February 21, 2014
- The wizard of war: China, Syria and Russia, oh my
- The sector that outperforms as the world goes to pot
- Is 2014 the year inflation becomes a hot topic again?
- Fewer farms, older farmers — Chris Mayer picks apart a way to play it
- Reader has fun with charts… No, the NSA didn’t hack The 5… documented evidence of a deliberate plan to tank the currency… and more!
And now, the unintended consequences of a growing middle class in China. Literally growing.
From the AFP newswire: “Chinese soldiers have become so much taller and fatter in recent years that they often find themselves cramped in tanks designed three decades ago, state media reported.”
The curse of a Westernized diet: A survey by the People’s Liberation Army (PLA) concludes the typical Chinese serviceman has added nearly an inch of height and two inches around the waist compared with 20 years ago.
We try to keep the tone light in the Friday 5 — going into the weekend and all. Alas, today, all we can do is find dark humor on the edges of World War III…
The girth of its troops notwithstanding, China is preparing for a “short, sharp war” against Japan — or so says a senior U.S. military officer.
Capt. James Fanell is intelligence director for the U.S. Pacific Fleet. During a speech last week, he described a big military exercise the Chinese conducted during 2013. “We concluded that the PLA has been given the new task to be able to conduct a short, sharp war to destroy Japanese forces in the East China Sea, following with what can only be expected as the seizure of the Senkakus.”
Recall the Senkakus are the islands controlled by Japan but claimed by China. Recall further that Japan’s Prime Minister Shinzo Abe has been demonizing the Chinese, the better to distract ordinary Japanese from an economy that’s sucked for fully 25 years now. And recall further still that the United States is obliged to come to Japan’s defense in the event of war.
If you’ve been with us for a while, you’ve seen all this coming. As one expert put it in our virtual pages in late 2012: “The United States risks getting involved in hostilities over strategically irrelevant and economically marginal islands.”
Alas, the people who actually make the decisions don’t have that kind of foresight. As one policy wonk with the National Security Council put it this week to the D.C. insider website The Swoop, “When we announced the so-called pivot to the Asia-Pacific, we had little idea that we would be entering into this minefield caused by our own allies.”
Meanwhile, President Obama is revisiting “military options” for Syria. “There is a general sense that it’s time to take another look,” an anonymous U.S. official tells The Wall Street Journal.
For real. The president spent all last August threatening war against Syria — until Americans flooded Congress with phone calls opposing yet another Middle East war and the Russians came up with a way to disarm Syria of its chemical weapons.
Since then, there’ve been peace talks between the Syrian government and rebels in Geneva. But they went nowhere because Washington kept insisting the only acceptable end result was for Syrian President Bashar Assad to step down. Not much incentive for Assad to negotiate, eh?
Meanwhile, The Washington Post informs us U.S. officials are redoubling their efforts to train and arm the Syrian rebels — well, the “good” rebels anyway and not the al-Qaida rebels that engage in beheadings and cannibalism. We’re sure they’ve got “slam-dunk” intel to know the difference…
But if it’s real World War III potential you’re looking for, it’s in Ukraine.
A crisis that’s been simmering for weeks boiled over on Wednesday. The official death toll from fighting between protesters and police is 77. With pictures of stuff blowing up, suddenly, the media give a damn.
Well, they cared a little two weeks ago too, when the top U.S. diplomat for Europe was caught on audio using the F-word during a phone conversation evidently tapped by the Russians. Assistant Secretary of State Victoria Nuland was expressing frustration that the European Union wasn’t acting more forcefully on Ukraine. “F*** the EU,” she said.
The media fixated on the profanity of Ms. Nuland and the perfidy of the Russians.
The real story is something Nuland spilled back in December.
She told the National Press Club the United States has “invested” $5 billion to achieve regime change in Russia’s backyard. Or as she put it, to give Ukraine “the future it deserves.”
That’s what her phone call to the U.S. ambassador was all about: They were running down a list of officials they planned to install once the protesters chased the pro-Russian President Viktor Yanukovych from power.
Never mind Yanukovych won elections in 2010 that international observers declared free and fair — much less U.S. rhetoric that Ukrainians should “decide their own future.”
“How would Obama react,” asks Pat Buchanan this morning, “if thousands of tea party members established an encampment on the Mall, burned down the DNC, occupied the Capitol and demanded he either repeal Obamacare or resign?”
“If the Cold War is over, why are we playing these Cold War games?” Buchanan adds.
“Putin’s Russia has re-emerged as America’s No. 1 enemy,” answers veteran foreign correspondent Eric Margolis. “At times, the Cold War seems to be inching back.”
Alas, Margolis suggests a much hotter war might be a better analogy: “Nuclear powers must not indulge in such schoolyard squabbles. World War I, whose 100th anniversary comes this fall, began just this way.”
Adds former Reagan Treasury official Paul Craig Roberts; “It was fools like Nuland playing the great game that gave us World War I.”
As we go to press, Yanukovych and the opposition have agreed to early elections before year-end. But the story isn’t going away; U.S. meddling in Ukraine goes back to the “Orange Revolution” nearly 10 years ago that booted Yanukovych from the prime minister’s office. Hard guy to get rid of…
“What is coming in Ukraine,” Buchanan suggests, “is likely to be far worse than what we have seen up to now.”
