Time for Some Mercenary Shopping

Now that the Libyan rebels will be receiving the proceeds of oil exports, it’s time to help them with their budgeting. As you know, we Americans are experts at managing our government budgets. So, we should know, right?

I suggest that the Libyan rebels spend every penny on mercenaries which they desperately need to fight Kadafi’s mercenaries. It’s pretty obvious that these rebels are only good for shooting their guns in the air and cheering when the cameras are rolling. Sure, they can “capture” territory when Kadafi orders a strategic retreat, but that’s as good as it gets.

Maybe Kadafi will bug out, or maybe the Libyan people will oust Kadafi themselves, and then the rebels could “capture” Tripoli and shoot the air some more.

But if not, then some people who actually know how to fight are going to be needed. Otherwise, Libya just might be permanently split in two.

The Kremlin ♥ Libertarians

Did you know that the very first conspiracy book published on the JFK assassination was written by a KGB agent? Here it is:

That’s a photo of my copy. Maybe it will become a valuable collector’s item one day, but I doubt it. The fact is that the libertarian/conspiracy community fights tooth and claw to protect the Russians and their role in the assassination. So this book has been swept under the rug and will likely remain there. But if you want to buy a copy, there are a few available from Amazon.

And the Russians are still busy publishing anti-American propaganda. The Kremlin even has its own TV network now. The Wikipedia page on RT says:

“According to a variety of sources such as Der Spiegel and Reporters Without Borders, the channel presents pro-Kremlin propaganda.”

And RT loves libertarians like Lew Rockwell. Just look at this revolting display as this Rockwell buffoon lauds Russia and bashes the USA while discussing the Libyan civil war:

Is Rockwell a Libya expert? Not hardly. RT has him on because they can count on him to bash America without a script. The Kremlin just laps this up; they can’t get enough:

Rockwell “hopes” that the Russians can help with a diplomatic resolution in Libya. Can you imagine? Maybe Rockwell wants Vladimir Putin to apply the same “diplomatic” solution that he used on Georgia in 2008.

Rockwell says that President Obama is committing an “act of naked aggression.” But that is hardly the case. It was the Libyan people who started this fight, trying to throw off their dictator. Mr. Libertarian frowns upon that.

Rockwell says that President Obama is a terrorist. But Obama didn’t do anything at all until Kadafi was about to sack the rebel capital of Benghazi. Clearly, Obama only stepped in to prevent that, and reluctantly so.

Note to Rockwell: How would you feel if you organized a protest down there in Auburn, and President Obama flew in African mercenaries to break it up? Sort of like this:

I know that you were looking forward to that scene being replicated on a much larger scale in Benghazi, but it doesn’t look like you will get your wish now. (End of note to Rockwell).

Of course, what Rockwell says is of no consequence. But I point it out because this is further proof that a libertarian like Ron Paul would be a disaster as a president. These libertarians simply cannot think clearly, or objectively. And they are way too eager to side with our enemies.

Circling back to JFK, on July 24, 2010, Rockwell published a story (no longer on his website) about “The Speech that got JFK Killed”. Supposedly, JFK gave a speech criticizing the CIA, and got himself killed for it. But when I tracked down the speech, and read the whole thing, instead of a few quotes taken out of context, I found that it was the exact opposite of what Rockwell was claiming.

The full text of the speech is below. I would summarize it like this: Kennedy gave the speech to The American Newspaper Publishers Association, whose members had been doing stories about various government top-secret projects. Kennedy simply said to them: “I know government secrecy is a bad thing, but could you please ease up on us a bit so we can win this Cold War and defeat the Soviets?”

You see? Kennedy was actually asking the media to help the CIA.

Not only is Rockwell a buffoon, but he has no journalistic credibility either.

Note: The claim that the book up at the top was written by a KGB agent is made by former Soviet intelligence officer Ion Mihai Pacepa. He says it was part of the KGB’s “Operation Dragon”, which also initiated the “Lydon Johnson Did It” conspiracy theory.

On April the 27th, 1961, Kennedy made the speech below to the “American Newspaper Publishers Association” at the Waldorf-Astoria Hotel in New York City. Kennedy’s failed “Bay of Pigs” invasion of Cuba had just occurred 10 days prior, on April 17-19th. So, that is what JFK is referring to when he says: “events of recent weeks.”

