iran’s nuclear program by only a year or two
- Further, Joint Chiefs Chairman Gen. Martin Dempsey says a U.S. or Israeli attack would “guarantee that which we are trying to prevent: an Iran that will spare nothing to build a nuclear weapon.”
“I’ve never seen a more lopsided debate among the experts paid to make these judgments,” Beinart goes on. “Yet it barely matters. So far, the Iran debate has been a rout, with the Republican presidential candidates loudly declaring their openness to war and President Obama unwilling to even echo the skepticism of his own security chiefs.”
“War is no longer made by simply analysed economic forces if it ever was,” Ernest Hemingway wrote in an essay entitled “Notes on the Next War: A Serious Topical Letter,” published by Esquire in 1935.
“War is made or planned now by individual men, demagogues and dictators who play on the patriotism of their people to mislead them into a belief in the great fallacy of war when all their vaunted reforms have failed to satisfy the people they misrule.”
As such, Congress is moving quickly. A bipartisan group of senators introduced a bill last week that:
“…rejects any United States policy that would rely on efforts to contain a nuclear weapons-capable Iran; and urges the president to reaffirm the unacceptability of an Iran with nuclear weapons capability and oppose any policy that would rely on containment as an option in response to the Iranian nuclear threat.”
Leave aside the fact the bill leaves the definition of nuclear weapons “capability” murky. The point is that if Iran crosses this new red line, it compels the United States to go to war.
“Imagine,” writes M.J. Rosenberg of the Israel Policy Forum, “if President Kennedy had been told by the Congress back in 1962 that if the Soviet Union placed missiles in Cuba, he would have no choice but to attack the USSR. If it had, I wouldn’t be here writing this column today, and you wouldn’t be reading it.”
Right now, this is nonbinding legislation. But it has the support of the American Israel Public Affairs Committee. “Often, AIPAC-backed congressional initiatives start as nonbinding language (in a resolution or a letter), and then show up in binding legislation,” says Lara Friedman of Americans for Peace Now.
“Once members of Congress have already signed on to a policy in nonbinding form, it is much harder for them to oppose it when it shows up later in a bill that, if passed, will have the full force of law.”
Whatever. What’s a new war to you?
The price of oil this morning is up a few pennies, to $106.33. Under ordinary circumstances, it would have come down today, because the Energy Department says U.S. crude inventories grew more than expected last week.
The fact that it didn’t come down speaks to a “fear premium” — fueled in large part by tensions over what will happen next in the Persian Gulf. Meanwhile, oil priced in euros and pounds is setting record highs — which won’t do much to prevent a new eurozone recession.
What makes matters especially delicate this time is that Iran has its own imperial legacy to protect — one with a longer history than the U.S. one, in fact.
“Don’t forget,” reminds our own Byron King on the matter, “Iran used to be Persia. At one point, Persia was the biggest and most-powerful empire in history. Iraq, Syria, Turkey, Egypt — even Israel — the Persians controlled them all. Along with all of Afghanistan and Pakistan and most of the oil-rich coast of the Caspian.”
“For 300 years, Persian armies held off the Roman Empire. Their scholars walked with Aristotle and Plato. And influenced Greek art. It was the Persians who invented chess. And the windmill. Not to mention bricks, algebra, trigonometry and wine.”
“The bottom line is no empire forgets its past glory.” And if two of them clash, you best prepare yourself for the consequences — which Byron lays out in considerable detail here.
By way of returning to quotidian mundanities, we see U.S. stocks are whipsawing within a narrow range today.
For a third day, the Dow is playing coy with 13,000. And while 1,365 is not a round number, it’s proving an equally stubborn point of resistance for the S&P 500.
“Quite frankly,” says our resident technician, Jonas Elmerraji, “it’s no great shock that Mr. Market is failing to plow through a key resistance level this week — after all, stocks have already posted fairly impressive performance year to date in 2012.”
“We’ll need a real catalyst to push stocks above that post-crash high watermark.”
“The fear of stocks,” Jim Nelson adds from the income desk, “and the desire for higher yields are clearly coalescing — pushing the unlikeliest of investments much higher.”
“S&P, which had given the state of California a ‘negative’ outlook as recently as eight months ago, reversed its opinion last week. The state’s muni debt now comes with a ‘positive’ outlook.”
“Yesterday, California took advantage of its new rating outlook by issuing $860 million worth of ‘century bonds.’ Meaning the state won’t have to pay bondholders back until the year 2112. And the rate the state has to pay these bondholders in annual income… 4.9%.”
“That’s next to nothing.”
Meanwhile, the state also announced a deal it struck with Barclays and JPMorgan Chase for a bridge loan. The reason, according to Bloomberg: “Controller John Chiang said in January that… tax collections trailed budget projections and spending exceeded estimates.” Without the bridge loan, “the state would face a $3.3 billion cash shortfall by mid-April.”
“California can’t control its fiscal house month to month,” Jim sums up, “but it can get a low-interest 100-year loan without any problem?”
“Of course, don’t tell the average 401(k) contributor how ridiculous this situation is. According to Thomson Reuters, municipal bond funds saw their 11th week of inflows last week,” totaling more than $1 billion.