With so many beating war drums, it’s little surprise ITA — one of the defense and aerospace ETFs — is outperforming the broad market this year. Again…
“As much as it pains my inner accountant to see the U.S. government fill the national books with red ink,” says our military-tech maven Byron King, “the fact is that most of the companies we hold in our portfolio are cashing in from the government’s checkbook. It won’t stop for a long time, and it’s investable.”
Indeed, the average pick in the portfolio is up 26% — with much more upside to come. In fact, one company on Byron’s radar recently jumped 40% in a single day. Many more stories like that might be coming this spring… for reasons Byron lays out in detail at this link.
Major U.S. stock indexes are all in the green this morning, traders unfazed by the latest judging scandal in Olympic figure skating. At 1,842, the S&P 500 is once again within reach of its all-time highs near 1,850.
Gold gave up a few bucks overnight and made them all back this morning; the bid is back to $1,324.
The CRB commodity index — which poked above 300 this week for the first time in a year — remains there this morning. That makes the following item most timely…
“Tomorrow’s hamburger may cost as much as today’s steak,” MarketWatch informs us.
The Agriculture Department reported yesterday that ground beef prices jumped 5% last year to an average $3.50 a pound. With the size of the U.S. cattle herd at a 63-year low, don’t expect that to change.
“INFLATION” said the instant message from Rude Awakening editor Greg Guenthner, who flipped the story my way yesterday. That dovetails with the broad breakout in commodities he spotted in our virtual pages on Wednesday. “Commodities (as a group) are still way below their 2008 highs. Many have room to run from here.”
The strongest performer of any asset class so far this year? Coffee, up 55% as of this morning.
Staying down on the farm… the number of U.S. farms keeps shrinking.
The Census Bureau is out with a new report. It finds 2.1 million farms in the United States during 2012 — down 4.3% from 2007.
That’s not shrinkage — it’s consolidation. The number of farms with at least 1,000 acres grew from 2007-12. The number with fewer than 1,000 fell. The number of farms with 180-499 acres collapsed 6.1%.
That continues a longstanding trend. “American farmland is not the idyllic small farms of old,” says our Chris Mayer. “From 1982-2007, there was a lot of consolidation. Now half of all U.S. cropland is held on farms of 1,105 acres or more. In 1982, this figure was 589 acres. So farms are bigger.”
Meanwhile, the new Census report says one-third of U.S. farmers are 65 or older.
“Consolidation trends and an aging ownership base bode well,” for an innovative investment vehicle Chris is eyeing.
“We live in an age,” he says, “when people will package up almost anything into a real estate investment trust, or REIT. There are REITs made up of everything from prisons to gaming properties, from cellphone towers to billboard operators. Why not create one for farmland?”
Thus does Farmland Partners plan an IPO later this year, trading under the ticker FPI.
“FPI intends to own and acquire high-quality farmland in North America. The focus will be on primary row crops — such as corn, wheat, soybeans, alfalfa and cotton.” Its initial properties will be concentrated in Illinois. Day-to-day management will be, if you’ll excuse the expression, farmed out to contractors.
“I think FPI is an intriguing idea,” says Chris. “I’m just not sure yet if it will work well. I wish the idea were around 10 years ago. Today, U.S. cropland is expensive. It has had years of fat gains.
“Given the unproven nature of FPI’s model and the healthy pricing of farmland, I’ll need a good deal to get involved with FPI.”
Besides, we’ve long said that with any IPO, you’re best off waiting until after it’s been trading a few weeks or months. We’ll keep it on our radar.
“Is it just me,” a reader writes tentatively, “or is there a trend change in first-time unemployment claims?” He passes along this chart…
“If you plot trend lines from September 2013, you will see a steep upward trend starting: higher lows and higher highs. I was wondering if this is an effect of the new health care law as it reverberates around the country, but it’s a big country.”
The 5: Hmm… Well, the original spike appears to coincide with the “partial government shutdown” at the start of October. And even the statisticians at the Bureau of Labor Statistics cautioned the holidays were making the numbers exceedingly noisy at year-end 2013.
But you might be on to something. We’ll keep an eagle eye.
“I typically read The 5 early the following morning after it is sent,” a reader writes. “However, I did not find yesterday’s issue in my inbox. Is everything all right? NSA cyberattack?
“By the way, have you discussed the new drone program used to locate and help eradicate feral hogs? More pulled pork to go around.”
The 5: We ran into a glitch, and we didn’t realize until early this morning that the vast majority of 5 readers never got their issue yesterday. We immediately blasted it out. If you’ve not received it yet, we’ll arrange drone delivery, but we can’t guarantee success if any feral hogs are in your vicinity.
“I feel shafted!” writes our final correspondent. “I got only three minutes and 44 seconds of reading time out of your purported 5 Min. Forecast one day. Another day, I got only 27 seconds past the 4:10 mark! Please don’t use the 21st-century packaging gimmick of putting less product in the same size box!
“P.S. Congrats to the Mogambo Guru on a good metals week! This may be another year of no-brainer big gainers for the man in the bunker. Thanks for The 5.”
The 5: Rest assured you’re never shortchanged on the number of words in your 5. We just have to give the clock a good hard smack now and then to get it running properly…
Have a good weekend,
The 5 Min. Forecast
P.S. You’ve read the warnings for years — a planned devaluation of U.S. currency (as opposed to the devaluation that occurs owing to natural federal stupidity — heh).
Alas, now there’s documentary proof — from the U.S. Treasury — of exactly such a fiendish plot.
We doubt if you’re surprised… but you still owe it to yourself to check out our latest expose and follow our suggested game plan to protect yourself.