The speech:

“Mr. Chairman, ladies and gentlemen:

I appreciate very much your generous invitation to be here tonight.

You bear heavy responsibilities these days and an article I read some time ago reminded me of how particularly heavily the burdens of present day events bear upon your profession.

You may remember that in 1851 the New York Herald Tribune under the sponsorship and publishing of Horace Greeley, employed as its London correspondent an obscure journalist by the name of Karl Marx.

We are told that foreign correspondent Marx, stone broke, and with a family ill and undernourished, constantly appealed to Greeley and managing editor Charles Dana for an increase in his munificent salary of $5 per installment, a salary which he and Engels ungratefully labeled as the “lousiest petty bourgeois cheating.”

But when all his financial appeals were refused, Marx looked around for other means of livelihood and fame, eventually terminating his relationship with the Tribune and devoting his talents full time to the cause that would bequeath the world the seeds of Leninism, Stalinism, revolution and the cold war.

If only this capitalistic New York newspaper had treated him more kindly; if only Marx had remained a foreign correspondent, history might have been different. And I hope all publishers will bear this lesson in mind the next time they receive a poverty-stricken appeal for a small increase in the expense account from an obscure newspaper man.

I have selected as the title of my remarks tonight “The President and the Press.” Some may suggest that this would be more naturally worded “The President Versus the Press.” But those are not my sentiments tonight.

It is true, however, that when a well-known diplomat from another country demanded recently that our State Department repudiate certain newspaper attacks on his colleague it was unnecessary for us to reply that this Administration was not responsible for the press, for the press had already made it clear that it was not responsible for this Administration.

Nevertheless, my purpose here tonight is not to deliver the usual assault on the so-called one party press. On the contrary, in recent months I have rarely heard any complaints about political bias in the press except from a few Republicans. Nor is it my purpose tonight to discuss or defend the televising of Presidential press conferences. I think it is highly beneficial to have some 20,000,000 Americans regularly sit in on these conferences to observe, if I may say so, the incisive, the intelligent and the courteous qualities displayed by your Washington correspondents.

Nor, finally, are these remarks intended to examine the proper degree of privacy which the press should allow to any President and his family.

If in the last few months your White House reporters and photographers have been attending church services with regularity, that has surely done them no harm.

On the other hand, I realize that your staff and wire service photographers may be complaining that they do not enjoy the same green privileges at the local golf courses that they once did.

It is true that my predecessor did not object as I do to pictures of one’s golfing skill in action. But neither on the other hand did he ever bean a Secret Service man.

My topic tonight is a more sober one of concern to publishers as well as editors.

I want to talk about our common responsibilities in the face of a common danger. The events of recent weeks may have helped to illuminate that challenge for some; but the dimensions of its threat have loomed large on the horizon for many years. Whatever our hopes may be for the future–for reducing this threat or living with it–there is no escaping either the gravity or the totality of its challenge to our survival and to our security–a challenge that confronts us in unaccustomed ways in every sphere of human activity.

This deadly challenge imposes upon our society two requirements of direct concern both to the press and to the President–two requirements that may seem almost contradictory in tone, but which must be reconciled and fulfilled if we are to meet this national peril. I refer, first, to the need for a far greater public information; and, second, to the need for far greater official secrecy.

The very word “secrecy” is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths and to secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers which are cited to justify it. Even today, there is little value in opposing the threat of a closed society by imitating its arbitrary restrictions. Even today, there is little value in insuring the survival of our nation if our traditions do not survive with it. And there is very grave danger that an announced need for increased security will be seized upon by those anxious to expand its meaning to the very limits of official censorship and concealment. That I do not intend to permit to the extent that it is in my control. And no official of my Administration, whether his rank is high or low, civilian or military, should interpret my words here tonight as an excuse to censor the news, to stifle dissent, to cover up our mistakes or to withhold from the press and the public the facts they deserve to know.

