Asset protection

#2 Most Read This Week: Markets Climb as World Faces Crisis

egypt-riots-2011-5“The concept of order that has underpinned the modern era is in crisis.” – Henry Kissinger
On August 28th while the geographical area formerly known as Iraq descended further into chaos, President Obama announced to the world “We don’t have a strategy, yet.” A few days later, another brave American journalist was brutally beheaded by a slickly televised cockney-accented jihadist. Clearly things are not going well outside the bubbly confines of the S&P 500. 
Last week The Wall Street Journal published an extract from Henry Kissinger’s forthcoming book, “World Order“. In it, the former Secretary of State cited Libya, ISIL, Afghanistan and “a resurgence of tensions with Russia and a relationship with China” as developments of grave concern to the United States.  Kissinger went on to warn, “The concept of order that has underpinned the modern era is in crisis.”

Kissinger noted that the era between 1948 and 2000 could be considered an “amalgam of American idealism and traditional European concepts of statehood and balance of power. But vast regions of the world have never shared and only acquiesced in the Western Anglosphere concept of order. These reservations are now becoming explicit, for example, in the Ukraine crisis and the South China Sea. The order established…by the West stands at a turning point.”

In the 20th Century, the Anglosphere was unsuccessfully challenged by Germany and Russia. The first German challenge ended with the abdication of the Kaiser in 1918. But Allied negotiators failed in a crucial test and set the stage for a brutal outcome. Although Germany was left unoccupied, its citizens were saddled with a very heavy debt load. These conditions were mutually incompatible. Soon a strong man emerged in Germany to try to throw off the Anglo yolk. Similarly at the end of the Cold War, the Soviet Union never was occupied, but hadnegotiated a peace. Implicit in the voluntary dismantling of the Soviet Union was the Russian understanding that NATO would not extend its membership to the former Soviet satellite states in Eastern Europe. 

But fired with the heady feeling of apparent ‘victory’, the Anglosphere attempted to ‘bend’ the agreed Cold War peace terms by extending NATO membership to the Baltic States, Hungary, Slovakia, Romania, and Poland. It was no secret that the Ukraine was next on NATO’s wish list. Such an outcome would have been very difficult for Russia to accept. 

Like the Germans, the Russians are a proud and tough people. While ‘acquiescing’, to use Kissinger’s term, they resented deeply this seemingly covert aggression by the Anglosphere. Under a tough, patriotic and charismatic President Putin, Russia apparently now seeks to regain some of its lost regional sphere of influence or empire. In this very limited sense, the Putin/Hitler comparison is apt.

Amazingly, the Obama Administration failed to recognize the Crimea and the land bridge to it, as a vital Russian interest. As a result, the U.S. Administration badly bungled the diplomatic response to Russia’s annexation of the territory. Far more serious is the probability that Anglo miscalculation can force greater cooperation between Russia and China and perhaps even Russia and Germany.

In his efforts to strike back at Putin, Obama’s choice of weapons defies practical sense. The trade sanctions seem to offer little except discord among the NATO allies. It was recently revealed that Germany was forced to negotiate secretly with Russia to ensure the continuation of some 40 percent of its winter energy supplies. Sensing these divisions doubtless has increased Putin’s ambitions. Now the entire Ukraine is in his sights. Over the weekend, news reports suggested a serious escalation of the conflict, which resulted in the Ukranian government shifting to a more defensive posture as Russian forces made serious territorial gains. More concerning, Obama’s misjudgments may push Germany increasingly from the Anglosphere towards the Asian sphere of Russia and China.

At the upcoming NATO meetings it is likely that, underlying some bellicose speeches, the real politicwill dictate an overriding need to find a face-saving ‘off-ramp’ or way of accepting Russia’s territorial hegemony over its “back yard.” 

In the short-term, the flow of fear-money to the U.S. likely will continue and, depending on NATO’s decision, even increase. This could help drive the U.S. dollar, equities and Treasuries to new increasingly bloated highs. Over the medium term as anti-Russian trade sanctions bite harder, likely they will deepen the looming international recession. This may inspire central banks to enact still more aggressive monetary stimulation, taking financial markets yet higher.

In light of the increasing evidence that Keynesian monetary stimulation is failing to ignite meaningful improvement in the broad economy, central banks may be tempted to create even more synthetic money. However, given the failure of past QE strategies to do much good, some central banks may try novel approaches to liquidity injection. In late August, the Council on Foreign Relations published in its Foreign Affairs magazine an astonishing article entitled,

‘Print Less But Transfer More: Why Central Banks Should Give Money Directly to the People’.

