Watch out neo-cons, liberal elites like war too…

  • Check your junk
  • Unrest
  • ‘Tiny stocks’ gone wild
  • Block your diary
  • Modern warfare has nothing to do with bombs
  • The ‘Opium Wars’

Perhaps Damon Linker, writing in The Week, summed it up best:

From the start of the 2016 Republican primaries on down through Donald Trump’s surprise electoral college victory, the transition, and the opening months of his administration, members of this foreign policy establishing and these leading politicians and pundits have been united in expressing dismay and alarm about Trump’s lack of temperamental and intellectual fitness to serve as commander-in-chief. Yet the moment Trump gave the order to launch 59 Tomahawk missiles at a Syrian airbase used in a chemical weapons attack a few days earlier, all was forgotten and forgiven. Finally Trump became president! Finally he put Syrian President Bashar al-Assad in his place! Finally the U.S. showed it had moved beyond former President Barack Obama’s reluctance to use military force!

Linker later points out that Nobel Peace Prize award winner Obama wasn’t all that reluctant to use force. He (the Nobel Peace Prize award winner) authorised the bombing of at least nine countries during his presidency. Apparently, none of these, as with Syria, were considered an act of war.

War today must mean something different to what it meant just a few years ago.

What we find most amusing is that this ‘non-war’ is entirely a consequence of the liberal media’s blood thirst for action. Even before Trump became president, and certainly after he became president, the liberal media has pushed for a hardline response to Russia on alleged interference in the US presidential election.

Now they’ve gotten what they wanted.

And as the Washington Times has noted, boy, is the liberal media enjoying the blood of war:

CNN host Fareed Zakaria said Donald Trump “became president” Thursday night when he announced to the American people that he ordered an airstrike against Syrian President Bashar-al Assad’s military.

“I think Donald Trump became president of the United States,” Mr. Zakaria said Friday. “I think this was actually a big moment.”

Gosh. If bombing things is all it takes to be presidential, it’s a wonder the US government didn’t give Timothy McVeigh the Purple Heart, rather than the electric chair.

But it wasn’t just CNN. As USA Today notes, MSNBC got in on the action too:

Brian Williams is facing online criticism for waxing poetic about what he called “beautiful pictures” of U.S. missiles launching during an attack on a Syrian air base.

During his MSNBC program, The 11th Hour, late Thursday night, Williams said the “beautiful pictures at night” tempted him to quote a line from a Leonard Cohen song: “I am guided by the beauty of our weapons.” He went on to call the images “beautiful pictures of fearsome armaments.”

If anyone thinks it’s just the neo-cons who have a thirst for war, it seems clear that the liberal left and mainstream establishment can give them a run for their money. As Donald Trump might say, (or not), ‘So sad.’


Overnight, the Dow Jones Industrial Average fell 6.72 points, or 0.03%.

The S&P 500 dropped 3.38 points, for a 0.14% fall.

In Europe, the Euro Stoxx 50 index fell 10.4 points, or 0.3%. Meanwhile, the FTSE 100 gained 0.23%, and Germany’s DAX index fell 0.5%.

In Asian markets, Japan’s Nikkei 225 index is down 251.59 points, or 1.34%. China’s CSI 300 is up 0.06%.

In Australia, the S&P/ASX 200 is up 1.5 points, or 0.03%.

On the commodities markets, West Texas Intermediate crude oil is US$53.54 per barrel. Brent crude is US$56.40 per barrel.

Gold is trading for US$1,277.5 (AU$1,704.19) per troy ounce. Silver is US$18.44 (AU$24.60) per troy ounce.

The Aussie dollar is worth 74.95 US cents.

Check your junk

Before we go on, another reminder that the name of The Daily Reckoning eletter has changed. It’s now Markets & Money. Hopefully, you’ve continued to receive the eletter directly to your inbox.

But, it’s also possible that the eletter has found its way into your junk mail under its new title. So, quickly check your junk mail folder. If you see instances of Markets & Money in there, you’ll just need to drag any one of the Markets & Money emails into your inbox, and that should ensure all future emails go straight to your inbox.

That’s important. We wouldn’t want you to miss out on any important updates, and of course, the key commentary from our colleagues, Vern Gowdie and Jason Stevenson.

Now, on with the show…


Our anti-Tesla Inc [NASDAQ:TSLA] crusade continues. Rightfully so, in our view.

And, as the Financial Times reports, it seems that, despite the soaring stock price, some investors are getting edgy too:

A powerful group of investors has called for stronger boardroom controls at Tesla to limit the influence of chief executive Elon Musk and prevent “groupthink”.

The changes should include the appointment of two new directors with no ties to Mr Musk, along with a requirement that all directors stand for re-election every year, according to a letter sent to Tesla by five investment groups.

These are the groups that we believe are in the position of having to support the company due to the size of their investments. We figure they know the whole business is on shaky ground. But they can’t sell due to the size of their investment.

If they sell anything close to a meaningful amount of stock, other investors will start to think they know something the rest of the market doesn’t, and so they’ll pour out of the stock too.