But I do ask every publisher, every editor, and every newsman in the nation to reexamine his own standards, and to recognize the nature of our country’s peril. In time of war, the government and the press have customarily joined in an effort based largely on self-discipline, to prevent unauthorized disclosures to the enemy. In time of “clear and present danger,” the courts have held that even the privileged rights of the First Amendment must yield to the public’s need for national security.

Today no war has been declared–and however fierce the struggle may be, it may never be declared in the traditional fashion. Our way of life is under attack. Those who make themselves our enemy are advancing around the globe. The survival of our friends is in danger. And yet no war has been declared, no borders have been crossed by marching troops, no missiles have been fired.

If the press is awaiting a declaration of war before it imposes the self-discipline of combat conditions, then I can only say that no war ever posed a greater threat to our security. If you are awaiting a finding of “clear and present danger,” then I can only say that the danger has never been more clear and its presence has never been more imminent.

It requires a change in outlook, a change in tactics, a change in missions–by the government, by the people, by every businessman or labor leader, and by every newspaper. For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence–on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day. It is a system which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations.

Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. It conducts the Cold War, in short, with a war-time discipline no democracy would ever hope or wish to match.

Nevertheless, every democracy recognizes the necessary restraints of national security–and the question remains whether those restraints need to be more strictly observed if we are to oppose this kind of attack as well as outright invasion.

For the facts of the matter are that this nation’s foes have openly boasted of acquiring through our newspapers information they would otherwise hire agents to acquire through theft, bribery or espionage; that details of this nation’s covert preparations to counter the enemy’s covert operations have been available to every newspaper reader, friend and foe alike; that the size, the strength, the location and the nature of our forces and weapons, and our plans and strategy for their use, have all been pinpointed in the press and other news media to a degree sufficient to satisfy any foreign power; and that, in at least in one case, the publication of details concerning a secret mechanism whereby satellites were followed required its alteration at the expense of considerable time and money.

The newspapers which printed these stories were loyal, patriotic, responsible and well-meaning. Had we been engaged in open warfare, they undoubtedly would not have published such items. But in the absence of open warfare, they recognized only the tests of journalism and not the tests of national security. And my question tonight is whether additional tests should not now be adopted.

The question is for you alone to answer. No public official should answer it for you. No governmental plan should impose its restraints against your will. But I would be failing in my duty to the nation, in considering all of the responsibilities that we now bear and all of the means at hand to meet those responsibilities, if I did not commend this problem to your attention, and urge its thoughtful consideration.

On many earlier occasions, I have said–and your newspapers have constantly said–that these are times that appeal to every citizen’s sense of sacrifice and self-discipline. They call out to every citizen to weigh his rights and comforts against his obligations to the common good. I cannot now believe that those citizens who serve in the newspaper business consider themselves exempt from that appeal.

I have no intention of establishing a new Office of War Information to govern the flow of news. I am not suggesting any new forms of censorship or any new types of security classifications. I have no easy answer to the dilemma that I have posed, and would not seek to impose it if I had one. But I am asking the members of the newspaper profession and the industry in this country to reexamine their own responsibilities, to consider the degree and the nature of the present danger, and to heed the duty of self-restraint which that danger imposes upon us all.

Every newspaper now asks itself, with respect to every story: “Is it news?” All I suggest is that you add the question: “Is it in the interest of the national security?” And I hope that every group in America–unions and businessmen and public officials at every level– will ask the same question of their endeavors, and subject their actions to the same exacting tests.

And should the press of America consider and recommend the voluntary assumption of specific new steps or machinery, I can assure you that we will cooperate whole-heartedly with those recommendations.

Perhaps there will be no recommendations. Perhaps there is no answer to the dilemma faced by a free and open society in a cold and secret war. In times of peace, any discussion of this subject, and any action that results, are both painful and without precedent. But this is a time of peace and peril which knows no precedent in history.

It is the unprecedented nature of this challenge that also gives rise to your second obligation–an obligation which I share. And that is our obligation to inform and alert the American people–to make certain that they possess all the facts that they need, and understand them as well–the perils, the prospects, the purposes of our program and the choices that we face.

No President should fear public scrutiny of his program. For from that scrutiny comes understanding; and from that understanding comes support or opposition. And both are necessary. I am not asking your newspapers to support the Administration, but I am asking your help in the tremendous task of informing and alerting the American people. For I have complete confidence in the response and dedication of our citizens whenever they are fully informed.