Such open signs of Keynesian desperation might magnify fears of economic recession combined with financial hyperinflation, or stagflation, and bring precious metals increasingly into play. Further, it may threaten the U.S. dollar’s Reserve status.

In short, the order that has dominated global politics for much of the past century is facing a severe test on all fronts. Unfortunately, the current leadership in Washington is woefully lacking in strategic understanding and intestinal fortitude. This is exactly the wrong combination at the wrong time. The Anglosphere’s ineptitude may even overcome the best efforts of Janet Yellen and succeed in pushing the stock market into a much needed correction.

Investor Implications Scottish Independence YES Vote Panic

scotland-trojan-horse-bank-of-englandThere is PANIC in the air as the NO Campaigns 20% opinion poll lead at the start of 2014 has now completely evaporated as the YES campaign edges into the lead with just 12 days to go.

“Whether the 300 year old United Kingdom lives or dies will be determined by as few as 4.5% of the British electorate on September 18th as only the people of Scotland, some 9% of the UK electorate have been afforded the luxury of deciding what happens to the United Island of Great Britain, and that if the tunnel visional nationalist have their way they would succeed in setting in motion its termination starting the morning of 19th of September when the world that Brit’s have know for centuries starts to unravel.”

“90% of North Sea oil revenues come from Scottish waters”

….continue reading more from the Market Oracle  Scottish Independence YES Vote Panic – Scotland Committing Suicide and Terminating the UK?


Scottish Independence Vote: Investor Implications

By: Axel G. Merk, Merk Investments

Is your portfolio’s fate dependent on Scotland’s? Why is it that when a place known for haggis, kilts and bagpipes indicates it might want to be independent, the markets pay attention?

The usually rather boring pound sterling jumped to life in recent days, becoming one of the world’s most volatile currencies. The trigger was a poll that suggested that the pro-independence camp in Scotland might hold the upper hand in the September 18, 2014 vote. Until recently, that event risk had not been priced in. All else equal, greater volatility warrants a lower price for an instrument (a security or currency). Prudent risk management takes into account the riskiness of the instrument.

Before we discuss specifics for Scotland, I would like to remind everyone that we are literally asking to be surprised by event risks of this sort in general as markets have been rather sleepy- evidenced by low volatility. In our assessment, this lull is a direct result of quantitative easing and related efforts by central bankers around the world that make risky assets appear less risky. Except, of course, the world is a risky place. So when something does pop up, the markets are taken by “surprise.” Just as the sterling fell sharply, the same could happen to the S&P 500 or any other investment. After all, keep in mind that the independence vote is not news; neither is the fact that the yes-vote has been gathering steam. In this complacent market environment risks are being suppressed until they can’t be ignored any longer – then they break out with a vengeance. It’s in this context that investors may want to stress test their portfolios in general- the lack of volatility in your portfolio may be deceiving.

Event risk means that once the event is over, reality ought to settle in. If the vote is NO, i.e. Scotland remains part of the UK, it might cause a relief rally in the sterling. However, if the vote is YES, the outcome isn’t all that obvious. Notably, while everyone is now glued to watching each poll, is Scottish independence, in the short-run might mean more uncertainty as it could trigger, amongst others, a challenge to Prime Minister David Cameron’s government; there’s also a lot of uncertainty around what might happen to the North Sea oil assets. But let’s not forget that Scotland comprises less than 10% of Britain’s GDP. Let’s also not forget that when a country splits up, there may be a flight of mobile capital to the stronger. While Scots rightfully show that that they do quite well based on numerous economic measures, the vulnerability remains with Scotland, as it has to play catch-up with institutions building: what happens if depositors move their deposits from Edinburgh to London? An asset-liability mismatch for the financial sector could be rather precarious as the Scottish financial system is about thirteen times Scotland’s GDP. If there is no access to a lender of last resort, it could destabilize Scotland.

The European Union, in our assessment, will initially play tough, arguing that Scotland will have to apply (and fulfill all criteria) to become an EU member, but ultimately would like an independent Scotland to become a member. Conversely, Scotland may try to take hostage some oil assets. In short, it will be haggling over haggis – a solution to many issues will be negotiated. This would take time.

