- American investors and a cascade of consequences (Ukraine)
- Jim Rickards: “Russia will win the war militarily”
- All Moscow needs is its “Tet moment”
- VIPS to Biden: Ignorance is bliss?
- American industry is underutilized
- A D.C. power couple’s resolution… “This doesn’t sit well with me”… And more!
“The American people and investors in particular are not prepared for any of this,” says Paradigm’s Jim Rickards.
“This” is a cascade of unexpected outcomes in the Ukraine war.
Jim went on record in the Dec. 6 edition of The 5, saying the Western media narrative of Ukraine racking up one victory after another bore little resemblance to battlefield reality. Instead, he said, “Russia has been preparing for a massive winter attack to roll back Ukrainian advances.”
Even the mainstream acknowledges that this Russian winter offensive is underway now.
“Russian Forces Attacking ‘In Waves,’” says Newsweek. “Russian Offensive Begins, Tide Turns in Bakhmut,” says USA Today.
“Losing Bakhmut will be a major blow to Ukraine,” Jim says now, “despite claims in the Western media that it really isn’t very important. Ukraine’s entire 800-mile defensive line would probably begin to crumble, and they don’t have heavily fortified positions to fall back on. Ukrainian troops, while brave and competent soldiers, are exhausted and running out of supplies as it is.”
All those American and German tanks pledged to Ukraine, you ask? Those won’t arrive for months.
Jim’s conclusion: “Russia will win the war militarily. Western military assistance may prolong the fighting but won’t affect the ultimate outcome.”
OK, I’m not as convinced as Jim that Russia is destined for victory — even while I don’t buy the Western UKRAINE IS TOTALLY WINNING narrative either.
Over the last year, I’ve been following the writings of the Israeli military historian Martin van Creveld. The Ukraine conflict strikes him as a grinding war of attrition — something comparable to the Western Front in World War I, or the Iran-Iraq War of the 1980s. That is, nobody’s making much progress either way, and the fighting could rage on indefinitely.
But here’s the thing: Even if Jim’s wrong, Russia doesn’t have to “win” to strike a decisive blow. All Moscow needs is a “Tet moment.”
As you might know, the Tet Offensive was a turning point in the Vietnam War. Starting on Jan. 30, 1968, the Viet Cong and the North Vietnamese army launched a series of surprise attacks throughout South Vietnam.
Wikipedia characterizes the result as a “tactical victory” for the United States and South Vietnam… and a “military defeat” for the Viet Cong and North Vietnam.
So why is it remembered otherwise in the public consciousness?
To this day, you run into Americans who say incredulously But our side WON the Tet Offensive.
Which is true. But it didn’t matter. What mattered was that for nearly a year, American leaders had lied to the American people about the capabilities of the Viet Cong and North Vietnam.
In April 1967, President Lyndon Johnson called Gen. William Westmoreland home from Vietnam to deliver an upbeat message about the war’s progress to a joint session of Congress.
He called Westmoreland back to Washington again in November. “I am absolutely certain that whereas in 1965 the enemy was winning, today he is certainly losing,” Westmoreland said in a speech at the National Press Club. “We are making progress. We know you want an honorable and early transition to the fourth and last phase [of the war]. So do your sons and so do I. It lies within our grasp — the enemy’s hopes are bankrupt.”
In other words, American leaders had built up the expectation that North Vietnam and the Viet Cong were incapable of launching something on the scale of the Tet Offensive.
When they did anyway, everyday Americans were shocked by the images they saw on TV and the accounts they read in the papers.
Back to the present moment: “Your intelligence advisers seem blissfully unaware of what is coming,” says an open letter to Joe Biden dated Jan. 26.
“Russia is not only determined to prevail but has the means to prevail in Ukraine — the infusion of arms from the West notwithstanding.”
The letter is signed by 18 former U.S. military and intelligence hands belonging to an organization called VIPS — Veteran Intelligence Professionals for Sanity. Twenty years ago, VIPS issued a similar letter to George W. Bush just before he launched the Iraq War — warning that his “justifications” for the invasion were based on false intelligence.
The current letter to Biden harks back to Tet: “Several of us undersigned were intelligence officers during Vietnam 55 years ago, when the Vietnamese Communists mounted a fierce countrywide offensive at Tet… Earlier, smiley-face intelligence reporting from the military in Saigon left policymakers totally unprepared for the debacle. Recrimination was so widespread and bitter that President Johnson announced the following month that he would not run again for president.”
Nonetheless, as you also know, American leaders doubled down on their efforts in Vietnam — waging war for five more years.
What might happen this time, when the drumbeat of PUTIN FACES A HUMILIATING DEFEAT doesn’t pan out?
Back to Jim Rickards: “The U.S. will grow increasingly desperate. Its credibility is on the line after committing so much money, materiel and moral weight to Ukraine’s defense.
“The Biden administration has essentially turned the war in Ukraine into an existential crisis for the U.S. and NATO, when it never should have been. Ukraine has never been a vital U.S. interest. But the war is existential for Russia, and it won’t give up.
“Is the U.S. just going to throw up its hands and concede Russian victory? NATO may actually disintegrate in the face of such spectacular failure. So we’ll probably double down.
“Maybe a desperate Biden orders troops into western Ukraine as a buffer against a complete Russian takeover of the country. You can imagine what could go wrong. That situation may quickly devolve into a direct war between the U.S. and Russia rather than the proxy war that it is now.”