I not only could not stifle controversy among your readers–I welcome it. This Administration intends to be candid about its errors; for as a wise man once said: “An error does not become a mistake until you refuse to correct it.” We intend to accept full responsibility for our errors; and we expect you to point them out when we miss them.

Without debate, without criticism, no Administration and no country can succeed–and no republic can survive. That is why the Athenian lawmaker Solon decreed it a crime for any citizen to shrink from controversy. And that is why our press was protected by the First Amendment– the only business in America specifically protected by the Constitution- -not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply “give the public what it wants”–but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate and sometimes even anger public opinion.

This means greater coverage and analysis of international news–for it is no longer far away and foreign but close at hand and local. It means greater attention to improved understanding of the news as well as improved transmission. And it means, finally, that government at all levels, must meet its obligation to provide you with the fullest possible information outside the narrowest limits of national security–and we intend to do it.

It was early in the Seventeenth Century that Francis Bacon remarked on three recent inventions already transforming the world: the compass, gunpowder and the printing press. Now the links between the nations first forged by the compass have made us all citizens of the world, the hopes and threats of one becoming the hopes and threats of us all. In that one world’s efforts to live together, the evolution of gunpowder to its ultimate limit has warned mankind of the terrible consequences of failure.

And so it is to the printing press–to the recorder of man’s deeds, the keeper of his conscience, the courier of his news–that we look for strength and assistance, confident that with your help man will be what he was born to be: free and independent.”

Return to Apex

In the previous post from Thursday night, I discussed the possibility of a “return to apex” move by the SPX, and the resistance that might be found at that level. Here is the chart that I posted (click to enlarge):

And here is what happened on Friday:

The market rallied to within one point of the 1320 level that I mentioned, stalled, rolled over, and dropped all afternoon. Did I nail that or what?

Also notice that the SPX failed to close the gap at 1320.02 from March 9th that George mentioned. That’s a sign of potential weakness going forward. The bulls are looking a bit gassed-out in the short-term.

SPX Resistance Levels

Thursday’s rally ended at the recent downtrend line as you can see on this 60-minute SPX chart (click to enlarge):

If the market is able to move higher, the next resistance level may be found on a “return to apex” move. This next chart shows the SPX triangle (red) and the apex (blue). There should be resistance of some sort in the 1320 area:

Can the SPX make it up to the apex line? Maybe not. If the past few days have been a bull flag (purple), then it has already made a 100% extension and may be played out:

Notice that if the SPX can continue to extend the flag to 161.8%, you get to the apex level. So, that’s a confluence level, and should be doubly difficult to penetrate.

On the next chart, I draw a bullish inverted head-and-shoulders pattern (red). It doesn’t meet the letter of the law, but if it fulfills the spirit of the law, then blue line “L2” gives a target up at the February peak.

Of course, all of this is moot unless the SPX can crack the downtrend line on the first chart.

In other news, a couple of weeks ago DEBKAfile published a story about how the Saudis thought that the West was fomenting rebellion in their country. Specifically, the Saudis thought that a BBC show on Islam was a secret message to the rebels to start protesting.

That struck me as totally implausible. I mean, wouldn’t Saudi Arabia be the very last country where the West would want to start a revolution? But then today, France’s foreign minister, Alain Juppe said:

“he hoped the campaign in Libya serves as a warning to autocratic regimes elsewhere, including in Syria and Saudi Arabia.”

WOW, right? Lecturing the Saudis on their actions in Bahrain is one thing, but a direct “warning” is quite another. Maybe the Saudis weren’t being paranoid after all. Is a revolution in Saudi Arabia penciled into the agenda, just as soon as Libya is mopped up? And would the market be able to shrug that off?

No More OPEC “Catch and Release”

So says your next president, Donald J. Trump. Think about it: we captured Kuwait, and just tossed it back. Now it is frolicking in the warm waters of the Persian Gulf, happily charging us $100 a barrel for oil.

In 2003, we captured another OPEC country, Iraq, and are about to toss it back too. In the third video below, Trump discusses how dumb this is.