There’s a silver lining in all of this:


  • Greater volatility is good. It’s not good for asset prices, but it’s good for the price discovery process and, as such, the long-term health of one’s portfolio. It’s not healthy that risky assets appear almost risk free, as it encourages capital misallocation, thus inducing bubbles and subsequent crashes.
  • Greater volatility is good for currency investors. You may argue you don’t care about those currently speculators, but you should, as 30% to 50% of international equity returns are due to currency moves. If you hedge out currency risk you are missing opportunities. If you ignore currency risk, you are taken for a ride. Active management of currency risk is something prudent investors may want to consider – and the latest flare-up may be the canary in the coal-mine that it’s about time investors take currency risk seriously.
  • Opportunities are being created. The same poll that suggested Scots will vote for independence also suggested 44% of Scots believe Scotland would be worse off economically as an independent country (vs 35% thinking Scotland would be better off); similarly, 41% of Scots thought they would be personally worse off with Scotland as an independent country (21% thought they would be better off). To me this suggests a proud Scot may well indicate in a poll that they favor independence, but it doesn’t mean they’ll vote that way. In a world where asset prices are expensive, it’s refreshing to see value opportunities in the markets. And if there’s a ‘YES’ vote, the opportunity may get even better.


On Tuesday, September 16, 2014, please join me for a “fireside chat.” We will make most of the hour available for you to ask questions. Please register to participate. We no longer record our webinars (the regulatory overhead is too much hassle), so join live to get answers to the questions you always wanted to ask.

If you haven’t done so, also make sure you sign up for Merk Insights. If you believe this analysis might be of value to your friends, please share it on your favorite social media site.

Axel Merk

Axel Merk is President and Chief Investment Officer, Merk Investments, 
Manager of the Merk Funds.


Shocking Events — Past, Present and Future

This is a landmark time. 

Just look around you. Look at what’s happening in the world. Clearly, you will see that we are nearing a tipping point for us all.

Thirteen years minus nine days ago, a small group of terrorists attacked the very heart of our nation, setting off a tragic chain of events that have continued to ricochet through time, with a tremendous cost in life and treasure …

image1The fall of Saddam Hussein …The U.S. invasion of Iraq …

The emergence of al-Qaeda in Iraq, and now …

The rise of ISIS, the most brutal, most powerful terrorist organization of all time, bringing us around full circle to the danger of larger terrorist attacks on our soil.

At the same time, in parallel to the global war on terror, we’ve also had a global war on financial crisis.

Fifteen years ago, well before al-Qaeda’s first attacks on America, our tech stocks began to crumble. Over $5 trillion in equity value was wiped out. Our entire economy was temporarily paralyzed. And what’s worse, that crisis set off a tragic chain of economic events that also continue to ricochet through time …

Radical interest-rate cuts …

A great housing bubble — and BUST …

The emergence of a deadly debt crisis …

And now, the most risky and largest Fed money-printing operation of all time.

This chain of events has made the rich — especially wealthy Wall Street institutions — richer. But it has also wiped out vast amounts of invested wealth; the hard-earned savings of millions of everyday Americans.

It has propelled many investors to take unprecedented risks. And it is likely to bring us around full circle to the brink of another, potentially bigger, financial crisis.

So there you have it. The global war on terror. The global war on financial crisis. Two parallel and powerful historical sequences that are gaining momentum and reaching a crescendo.

Just bear in mind that not all is black and white.

For example, in a simplistic view of the world, global conflicts would automatically impact negatively. But that’s not always the case.

In fact, as Larry Edelson has correctly pointed out, right now, troubles overseas are driving large sums of fear money into the U.S. stock market, pushing our stock prices UP — not down.

And as Mike Larson has written, some of that flight capital is also flowing into key U.S. sectors, such as real estate and energy.

This is one reason why our markets have been going up. Another reason is the Federal Reserve. Years ago, bad economic or political news meant bad news for investors — a rationale for avoiding stocks.

But today, the Fed uses bad news as an excuse to pump up the stock market and inflate the economy even more — with tactics that would have been unthinkable years ago. Plus, some stocks have been soaring regardless of the fear money or Fed money, based on their own merits.

One of our readers, John R. has done an excellent job of voicing our readers’ most urgent concerns:

“I am 78 years old and retired after roughly 35 years in the investment management business. There are so many things that worry me, domestically, financially, as well as in the global situation, I don’t know where to start. We have:

“1. Debt levels never seen before with a slim chance or intent to pay them back.

“2. The threat of the US dollar losing its reserve currency status sooner than most people now predict.

“3. A worsening geopolitical situation throughout the world, and no evident world leader stepping up.

“4. For the first time in my life, the threat of radical Islamic terrorism right here in the US.

“5. A nation that’s more divided than any time since the American Civil War.”

John, I couldn’t have said it better myself.