Their only option is to try to rein in some of the more pie-in-the-sky PR moves that regularly come from Tesla and Mr Musk, and try to get it and him to focus more on making the company profitable.

Ironically, that could be the one thing that reveals to investors just what a poor investment Tesla really is.

We still like the short side.

‘Tiny stocks’ gone wild

More fun and wonder at the ‘tiny stock’ end of the market.

Check out this price action from earlier today:

chart image

Source: CMC Markets Stockbroking
Click to enlarge

One stock with a 100% gain.

Three stocks with a 50% gain.

Two stocks with a greater than 30% gain.

Four stocks with 25% gains or better.

Remember, this is a single day’s price action. We’re not talking multiple days, weeks, months, or even years, to get these gains.

And what’s more, of these 10 stocks, not one has a share price above 20 cents. The biggest share price is 16.5 cents.

Yet aside from that one stock, the remainder aren’t even above four cents per share. This is what makes ‘tiny stocks’ so truly exciting. It’s the prospect of a stock going from half a cent to one cent, in a day.

Or a stock going from two cents to eight cents in the space of a week.

Or better yet, a stock going from three cents to 30 cents or more (as happened with a stock one of our premium services recommended in 2015 – clocking up a greater than 1,100% gain…in less than a year).

Further, look at that list again. We doubt if most investors could recognise a single one of those stock codes. In fairness, we don’t blame them. These stocks are tiddlers. They don’t show up on the screens of most investors, or most investment analysts.

But they are the type of stocks that do show up on the screens of one analyst. A very good one too. We’ll share more on this with you later this week. Stay tuned.

Block your diary

If you couldn’t make it to our Great Repression investment conference in Port Douglas (or even if you could), make sure you’re available in Melbourne on 9 May — that’s next month.

After a break of six years, we’re pleased to announce the return of…

‘The Doomers’ Ball’.

This was a tradition started by my predecessor, Dan Denning, I think back in 2006. The first event was above a café on Brighton Road. Apparently, about 20 people turned up.

The last one in 2011, was at the Windsor Hotel on Spring Street, Melbourne. For that one, about 200 people turned up.

This year, we’re returning to the scene of the last ‘crime’ — the Windsor Hotel. Note, it will be a ticketed event, so don’t plan on just rocking up: you won’t get in. We’re working through the final details now. It’s been a bit of a mad rush to be honest.

But we hope to make the tickets available for purchase within the next few days. We’ll keep you posted.

Return guest

Now over to Jim Rickards for the latest ‘hot take’ on the financial warfare around the world…



Very Few People Have Financial Intelligence
Jim Rickards, Strategist, Strategic Intelligence

On Wednesday 5 April 2017, I had the honour of conducting a seminar on financial warfare for a class from the US Army War College. The War College is based in Carlisle, Pennsylvania, but my seminar was conducted in New York City as part of a visit to the city by the class.

The US Army War College is not a typical educational institution. Courses are offered at the graduate level only. There is no undergraduate curriculum. Students are typically midcareer officers: captains, majors and lieutenant colonels who are preparing for senior leadership positions.

My class was even more elite than typical War College students. I taught a group of about 15 officers as part of the Advanced Strategic Art Program. These students are the best and brightest in the military who are being specially trained in strategic thinking and planning.

In five or 10 years, you can expect members of this class to achieve a general’s rank and to hold positions at the highest levels of the Defense Department, National Security Council and agencies in the Intelligence Community such as the CIA or NSA.

As I mentioned above, the subject of my seminar was ‘Financial Warfare’. The fact that the dean and program leaders had included financial warfare on the curriculum of a strategic arts program shows how financial weapons have penetrated the battlespace. 

Future leaders of the US military will not be considered versed in all of the arts of war unless they have had at least some exposure to financial weapons, tactics and strategy.

The venue for our seminar was as impressive as the class itself. We conducted the seminar at the historic 69th Regiment Armory on Lexington Avenue in New York City. The 69th Regiment is one of the most storied units in the entire US military.

The regiment was formed in 1849 by Irish immigrants. It has two nicknames: ‘the Fighting 69th’, bestowed by Robert E. Lee during the Civil War and ‘the Fighting Irish’, because of the unit’s heritage.

Today, of course, the unit is a diverse mix of Americans from many ethnicities and religions. The Fighting 69th has fought in so many campaigns that the staff of its regimental colours is specially permitted to be one foot longer than the customary length in order to hold their many battle ribbons.

The 69th Regiment fought in the US Civil War in the battles of Antietam and Gettysburg, among others; the First and Second World Wars; and the recent wars in Iraq and Afghanistan.

I was doubly honoured both by being invited to instruct in the Advanced Strategic Art Program, and by being invited inside the home of the Fighting 69th. It was indeed a memorable day.

chart image

As an aside, the 69th Regiment Armory is a historic landmark building not just because of its military connections. It was the site of the infamous 1913 ‘Armory Show’, which was the first large exhibition of modern art in America. The Armory Show outraged some American sensibilities but was a breakthrough in terms of introducing new art forms and aesthetics to an American audience.