There are only 12 countries in all of OPEC (see list here), so we were well on our way to bagging the whole lot. Imagine, we take over OPEC, grow our economy twice as fast as China with free energy, and use the profits to pay down our debt, and buy even more aircraft carriers.

Trump thinks big.

Unfortunately, there may not be much of country left for Trump to run in 2012. As a matter of fact, Iran is more likely to take over OPEC than we are. Not only did we bankrupt ourselves conquering Iraq and Afghanistan, but we simultaneously took out Iran’s top two enemies: Saddam Hussein and the Taliban. And that vast geopolitical improvement for Iran is allowing them to be more aggressive now.

Under both American and European law, OPEC would be an illegal monopoly and broken up. And now that we are one big, happy global economy, surely a legal case could be made against OPEC, could it not? Trump is just itching to do some global trust-busting. How sweat would that be?

Interesting note: OPEC was formed after the USA embargoed Arab oil. From the Wikipedia article linked above:

“OPEC was founded in Baghdad, triggered by a 1960 law instituted by American President Dwight Eisenhower that forced quotas on Venezuelan and Persian Gulf oil imports in favor of the Canadian and Mexican oil industries.”

Larry Kudlow interview with Trump in three pieces:

Twitter Birdie Gets Facebroke

Maybe Moammar Kadafi will be taken out by a cruise missile by time you read this. But let the record show that he had defeated the rebellion before French, British, and American forces entered the fray. Kadafi had his tanks parked in downtown Benghazi, the rebel capital, when the first French warplanes came in.

The moral of the story is that if a dictator uses his petro-dollars to hire a mercenary to run you over with a T-72 tank, it make no difference how fervently you twitter away on your Facebook machine. Your ass is getting run over.

Note: A bazooka is an anti-tank weapon. An iPad is not. Just an FYI.

Wake up and Smell the Coffee Krugman!

Paul Krugman asks plaintively:

We’re well on the way to creating a permanent underclass of the jobless. Why doesn’t Washington care?

Because the White House and Congress are bought and paid-for by the multinationals, and the multinationals don’t care about jobs in the USA!

Get it? Washington cares about what the multinationals care about, and the multinationals care about international labor arbitrage. And they care about it very, very deeply.

Wake up and smell the globalist coffee. It’s not about the USA any more. Like FedEx CEO Fred Smith likes to say, it’s about growing the global pie. If the USA’s slice shrinks a bit while the other slices grow, then that’s just fine from the globalist perspective.

The creation of the American middle class was a political decision. And so is its destruction. Labor arbitrage was implemented by acts of Congress, such as NAFTA, explicitly designed to export jobs.

It’s been a done-deal for over a decade now. Exporting as many jobs as possible is official economic policy. It is the law of the land.

If a company like IBM wants to adopt a “No Americans” hiring policy, nobody will say boo to them. If Walmart wants to outsource its entire, massive IT staff to India, then kiss it goodbye because it’s gone baby gone. If the auto industry wants to move plants to Mexico while Detroit goes to weeds, then weeds it will be.

The globalists have everybody hypnotized with their “exporting jobs will create even more jobs here” mantra. Maybe President Trump will be able to smash that preposterous myth in 2012. But as far as I can tell, unemployed Americans are content to meekly shuffle off to the Food Stamps office, and that makes our adoption of a Brazilian-style favela system the more likely outcome.

Where are the Back-Up Generators?

The Japanese are constructing an emergency generator at Fukushima.

Note to Japan: Really? You seriously don’t have any already constructed generators that could be brought in? WTF?

Here is a quote from this Wall Street Journal story:

Meanwhile, Tepco itself raced to complete construction of an emergency power supply for the crippled plant in a last-ditch effort to resume pumping of coolant onto dangerously overheated radioactive material throughout the site.

Everybody is carrying on about how well-prepared the Japanese are for disasters. And maybe they are, compared to stupid countries like Russia, but it’s clear now that emergency generators must be held in reserve, off site, so that they can be brought in after a disaster.

Every country that operates nuclear plants should have a warehouse full of diesels generators located in the safest part of the country. And they should be rigged for helicopter transport, ready to go at the drop of hat. If California doesn’t have this, the idjits out there need to get to work in it right now.