In this environment, the first pitfall to avoid is the thousands of stocks in the world today that seem attractive on the surface, but, in reality, are pure garbage. They’re illiquid, poorly managed, and high risk. And I’d like to send you a complete list of them.

The second pitfall is the traditional buy-and-hold approach to investing. If you want to avoid portfolio-busting losses in a world with tremendous uncertainties, it’s simply not wise.

But the third pitfall is to simply withdraw from investing entirely, even while there are so many new opportunities to build your wealth.

Coming Next

My Ultimate Portfolio

More so than ever before, with the world in constant turmoil and Washington in eternal gridlock, the onus for defining your destiny falls squarely on you.

Wealth building is no longer an option; it’s a must. You will need money in order to insulate yourself from the geopolitical and political threats, to live in the world’s safest places, to be less dependent on the job market, to better secure your retirement, and to preserve your personal freedoms.

That’s what my goal is, both for myself and for our readers. And next up, I plan to give you what I believe is the ultimate wealth-building strategy to achieve all of the above.

This is a critical time for all of us. But by working together, we can get through the tumultuous days ahead in safety and comfort.

Good luck and God bless!


Martin D. Weiss, Ph.D.

Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40 years to helping millions of average investors find truly safe havens and investments. He is president of Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. And he is the chairman of the Sound Dollar Committee, originally founded by his father in 1959 to help President Dwight D. Eisenhower balance the federal budget. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recesssion and Depression.

How is Doug Casey Preparing for a Crisis Worse than 2008? He & His Fellow Millionaires Are Getting Back to Basics

Trillions of dollars of debt, a bond bubble on the verge of bursting and economic distortions that make it difficult for investors to know what is going on behind the curtain have created what author Doug Casey calls a crisis economy. But he is not one to be beaten down. He is planning to make the most of this coming financial disaster by buying equities with real value—silver, gold, uranium, even coal. And, in this interview with The Mining Report, he shares his formula for determining which of the 1,500 “so-called mining stocks” on the TSX actually have value.

The Mining Report: This year’s Casey Research Summit is titled “Thriving in a Crisis Economy.” What is the most pressing crisis for investors today?

Doug Casey: We are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different and longer lasting than what we saw in 2008 and 2009. Investors should be preparing for some really stormy weather by the end of this year, certainly in 2015.

TMR: The 2008 stock market embodied a great deal of volatility. Now, the indexes seem to be rising steadily. Why do you think we are headed for something worse again?

DC: The U.S. created trillions of dollars to fight the financial crisis of 2008 and 2009. Most of those dollars are still sitting in the banking system and aren’t in the economy. Some have found their way into the stock markets and the bond markets, creating a stock bubble and a bond superbubble. The higher stocks and bonds go, the harder they’re going to fall.

TMR: When Streetwise President Karen Roche interviewed you last year, you predicted a devastating crash. Are we getting closer to that crash? What are the signs that a bond bubble is about to burst?

DC: One indicator is that so-called junk bonds are yielding on average less than 5% today. That’s a big difference from the bottom of the bond market in the early 1980s, when even government paper was yielding 15%.

TMR: Isn’t that a function of low interest rates?

DC: Yes, it is. Central banks all around the world have attempted to revive their economies by lowering interest rates to all-time lows. It’s discouraging people from saving and encouraging people to borrow and consume more. The distortions that is causing in the economy are huge, and they’re all going to have to be liquidated at some point, probably in the next six months to a year. The timing of these things is really quite impossible to predict. But it feels like 2007 except much worse, and it’s likely to be inflationary in nature this time. The certainty is financial chaos, but the exact character of the chaos is, by its very nature, unpredictable.

TMR: Casey Research precious metals expert Jeff Clark recently wrote in Metals and Mining that he’s investing in silver to protect himself from an advance of what he calls “government financial heroin addicts having to go cold turkey and shifting to precious metals.” Do you agree or are you more of a buy-gold-for-financial-protection kind of guy?

DC: I certainly agree with him. Gold and silver are two totally different elements. Silver has more industrial uses. It is also quite cheap in real terms; the problem is storing a considerable quantity—the stuff is bulky. It’s a poor man’s gold. We mine about 800 million ounces (800 Moz)/year of silver as opposed to about 80 Moz/year of gold. Unlike gold, most of silver is consumed rather than stored. That is positive.

On the other hand, the fact that silver is mainly an industrial metal, rather than a monetary metal, is a big negative in this environment. Still, as a speculation, silver has more upside just because it’s a much smaller market. If a billion dollars panics into silver and a billion dollars panics into gold, silver is going to move much more rapidly and much higher.