That’s the outcome the mainstream doesn’t see coming. The impact on energy markets, commodity markets and stock markets could be extreme. We’ll stay on top of it in the weeks ahead.
[Ed. note: In the meantime, Jim is on the case of a new and looming threat to your portfolio: “A syndicate of billionaires, politicians and trillion-dollar asset managers have launched a new campaign to destroy your wealth.”
Jim is so concerned that he’s convening an exclusive summit for our readers set for next Monday evening. You’ll have a chance to sign up for access starting tomorrow. Watch this space.]
The big story in the markets today is gold sinking to its early-2023 lows.
The selling hit overnight in Hong Kong, even before the market opened in London. At last check, the Midas metal is off $19 to $1,835. Silver has shed another quarter to $21.59.
The major U.S. stock indexes are meandering — the Dow down a quarter-percent but still holding the line on 34,000… the S&P 500 nearly flat at 4,132… and the Nasdaq up nearly a half percent and back above 12,000.
Bonds are selling off, pushing yields higher. At 3.82%, the yield on a 10-year Treasury note is the highest it’s been so far this year.
Crude? Pancake-flat at $79.06.
The takeaway from the day’s economic numbers: The consuming part of the economy is going gangbusters… while the producing part is slowing down.
January retail sales came in way better than expected — up 3% from December. If you back out volatile car sales and rising gasoline prices, you still get a much-better-than-expected jump of 2.6%.
Meanwhile, industrial production was flat in January after a down month in December. Granted, the headline number is skewed by mild weather, which pushed utility output down 9.9%. In contrast, manufacturing grew 1% while mining and energy production grew 2%.
Still, it’s glaringly obvious the American industrial machine is slowing down judging by the capacity-utilization figure. In January, 78.3% of America’s industrial capacity was in use — down from a peak of 80.2% last spring.
On a long-term basis, this number has been declining steadily since the late 1960s. But that’s a reflection of America’s rise as a “knowledge economy” — which of course has made Americans everywhere much more prosperous and secure in their middle-class existence than they were in the late ’60s. Oh, wait…
The last card-carrying liberal is departing the Federal Reserve’s inner sanctum.
Fed vice chair Lael Brainard will move over to the White House as director of the National Economic Council. This is the position held the last two years by ex-BlackRock executive Brian Deese, and by Larry Kudlow during much of Trump’s term.
Everyone else at the top of the Fed’s power structure is a Republican or a more-conservative Democrat than Brainard. Ditto for the guy who’s being floated as her replacement at the Fed — Chicago Fed president Austan Goolsbee.
On the heels of yesterday’s hotter-than-expected inflation figures, it’s one more piece of supporting evidence that the Fed will jack up short-term interest rates higher and for longer than previously expected.
At the White House, Politico reports that “Biden is counting on [Brainard’s] background at the Federal Reserve and at Treasury to steer him through a maze of threats, ranging from a potentially market-shaking battle over raising the debt limit to increasingly tense relationships with major trading partners.”
On that second point we’ll go a step further: Brainard has a mandate to amp up Washington’s economic warfare against China.
Brainard is but one half of a classic D.C. power couple, the other half being Kurt Campbell — who holds the title of coordinator for Indo-Pacific affairs on the National Security Council.
As America’s top Asia diplomat under Barack Obama, Campbell formulated Secretary of State Hillary Clinton’s much-touted “pivot to Asia” — an explicit policy aimed at countering the Chinese government’s influence in China’s own backyard. The policy was rolled out in 2011 with a piece by Mrs. Clinton in Foreign Affairs with the presumptuous title “America’s Pacific Century.”
After several years of Beltway buckraking as an uber-connected corporate consultant, Campbell took up his current post at the start of the Biden administration. In May of 2021, he declared, “The period that was broadly described as engagement [with China] has come to an end.” Going forward, “the dominant paradigm is going to be competition.”
The whole time, the Biden administration has stepped up Trump’s economic warfare against Beijing — especially with the extensive ban last fall on semiconductor exports.
Now Campbell and Brainard can join forces on China policy from their respective high perches at the White House.
To the mailbag, and a reader’s concern about profiting off the misery of others…
Monday, we cited the case for the “Biden’s Big Blackout” thesis of Jim Rickards: Jim anticipates current policy in Washington will result in a 10-year energy crisis — but “because of certain opportunities brought on by the crisis, you can potentially grow your own personal wealth even while most of America suffers.”
This notion sticks in the reader’s craw: “I’ve had the feeling for a while now, much stronger after reading the above, that the whole investing culture is a heartless chase for riches and to hell with compassion.
“People may suffer for the next 10 years but hey, you can grow your wealth on their suffering. This doesn’t sit well with me.”
The 5: To be clear, by following Jim’s strategy you would not be pulling desperately needed cash out of the pockets of your fellow Americans.
Indeed, the companies Jim recommends to new Strategic Intelligence subscribers are the ones that will be best positioned to solve the crisis and bring sorely needed relief to middle-class, working-class and poor Americans.
Wouldn’t you like to have a hand in that? It’s a terrific instance of “doing well by doing good.”
Hopefully that answers your objection and now you can examine Jim’s case with a clear conscience!
Best regards,
Dave Gonigam
The 5 Min. Forecast