It turns out that operating nuclear reactors is serious business. Who knew?

The Great Pipeline Conspiracy

Why, may I ask, must I be subjected to endless babbling about the Strait of Hormuz whenever something happens in Sandland? My life would be so much more peaceful if certain idiots would just BUILD SOME DAMN PIPELINES ALREADY!

Look at this map of North Africa (click to enlarge). See all those pipelines? They go right under the Mediterranean and up to Europe. Fancy that.

Map by Sémhur.

That’s how civilized people do business. Say what you want about Moammar Kadafi, but the green line on the map is the Italian Greenstream gas pipeline which transports Libyan natural gas to Sicily. Nice and neat. No fuss, no muss. No pirates hijacking tankers there.

The red line is the proposed 2,500 mile Trans-Saharan gas pipeline, which will go all the way down to Nigeria. Quite a project, no?

But apparently it is impossible to build pipelines to circumvent the Strait of Hormuz. Funny how that works.

A long time ago, L. Fletcher Prouty said that the Arab-Israeli wars were orchestrated to destroy pipelines, force oil onto ships, and through the Strait of Hormuz. The more precarious the delivery system, the easier it is to stage a crisis and get the price of oil up. Was he right? I don’t know, but you have to admit, the pipelines are rather conspicuous in their absence.

But that wasn’t always the case. Did you know that there was once a pipeline that took Saudi oil up to the Mediterranean coast? The Trans-Arabian Pipeline was the largest in the world at the time, but is now shut down.

When the Israelis captured the section of the pipeline that ran through the Golan Heights in 1967, they allowed it to continue operating. According to Wikipedia, the pipeline was closed down due to bickering between Saudi Arabia, Jordan, and Syria.

What about pipelines across Saudi Arabia to the Red Sea, or down to the Arabian Sea? Here is a story about a giant program to build no less than 5 such pipelines, and train up a Saudi army dedicated to protecting them. What became of it? I don’t know. I spent an hour googling around, but couldn’t find a single word on the subject beyond the original story which was published by DEBKAfile. Not only that, but I couldn’t find the original article on Debka’s site.

Sometimes I get the feeling that Google is hiding information.

With their nuclear reactors melting down, the Japanese need to buy even more oil from the Arabs, just when a Sunni/Shiite religious war is brewing. Pipelines, of course, aren’t invulnerable, but a few extra ones would come in handy right about now, would they not?

The Saudis Were Sweating

On Friday, Saudi Prince Al-Waleed bin Talal said emphatically on CNBC that Saudi Arabian troops would not be needed in Bahrain. Three days later, 1,000 Saudi troops deployed to Bahrain. But my subscribers at The Daily Jobs Update were not surprised, because I had sent out the warning below at 4:30pm EST on Sunday.

Note: Al-Waleed mentions troops in Bahrain at 6:23 into the first video.

The Saudis Are Sweating

Friday’s “Day of Rage” in Saudi Arabia was considered to be a flop, with a very small turnout. But if that was the case, then why did Prince Al-Waleed bin Talal sound hysterical when he was interviewed by Maria Bartiromo of CNBC Friday night? Here is the interview:

Al-Waleed began calmly, saying the “Day of Rage” was a “tempest in a tea cup”, but then starts to sound panicky as the interview progresses.

In fact, his voice cracks twice at 3:30 and 4:18.

For comparison, here is his infamous “manger” interview from 2008 during the financial crisis. Al-Waleed talks about Citigroup and is very calm:

Notice that CNBC had a camera there for the 2008 interview, but not for the Friday interview. CNBC said that the Saudis had restricted press coverage of the demonstrations, so maybe we’re not getting the full story.

Also notice how much more deferential Bartiromo was at the beginning of the 2008 interview. She acted like she was addressing a deity, but on Friday, she was challenging him on women’s right to drive cars. Quite a change of attitude there.

It is possible that Saudi Arabia is stable enough, and Al-Waleed was actually fearing for events on the borders of his country in Bahrain and Yemen.

George Friedman has an excellent analysis of the geo-political situation here.

The market rallied on Friday on news of the “Day of Rage” flopping, but I’m worried that Prince Al-Waleed’s body language is indicating that things are far from settled.