TMR: Are you are saying that because silver is more volatile generally, that is good news when the trend is to the upside?

DC: That’s exactly correct. All the volatility from this point is going to be on the upside. It’s not the giveaway it was back in 2001. In real terms, silver is trading at about the same levels that it was in the mid-1960s. So it’s an excellent value again.

TMR: In another recent interview, you called shorting Japanese bonds a sure thing for speculators and said most of the mining companies on the Toronto Stock Exchange (TSX) weren’t worth the paper their stocks were written on, but that some have been priced so low, they could increase 100 times. What are some examples of some sure things in the mining sector?

DC: Of the roughly 1,500 so-called mining stocks traded in Vancouver, most of them don’t have any economic mineral deposits. Many that do don’t have any money in the bank with which to extract them. The companies that I think are worth buying now are well-funded, underpriced—some selling for just the cash they have in the bank—and sitting on economic deposits with proven management teams. There aren’t many of them; I would guess perhaps 50 worth buying. In the next year, many of them are likely to move radically.

TMR: Are there some specific geographic areas that you like to focus on?

DC: The problem is that the whole world has become harder to do business in. Governments around the world are bankrupt so they are looking for a bigger carried interest, bigger royalties and more taxes. At the same time, they have more regulations and more requirements. So the costs of mining have risen hugely. Political risks have risen hugely. There really is no ideal location to mine in the world today. It’s not like 100 years ago when almost every place was quick, easy and profitable. Now, every project is a decade-long maneuver. Mining has never been an easy business, but now it’s a horrible business, worse than it’s ever been. It’s all a question of risk/reward and what you pay for the stocks. That said, right now, they’re very cheap.

TMR: Let’s talk about the U.S. Are we in better or worse shape as a country politically and economically than we were last year? At the Casey Research Summit last year, I interviewed you the morning after former Congressman Ron Paul’s keynote, and you said that you hoped that the IRS would be shut down instead of the national parks. There’s no such shutdown going on today, so does that mean the country is more functional than it was a year ago?

DC: It’s in worse shape now. The direction the country is going in is more decisively negative. Perhaps what’s happening in Ferguson, Missouri, with the militarized police is a shade of things to come. So, no, things are not better. They’ve actually deteriorated. We’re that much closer to a really millennial crisis.

TMR: Your conferences are always thought provoking. I always enjoy meeting the other attendees—it’s always great to talk to people from all over the world who are interested in these topics. But you also bring in interesting speakers. In addition to your Casey Research team, the speakers at the conference this year include radio personality Alex Jones and author and self-described conservative paleo-libertarian Justin Raimondo. What do you hope attendees will take away from the conference?

DC: This is a chance for me and the attendees to sit down and have a drink with people like Justin Raimondo and author Paul Rosenberg. I’m looking forward to it because it is always an education.

Another highlight is that instead of staging hundreds of booths of desperate companies that ought to be put out of their misery, we limit the presenting mining companies in the map room to the best in the business with the most upside potential. That makes this a rare opportunity to talk to these selected companies about their projects.

TMR: We recently interviewed Marin Katusa, who was also excited about the companies that are going to be at the conference. He was bullish on European oil and gas and U.S. uranium. What’s your favorite way to play energy right now?

DC: Uranium is about as cheap now in real terms as it was back in 2000, when a huge boom started in uranium and billions of speculative dollars were made. So, once again, cyclically, the clock on the wall says buy uranium with both hands. I think you can make the same argument for coal at this point.

TMR: You recently released a series of videos called the “Upturn Millionaires.” It featured you, Rick Rule, Frank Giustra and others talking about how you’re playing the turning tides of a precious metals market. What are some common moves you are all making right now?

DC: All of us are moving into precious metals stocks and precious metals themselves because in the years to come, gold and silver are money in its most basic form and the only financial assets that aren’t simultaneously somebody else’s liability.

TMR: Thanks for your time and insights.


International investor Doug Casey, chairman of Casey Research, LLC, has written several books on crisis investing, including the groundbreaking “Crisis Investing: Opportunities and Profits in the Coming Great Depression” (1979). He has appeared on NBC News, CNN and National Public Radio, and he’s been featured in periodicals such as Time, Forbes, People, Barron’s and The Washington Post. He has also written countless articles for his own publications.

Want to read more Mining Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page. 

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1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. 
2) Doug Casey: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
3) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.



Dead Ahead: Big Black-Swan Events!