Among the most provocative artists was Marcel Duchamp, whose Nude Descending a Staircase No. 2, exhibited at the Armory Show, is considered one of the greatest paintings of the 20th century.

Despite the military bearing of the Armory, one cannot wander its halls and interior spaces without sensing the echoes and vibrations of that long-ago explosion of modern art in America.

The seminar students included officers from the Army, Marines, Navy and Air Force. Some had military postings, while others were on secondment to the Department of Homeland Security, US Border Patrol, National Security Agency and the Defense Intelligence Agency.

The students were all heading to new assignments after completing their classwork at the War College. When the new assignments were disclosed, some just muttered ‘Hawaii’ in muted tones. They could not be more specific, but I took ‘Hawaii’ to mean the Hawaii Cryptologic Centre, HCC, on Oahu, which is the NSA’s super-secret listening post for signals intelligence from Asia.

My Seminar Presentation

My seminar plan covered two hours, of which the first hour would be formal presentation and the second hour was reserved for discussion. I encouraged the class to ask questions or interject in the first hour as well. I warned them I was perfectly capable of speaking for several hours without pausing for breath, and if they did not want to hear me go on for that long, it was in their interests to start the dialogue as soon as possible.

The students were only too happy to oblige. The questions began within minutes of the start of the presentation and kept coming. That was fine with me. That kind of interaction is the difference between a true seminar and a lecture.

The questions were among the most thoughtful and technically proficient I have ever been asked. It was interesting to me that a military audience asked more sophisticated financial questions than the typical audience of investors and economists that I routinely address. It was quite a positive testament to the preparedness of our financial war fighters among the senior officer ranks.

My presentation began by defining financial warfare as the effort to:

Degrade and defeat the capabilities of adversaries by nonkinetic means through sanctions, capital markets, banking systems, exchanges, clearinghouses and payments channels for cash, stocks, bonds, deposits, commodities, foreign exchange and derivatives. 

I unpacked this definition by explaining the difference between the banking system —– mostly about deposits, cash and money transfers — and capital markets, having to do with securities underwriting and trading and derivatives. 

I also explained the difference between exchanges and clearinghouses. In a future crisis, the role of clearinghouses may prove crucial both as a means to untangle the web of cross-obligations, and as a vulnerable node that could be the target of an enemy attack.

chart imageThis is the opening slide of the presentation I used for my financial warfare seminar conducted for the US Army War College. I made the point that financial warfare is not entirely new. Economics and geopolitics have always been closely connected. What is new is that financial warfare can be used without kinetic warfare, and can be decisive even when used alone.

I also drew links between past financial warfare and new 21st-century challenges that are strikingly similar in their dynamics.

The ‘Opium Wars’

For example, one slide discussed the Opium Wars of 1839–1860. These wars had their origins in the UK’s trade deficit with China at the time. The UK was purchasing extensive goods from China. But China did not buy anything in significant quantities from the UK, which it considered to be an inferior civilisation with nothing of value to offer. The result was a drain of precious metals, mostly silver, from the UK to China to cover the UK trade deficit.

The UK needed to find something the Chinese would buy to reduce the trade deficit. They settled on opium, a precursor drug for heroin, which they obtained from their poppy fields in the Indian Empire, then part of the British Empire.

The Chinese banned the import of opium, but the Royal Navy opened the Chinese ports by force, hence the name Opium Wars. This led to the addiction of much of the Chinese population, and eventually to the collapse of the Qing dynasty.

President Trump just met with President Xi of China to discuss the US trade deficit with China. It’s essentially the same problem the British had in 1839. Today we don’t cover the deficit with gold or silver, but with paper promises in the form of Treasury notes.

Now the shoe is on the other foot. The Chinese are the leading producer of a form of synthetic heroin called fentanyl, which is a large contributor to the opioid addiction crisis in the US today. Opioid addiction is affecting participation, productivity and early mortality in the US labour force. It’s leading to the decline of American power from within. The Chinese are doing to America what the British did to the Chinese 175 years ago, with devastating effect.

I explained to my strategic studies class that this is part of a Chinese effort to destroy US power much as the British destroyed the Qing rulers. The US–China currency wars of the early 2000s led to a trade war, which has now become a new ‘Opium War’, which the US is losing.

Wrapping up the Seminar

Other topics covered in the seminar included financial sanctions, the role of gold in transferring wealth while avoiding digital payments systems in order to escape detection and interdiction, and an endgame that could lead to the demise of the US dollar as the benchmark global reserve currency.

When the seminar was over, we were kindly treated to a tour of the Armory by its professional staff, including a film depicting the history of the Fighting 69th. The highlight for the class was a visit to the private Garryowen Club inside the Armory, which is private bar for military personnel and guests.

Then it was time for the class to prepare for the next day. Their next guest lecturer was former Secretary of the Treasury Tim Geithner. I assured the class his views on the subject of systemic vulnerability would be quite different from mine.

That’s a good thing for the Strategic Art Program participants. Exposure to diverse opinions is the essence of sound pedagogical technique. Our civilian colleges could certainly learn something about intellectual diversity from the best and brightest at the US Army War College. 

All the best,

Jim Rickards