Rare Audio of the Founding of Zero Hedge

One day, while “Tyler Durden” was pulling the splinters out of his hands after carrying around his “The End is Near” sign, he had a flash of insight. And Zero Hedge was conceived:

      Click to hear the historic moment of inspiration

Why did every crazy guy in history carry around an end-is-near sign? Because when people are ignoring you, forecasting doom is one way to finally get some attention. Sort of like getting a loud motorcycle and riding around, gunning the engine, until people finally look at you.

The blog-o-sphere’s prophets of doom are the direct descendants of those crazy guys who used to march around with signs.

In other news, the SPX dropped 25 points today. Only another 629 to go before the Zero Hedgers can get out even on their short trades.

Rare Photo of Zero Hedge’s “Tyler Durden”

Before blogs were invented, “Tyler Durden” was doing his work the old-fashioned way. Click here to see this rare photo.

In other news, Zero Hedge “reported” on the mutual-fund flow data today. Two days ago, I predicted:

“I’m sure they will get back to “reporting” on this data just as soon as it turns bearish again.”

The report released today showed an outflow, and after ignoring it for five weeks, here is Zero Credibility resuming its “coverage”.

What did I tell you?

SPX Weekly Golden Cross

The S&P 500 index is working on a weekly “golden cross”, which is when the 50-week moving average crosses above the 200-week average. See the red line crossing above the green line (click chart to enlarge):

This doesn’t happen very often. The last cross-up occurred in the Summer of 2004:

As you can see, the market continued to rally for three more years. However, this is a very long-term view and says nothing about the immediate future. The NASDAQ-100 made its golden cross last April, just before the Flash Crash:

But even after a very extensive correction, the 50-week average did not cross back down. When the Russel 2000 small-cap index made its cross in November, I thought it might correct in the short-term, but it just kept blasting higher.

And the Vix Death-Cross started it all off in March 2010.

Note to Ticker Street: Yes, I remember the Vix Death Cross.

As a matter of fact, I invented it. If you Google “vix death cross“, you will see me at the top of 147,000 search results – unless Google shows you “personalized” results. Then there’s no telling where I might rank.

Why the Market Didn’t Crash

The market continues to shrug at the travails of Sandland. One of the reasons why is that retail buyers pumped $23.3 billion into US mutual funds over the past seven weeks. And that is the first inflows of any kind since the Flash Crash last May. Look at the right-most bars on this chart (click to enlarge):

Can this trend continue? How much more fire-power do retail buyers have? Can we assume that the money that panicked out of the market after the Flash Crash could come back in? If so, how much would that be?

Answer: $80 billion. Here is a chart showing the cumulative flows between May 2010 and now:

Additionally, the mutual-fund industry was suffering net outflows long before the Flash Crash. All the way back to the beginning of 2008, in fact. Before the flow reversed just recently, mutual-funds had lost $284 billion over the last three years.

Everybody is carrying on about who will prop-up the market after QE2 ends. Well, this is a potential answer to that question. In fact, this is exactly what the Fed has been trying to do: flush money out of the mattresses and back into the economy. The first chart above makes it clear that Bernanke may have succeeded.

Of course, something really scary could reverse the flow again. Seeing Saudi Arabia go up in flames on the teevee wouldn’t likely be shrugged off.

Note: This data comes from the Investment Company Institute, which is the official trade-organization of the mutual-fund industry. I use the data of mutual funds labeled as “investing in domestic stocks”.

Note: Zero Hedge copy-catted me and began reporting on this data last year. They posted updated charts just as soon as the data was released each Wednesday. Until the data turned bullish. Now? No more charts. I’m sure they will get back to “reporting” on this data just as soon as it turns bearish again, but in the mean time, you can always find up-to-date charts, whether bullish or bearish, at The Daily Jobs Update.

The USA’s Dependency on Foreign Imports of…

I bet you thought that the next word was going to be “oil”, right? Guess again Mr. Smartenheimer. The next words are “manufactured goods.”

In 2010, the USA imported $364.9 billion worth of goods from China.

That was more than our oil imports of $343 billion.

Staggering, no?

We are all worried about revolution in the Middle East cutting off our supply of oil, but what about a revolution in China cutting off our supply of electronics?