A subtle, but fundamental, shift — not yet widely discussed in financial circles — is sweeping the globe, with enormous potential consequences for the U.S. economy, for investors and for you personally:

The old global war on splintered terrorist cells
and ragtag militias is turning into a global war
against fully armed, well–organized armies.

This is happening in all three theaters of war that are currently at the top of the news — in Iraq and Syria, in the region surrounding Israel, and in Ukraine.

It’s causing a rapid, tectonic shift in strategy-making at the Pentagon, in the White House and in Congress.

It could cast a long shadow on nearly everything that Washington does to the U.S. economy — warping the federal budget … prodding still more Fed money printing … and creating all kinds of new excuses to pursue reckless, unsound policies.

And it’s likely to trigger a series of black-swan events — powerful, unpredictable changes that strike like a comet from distant space.

So, first, let me demonstrate for you the enormity of this change. Then, I’ll explain the economic and investment consequences.

Iraq and Syria: ISIS is Already a Full-Fledged Army

ISIS used to be viewed as just another al-Qaeda affiliate among the dozens of groups that have sprouted up like wildfire across Africa and Asia — all competing for recruits, few coordinating their activities.

Today, after months of prescient warnings that fell on deaf ears, that idea is finally being recognized for what it was: naïve and dangerous.

According to the New York Times, “ISIS’s success has alarmed American and regional security officials, who say it fights more like an army than most insurgent groups, holding territory and coordinating operations across large areas [with] a network of regional commanders who have their own subordinates and a degree of autonomy.”

ArabThe leadership structure, explains the Times, includes 25 deputies across Iraq and Syria, among which about one-third were military officers during the rule of Sadam Hussein, and nearly all were at one time imprisoned by American forces.

Behind this are the recent successes of an ISIS campaign to free hundreds of militants from Iraqi prisons, including intelligence officers and soldiers that had been leaders of Sadam’s elite Republican Guard. Moreover, many are graduates from Sadam’s military academies and are highly skilled strategists with years of experience fighting U.S. forces.

Now, with its control of large populated areas, ISIS is likely leveraging this experience to recruit and train tens of thousands of unemployed, disaffected youth. At the same time, for the global recruitment of jihadists, ISIS has turned mostly to foreigners, including Saudis and Westerners with advanced media and propaganda skills.Behind this are the recent successes of an ISIS campaign to free hundreds of militants from Iraqi prisons, including intelligence officers and soldiers that had been leaders of Sadam’s elite Republican Guard. Moreover, many are graduates from Sadam’s military academies and are highly skilled strategists with years of experience fighting U.S. forces.

Result: Both locally in the region and internationally across four continents, ISIS is like a jolt of electric-magnetic energy that’s transforming a messy, disjointed terrorist field into an aligned, singularly focused, global terrorist army. Now, mostly in Syria and Iraq; soon, also in Africa, Europe, North America and Asia.

But this isn’t the first time a terrorist organization has evolved into an army …

Lebanon and Syria: Before ISIS, Hezbollah
was the Largest Terrorist Army in the World

arab2According to The Tower Magazine, a reliable source on Israel and the Middle East, before ISIS burst onto the scene, it was Hezbollah that was “probably the world’s largest, most sophisticated, wealthiest and most militarily capable terror organization.” They explain how …

  • Hezbollah, a Shiite organization, was created, trained, funded and deployed as a proxy of the Iranian government, with operations spanning Europe, Africa, Asia, and the Americas.

  • It has effectively taken over the Lebanese government.
  • It has launched thousands of rockets at Israeli civilians.
  • It has killed more Americans than any other organization other than al-Qaeda.
  • And it is a fearsome weapon in the jihadist anti-Western arsenal.

The only saving grace: It’s vehemently opposed to the Sunni ISIS; and in the Syrian civil war, thousands of its fighters have been directly confronting ISIS armies on the battlefield.

Ukraine: Rebel Militias Replaced by Russian Army

Until just a few days ago, the Western-backed Ukrainian army was on the verge of defeating Russian-backed militias seeking to establish a break-away region aligned with Moscow.

arab3And even if Ukraine’s central government could not achieve victory, NATO and Russian forces always were two steps removed from a direct confrontation. Both were fighting a proxy war; neither involved in direct conflict.

Now, suddenly that has changed.

Now, the Western-backed Ukrainian troops are no longer making steady advances against inexperienced, oft-disorganized and extremely discouraged, local militias; they are retreating in panic from the vanguard of one of the largest, best-organized invading forces on the planet: the Russian army.