“That fresh investment capital from these ‘mom and pop’ investors is the very reason overrated states like California can get such cheap borrowing rates. How long can that last?”
“This could end badly.”
And so it goes.
[Ed note: For a few saner income-investing ideas, we suggest giving Jim’s latest presentation a look.]
Gold is adding on to yesterday’s late-day gains. At last check, it’s up to $1,784. Silver is up nearly 3%, at $35.22.
“Mobile and wireless computing will be strong for years to come,” says Ray Blanco, catching us up on an opportunity in tech, “despite weak overall economic conditions.”
No doubt, with the proliferation of smartphones and tablets. That means “the growth in mobile devices will lead to growth in mobile data traffic. Cisco recently released its yearly mobile data traffic forecast, and the upside is explosive.”
The unit represented in the chart is exabytes. For perspective, a typical movie download is two gigabytes. An exabyte is 1 billion gigabytes:
“Accommodating all of this new data traffic will require tremendous expansion in the networks that connect mobile devices,” says Ray. “This expansion will include installing networking devices that require the use of application processors.”
“Mobile networking devices that connect wirelessly,” says Ray, zeroing in even further, “such as cellular base stations, will require radio frequency circuitry to do so.” Readers of Ray’s Technology Profits Confidential are already investing in companies making this happen.
“Hundreds of thousands of cell phone sites are currently connected to carrier networks by copper communications lines,” Ray goes on, “but this technology does not provide the bandwidth necessary to accommodate the increased mobile traffic in a cost-effective manner.
“While fiber-optic technology can do so, installing new lines is an expensive proposition. Microwave links, however, provide far superior performance to copper links, while being far cheaper to install than fiber optics.”
Ray’s onto a company in that space, too. For access to Technology Profits Confidential, look here.
From the “things are tough all over” file, we see a growing number of high-end pawnbrokers are accepting fine wine as collateral.
“You’d be amazed by how many wealthy individuals have terrible credit ratings,” says Jordan Tabach-Bank from Beverly Loan Co. in Beverly Hills, Calif. “I have a lot of people who come in who have a business opportunity,” he tells Reuters, “and they need an infusion of cash for business purposes.”
Meanwhile, borro.com, a British-based pawnbroker, recently lent $120,000. The collateral? 128 bottles of Chateau d’Yquem, worth an estimated $250,000. The clients are described as those with net worth between $1 million and $10 million, “mostly small-business owners with cash flow problems.”
Meanwhile in Paris, Credit Municipal de Paris has been accepting wine in exchange for loans since 2008. It has a cellar with capacity for 90,000 bottles.
The wines most frequently offered as collateral there? Bordeaux.
“So if we take Canadian oil via the Keystone pipeline,” a reader writes after yesterday’s issue, “and refine it and export it, what’s wrong with that?”
“It is American jobs refining that oil, profits made here — what’s not to like? If we had the demand for it, we would buy it. Some people just don’t think things through. Would these same idiots be upset that we manufacture stuff here that we export?”
The 5: Probably.
“Has nobody else noticed,” writes a reader looking at the issue through another lens, “that the Chinese are ‘horsetrading’ infrastructure development for long-term commodity contracts all over the world, especially Africa?”
“Why would we not think the Chinese are not, as we speak, actively negotiating for the development of a trans-Canadian — i.e., to Alberta to Prince Rupert — pipeline in exchange for a long-term contract for tar sand oil?”
“I fully expect it to be a done deal by the time we get around to deciding that maybe we ought to approve the Keystone project after all.”
“My answer is an absolute yes,” writes a reader replying to our inquiry about a radio show version of The 5.
“I exercise obsessively and spend about two hours every day with earbuds stuck to my head. Would love to listen to The 5 while I work out. In fact, this sounds like a great idea for all of Agora’s daily missives.”
“Yes!” says another. “I’d love to listen on the radio, but it has to be Internet radio.”
“I would download it everyday!” adds a third.
“I’d love to listen to your show if it were on NPR,” says a fourth. “On other stations, I’d forget to dial around at just the right time. NPR is the way to go.”
“Maybe GBTV would be a good outlet,” writes a fifth, suggesting Glenn Beck’s online video venture. “I would check it out.”
The 5: NPR? Beck? Well, it does speak to the diversity you all exhibit…
“Please don’t turn The 5 into a radio show,” writes a dissenter. “We have constant noise coming at us in our society, we don’t need more. The written 5 is just perfect.”
“I listened to Porter Stansberry’s radio show for a few minutes on my computer,” adds another. “I’d rather have some moneymaking research breakthrough than a radio show.”
“My advice: Save your time. Do what you do best: good moneymaking research.
You don’t want to become the Donald Trump of advisory letters.”
The 5: Sheesh, if you put it that way…
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. “America’s Per Capita Government Debt Worse Than Greece,” screams a press release just out from Sen. Jeff Sessions, the top Republican on the Budget Committee.
We haven’t had a chance to vet the numbers ourselves, but they look credible: Greek per-capita debt is $38,937… while the U.S. number is $44,215.
How bad is it in Greece?
[photo by Ggia]
Bad enough that pay cuts for some government employees will be retroactive to November. Which means they’ll go without pay at all for a few weeks.
Of course, Greece can’t simply print their way out of the crisis. The United States can. Act accordingly.