Sunday, April 26, 2009

War Is Hell Except When It Is Heck, and Fighting Over the Difference Is Structural Bear Market Stuff

Kevin Depew at and Mish at GlobalEconomicAnalysis have each blogged persuasively that structural bear markets a la 1965-82 are characterized by social discontent.

The favorable geopolitical and economic trends that developed after the end of the Cold War, rise of the tres cool Internet, and then the fin de siecle stuff led to the greatest distribution of stock to the unwary since the late 1920s. Then the American mood changed with the stock market collapse and 9/11. Then came failure in Iraq, quaqmire in Pak-ghanistan, and then evidence followed by proof that the whole real estate story was a fraud, and with it the whole credit structure of the Western world partly collapsed. Baby boomers realized that they could not count on the stock market for retirement; it is now clear that even if it rises again, it could fall when funds are needed, so more savings and less consumption is the vogue.

The social mood is more sober. The politics reflect this. The freewheeling, roguish Bill Clinton was replaced by two apparently abstemious family men as the next two presidents.

The latest flap in Washington reflects similar dynamics that have pulled the markets down, which is intense division in the country on a core issue. That issue is whether to have a Truth Commission or similar investigation with the goal of justifying criminal charges against Bush Administration officials up to and including the former President for torture. What has already happened with the release of various memos and the promise of release of more photos is similar to Khruschev denouncing Stalin, and reflects a dark public mood, as is seen in structural bear markets.

Arguing over whether the CIA interrogation techniques were evil and criminal ("Hell") or merely abusive but not worth pursuing individuals in the courts over ("heck") looks to be reflective of negative national emotions as are typically seen in down-cycles for the stock market.

Econblog Review predicts that it will not serve the Establishment's interests to look too deeply into this matter, and that criminal charges will not be filed. For now, the publicity about this issue very much serves the interests of Big Finance, as it represents yet another distraction from the ongoing looting via PPIP, AIG conduit payments/payoffs to Big Finance, the $750 B "placeholder" in the first Obama budget proposal (which is somehow tagged to only cost $250 B!), and who knows what else.

In the meantime, America is acting more and more like Oceania, no matter who sleeps in the White House. The New York Times recently reported in United Militants Threaten Pakistan’s Populous Heart that indeed the first important foreign action of the Obama administration was an aggressive one that failed, ramping up the war in Pakistan against the Taliban that the U. S. helped to create in the 1980s:

As American drone attacks disrupt strongholds of the Taliban and Al Qaeda in the tribal areas, the insurgents are striking deeper into Pakistan — both in retaliation and in search of new havens. (Ed: If you want to be depressed and have not read it, please read the entire article via the link in the title; emphasis added.)

Tit for tat. It never ends. The military-industrial complex has joined with Big Finance for mutual profit by continually fighting in obscure places Over There. The Home Front loses, however.

If the conflict in Pakistan heats up, that war will be Hell, not heck. From an investment standpoint, the only durable beneficiaries if this catastrophe actually happens will be military companies and gold.

Copyright (C) Long Lake LLC 2009

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