It seems, in fact, that Russian President Putin’s strategy is to escalate its penetration into Ukraine in three phases:

Phase 1 was his so-called “humanitarian convoy” that defied the International Red Cross and crossed the border into Ukraine without IRC inspection or escort two weeks ago.

Phase 2 is Russia’s stealth invasion, now under way, using unmarked armament and troops. Despite Mr. Putin’s repeated denials, evidence is now virtually conclusive that his army has crossed into Ukraine and reached the battlefields on two separate fronts.

And it looks like Phase 3 will begin soon after he publicly admits the presence of his troops — an admission that I believe will presage an unabashed, all-out invasion by the Russian armed forces.

How big is the Russian military? Nominally speaking, it’s estimated to have 766,000 active personnel, about one-half as many as the U.S. But it also has 2.5 million reservists, three timesas many as the U.S.

Meanwhile, Russia’s total tank strength is massive — over 15,000 units or nearly double America’s. And its self-propelled guns (SPGs) number close to 6,000, also triple the U.S. arsenal. Both these tanks and SPGs could be critical on the Ukrainian battlefield.

I’m not implying that the U.S. or NATO will confront Russia on an Eastern European battlefield. NATO commanders have effectively vowed not to do so unless Russia invades a NATO-member nation, such as those with large Russian-speaking minorities, like Estonia, Latvia and Lithuania.

Rather, my points are twofold:

First, Russia has tremendous military resources to spare. It could easily and quickly overwhelm the Western-backed Ukrainian army with just a small fraction of its forces. Moreover, given the West’s implicit vow not to respond militarily, it could do so with almost total impunity.

Second, the only way Western Europe and the U.S. can or will retaliate is via sanctions on Russia. But unlike any previous sanctions, they will not be constrained or contained. Nor will Russia’s response. For the first time, Western Europe and the U.S. will hit hard with actions that cripple Russian industry, gut their stock market, and set off a far more dangerous round of tit-for-tat East-West economic warfare.

Don’t Underestimate the Economic
and Investment Consequences!

That’s the mistake most analysts and investors have already made — repeatedly. But you can be different. You can step back from the trees of day-to-day trading and see what many experts have been largely ignoring, what has been obvious to Larry Edelson and our Money and Marketsteam for many months:

Consequence #1. The movement of flight capital to the United States is large and accelerating. The main reasons: Despite all of our internal troubles and fumbles, the United States …

* Still sits at the pinnacle of all military forces in the world, with no peer in terms of advanced weaponry, warships and air power.

* Still boasts the largest economy in the world.

* Still has the strongest alliances with the largest number of countries.

* Already has new drilling technologies to achieve the long-sought goal of energy independence.

If we slide further down our current fiscal and monetary path, could this change? Absolutely. But right now, the U.S. continues to be the single most secure and dominant economic/military power on the planet; and that helps explain why flight capital from all over the world continues to flow into the U.S.

Not just from frightened families in the Arab world, as I illustrated here last week, but also from …

* Major banks and other financial institutions still heavily invested in North Africa, the Middle East, Pakistan and other hot spots.

* Russian oligarchs, who have already moved a good portion of their big cash hoards out of Russian banks, and are now taking the rest …

* Japanese pension funds and institutions, who had invested heavily overseas in recent years, and are now shifting from what they consider “hot zones” (like the Persian Gulf and North Africa) to what they deem “safe zones” like the U.S. and Japan itself.

* Massive sovereign wealth funds that are so large, even small moves can have a big market impact. I’m talking about Norway’s Government Pension Fund (with $893 billion in assets), UAE’s Abu Dhabi Investment Authority ($773 billion), Saudi Arabia’s SAMA Foreign Holdings ($738 billion), and China’s three largest sovereign funds (over $1.5 trillion), just to name the largest.

* Plus many other sources of flight capital, some hidden or some not.

This helps explain why the U.S. stock market has been going up and could continue to do so.

It also helps explain why U.S. real estate, especially in key markets, is recovering.

Consequence #2. Escalating economic warfare with Russia; a closer alliance between Russia and China; and bigger efforts by both to draw unaligned developing nations into their fold.

Consequence #3. Big new strains on the shaky U.S. federal budget: In Eastern Europe, NATO members are already pleading for — and about to get — more NATO forces. In Washington, the Pentagon is already pushing for money to finance a stronger U.S. military presence globally. And all over the U.S., Americans, who, just weeks ago, were still demanding cutbacks in military spending, are now pleading for big increases.