Libertarian economists brush off the fact that we have lost a huge number of manufacturing jobs by citing improvements in productivity. While I am sure that great strides have been made in manufacturing productivity, I have a question: If our workers are now so fabulously productive, why can’t they make the mountains of products that we import?

Riddle me that.

Yes, the USA is still the world’s largest manufacturing nation. But what is the trend?

Beating up on small countries like Iraq and Afghanistan is pretty easy for us. But what if we had to fight a prolonged land war with a real nation? Like China? We had plenty of trouble with the Chinese during the Korean War when we were a manufacturing titan and China was a nation of rice farmers in ruins after its civil war and Japanese invasion. The Chinese infantry inflicted heavy casualties on the US Marines.

Could we win a ground war in Korea today if the Chinese came in again, this time with tremendous industrial capacity?

Maybe if Mexico were on our side, and allowed us to use all the plants that we moved down there to make tanks and other weapons. But of course, Mexico has never been a US military ally. Maybe they will be nice to us in the future though. Keep your fingers crossed…

General MacArthur warned against getting into land wars in Asia. He wasn’t eager to take on Asia’s endless manpower. But now that manpower is backed-up with endless industrial capacity, which they have been able to build thanks to free access to our market.

Military experts say that the USA and South Korea could make short work of North Korea. But having American and South Korean troops on their border isn’t any more acceptable to the Chinese today than it was 60 years ago. Imagine if the Chinese sent in well-equipped ground forces while simultaneously embargoing our supply of electronics and rare-earth minerals?

MacArthur wouldn’t want anything to do with that, and neither would I. Remember the long delays in getting reinforced Humvees to Iraq? Making steel is a challenge for us now. Imagine if we were fighting a force armed with more than IEDs.

Note: To calculate oil imports for 2010, I got the total number of barrels imported from here, and multiplied it by the average price of oil (about $80) from here.

Nicholas Colas Bungles Withholding-Tax Analysis

On Sunday, Zero Hedge ran a piece by Nicholas Colas of BNY in which Colas stated that federal withholding-tax receipts were down 4% year-over-year for the month of February (through the 22nd). And he drew the exact wrong conclusion. February is in the books now and receipts were actually up 3.8%. See for yourself. First, look at the final total from February 2010 (click image to enlarge):

Inside the red box, you see $139,589, right? Now, let’s look at the final report for February 2011 that was released today:

Inside the red box, you see $144,891. And that is $5,302 higher than $139,589. And since the numbers are expressed in millions, that’s a $5.3 billion beat.

That is flat-out year-over-year growth of 3.8%.

Colas didn’t even get the sign of the number right! Ridiculous!

And there was a huge tax-cut too, right? The only rational, objective way to interpret this data is that the economy has been creating jobs at a very healthy clip. If you like, you can change “creating” into “re-instating jobs lost during the Great Recession”, but the idea that the economy is contracting, stalling, or even slowing down just doesn’t fly. As a matter of fact, things are likely accelerating, though we can’t tell for sure because the tax-cut has clouded this data.

So why did Colas get it so horribly wrong? He made a couple of rookie mistakes. First of all, he used a period that was too brief. Paychecks go out every other Friday, monthly, or twice-monthly. When comparing two periods of withholding data, you absolutely must use periods that contain equivalent pay-cycles.

Colas’s second rookie mistake was to synchronize to the calendar rather than the work week. February 2010 began on a Monday, while February 2011 began on a Tuesday. That will often make a big difference.

So, Colas didn’t use enough data, and the periods he compared were not equivalent. He calculated the right number, but for non-comparable data. Here is what Colas did:

Here is the correct way to handle this sensitive data:

Notice how I grouped the data into work-weeks (#5 through #8 of the year). Also notice that I made sure to have a complete pay-cycle.

That’s how it’s done.

Going by work-weeks, we come up with a gain of 1.71%. And I believe that is the correct interpretation. Calendar February was up 3.8%, but that should be taken with a grain of salt because the calendar was a bit out of sync.

In any case, the fact that the data is higher after a large tax-cut is pretty miraculous.

As to the markets, they may well continue to react to events in the Middle East rather than to our expanding economy.