Consequence #4. More Fed funny money, or worse! If the U.S. is waging all-out economic warfare with Russia and China … if the U.S. budget deficit is going haywire again … and if all this begins to look like a new black cloud hovering over the U.S. economy …

The Federal Reserve is not going to stand idly by. It will do everything in its authority — or evenoutside its authority — to offset the real or imagined impacts on the financial markets, the job market, the real estate market and more.

What exactly will the Fed do? Too soon to say. But at the very minimum, it could use these new threats to the economy as another in a long line of excuses to delay what it should have done long ago — sopping up some of the $4 trillion in stimulants that it has injected into the economy bloodstream since 2008.

And this is just the beginning! If military and economic warfare continue to escalate globally, there’s no crystal ball that can divine the ultimate consequences. That’s why this environment is so prone to black-swan events.

My recommendations:

1. Tomorrow, just before noon Eastern Time, click here to attend my special online video briefing.

2. Continue to seize the opportunity to profit from the select investments we’ve been pointing you to — in sectors like domestic energy and technology.

3. Keep core, long-term positions in cash and gold — not only to protect yourself against financial threats, but also to help cushion against the inevitable black swans.

Good luck and God bless!


Martin D. Weiss, Ph.D.

Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40 years to helping millions of average investors find truly safe havens and investments. He is president of Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. And he is the chairman of the Sound Dollar Committee, originally founded by his father in 1959 to help President Dwight D. Eisenhower balance the federal budget. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recesssion and Depression.

The investment strategy and opinions expressed in this article are those of the author and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

Quite The Quagmire – “On the precipice of another collapse”

3737990 origWe, like many others, have been watching the increasing turmoil in the Middle East, contemplating the effects recent events have been having the financial markets, as well as their political implications. Looking back on US involvement in the region, it’s hard not to get a salty taste in our mouths. After all the sacrifice by American military families, we’ve accomplished little more than the destabilization of the region.

Yes, in the course of our intervention we eliminated some very brutal dictators, but we did so without adequate understanding of how that part of the world operates. This naivety has prevented us from installing a stable government since toppling regimes. In the end, it’s hard to argue that we’ve made life any better over there for the average person.

Militarily and politically, the United States should absolutely be withdrawing from the Middle East. While this would almost certainly escalate local strife to an event greater magnitude (in the near term), US involvement in these regional conflicts is beginning to resemble Vietnam more and more.

The only problem with a potential withdrawal is that currently the US economy is in such a state that it can’t support returning troops. There would be disastrous results from a sudden influx of labor when unemployment is already high; or of consumers when prices are already rising.

However, these are not justifications for leaving troops on the ground in the Middle East. Rather, it is further evidence of the lack of intelligence on the part of US central planners.

Frequent readers of our columns and listeners to our radio updates know that we often talk about the law of unintended consequences. This, however, is the law of unforeseen implications. The problem arises when power is concentrated among a small group of people who are incapable of seeing past next week.

One of the primary benefits of free and open markets is that they have a smoothing effect. Radical swings are often prevented when millions of people are competing with each other in pursuit of their own self-interests, and things are far smoother than when power is concentrated among just a few market movers.

As an added benefit, the collective intelligence of crowds is almost always greater than small groups or individuals. However, studies have shown that when power is focused among just a few people, not only do those people demonstrate less intelligence than crowds, but they are also more confident in their abilities – even though that confidence is more often misguided.

We see examples of this all the time. In financial markets, the Federal Reserve is almost the only market participant that matters. Everyone else involved with the markets is constantly watching to see what the Fed does, even though they more often than not do precisely the wrong things.

Likewise, in recent decades political power has been more focused in the White House (as opposed to Congress or the courts). This has happened despite the inability of people who occupy the Oval Office to understand the dynamics of regions in which they meddle. The result has been that they do things that change the world without an adequate understanding of why things are as they are; obviously a poor recipe for positive and sustainable change.

Now, after years of unintelligent actions by poor central planners, the United States finds itself in a quagmire. We’re trapped in a series of conflicts, none of which we can win, with no clear set of goals or any end in sight. Our economy has suffered collapse and failed to see any significant rebound because those who guide our monetary policy have tried to keep inflation at bay, with the result that a whole new set of bubbles has formed in the meantime. This has placed our economy on the precipice of another collapse, except that we have nowhere left to fall and no tools left to stem the calamity, much less any ability to reabsorb the heroes we sent abroad to help a people we didn’t understand.

About Dock Treece

Dock David Treece is a partner with Treece Investment Advisory Corp ( and is licensed with FINRA through Treece Financial Services Corp. He provides expert content to numerous media outlets. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.