The Gladstone
Economic Newsletter
Volume 18, No. 12
October 9, 2023
Hamas-Israel War Not What It Appears?
A Push Closer to a Market Collapse?
DISCLAIMER: The following is not intended as investment advice, but is rather intended to promote your own analysis of markets and the economic climate. The author is not a registered investment professional. Any action taken as a result of this analysis carries a high degree of risk. This newsletter contains the personal opinion of the author.
Dear Readers-
The explosion of the conflict in Gaza and Israel on Saturday, October 7th, caught the world by surprise. Or at least they say. Israelis and others are bemoaning the fact that the vaunted Israeli intelligence service had no inkling of the launch of the attacks by Hamas and the storming of Israeli settlements and border posts. The timing of these attacks caught a “rave” festival near the border by surprise, resulting in a lot of deaths among the concertgoers and the taking of many hostages. Numbers of concertgoers escaped, but videos show a shot up, burnt out column of cars which may have been from the concert.
How did this intelligence failure happen, given Israel’s huge number of paid informers in Gaza? The answer is that it may not have been an intelligence failure. The US and Israel had to know this (or something like it) was coming. Rafi Farber, of the End Game Investor channel on Youtube, is a devout Jew who lives in Israel. He reported yesterday that there are reports that Israeli Army units were ordered to not engage the Hamas fights, and that it took seven hours for the Israeli Army to make any real response. There are other things that make no sense about this whole affair.
Now, the modern Israeli Army is nothing like the Israeli Army of 1967 and 1973. This reflects the general changes in Israeli society, just as the current US Army reflects the general changes in US society (read destruction of societal values). How do I know this? Well, I have read Joel Chasnoff’s 2010 book “The 188th Crybaby Brigade- A Skinny Jewish Kid from Chicago Fights Hezbollah.” It is not a great book, but Chasnoff laments the lack of physical fitness in the Israeli Army recruits, the fact that one half of the draftees have doctor’s notes precluding active military service (even allergies qualify) and serve in the ammunition manufacturing plants instead, and the general disfunctionality of the modern Israeli Army. For the record, after the Obama- Biden years, if the modern US Army gets into a fight with an army like Russia’s, I assume we would be toast. Enough said.
Why would anyone want this war to start? Well, here are some of the theories:
1. Israel and Saudi Arabia appear to be on the brink of a peace treaty (beyond the Abraham Accords), and Iran does not want this. Part of the deal was said to be increased oil production from Saudi Arabia in order to bring down US gasoline prices for the election.
2. The Netanyahu government in Israel almost fell this summer from the protests over the proposed judicial reforms. Netanyahu had to rescind these “reforms.” Numerous Israeli servicemen announced they would not serve in protest. Bibi Netanyahu desperately needed a “Pearl Harbor” type crisis to bring Israel back together, and this is the perfect event.
3. Nato and Biden Administration desperately needed a large distraction from the huge impending military disaster in Ukraine. The Hamas war is perfect for this too.
I could go on with other theories that include the Hamas-Israel conflict might cause Iran not to go into BRICS, might provide a pretext for Israel to attack the nuclear facilities in Iran, that with the US tied down supporting conflicts in Ukraine and Israel this opens a window for China to attack Taiwan, etc. The point I am trying to make is that the timing of the Hamas attack and the seeming “intelligence failure” is not what it appears. How this all plays out will have to be seen in future events.
One further point, the media has been making a huge event of the US moving the USS Gerald Ford carrier group into the eastern Mediterranean to respond to this crisis. Some of us actually look every two weeks or so where the US carrier groups actually are. Out of the 14 US aircraft carrier groups, only one or two are actually at sea at any point in time. With this limited availability of US carriers active at sea, about two months ago I noted that the Gerald Ford group was posted to….the Eastern Med. I asked myself why was the Ford carrier group there? It couldn’t be Ukraine, as the Ford would not be allowed to transit into the Black Sea. Well, I guess I got an answer yesterday. The Ford was already in place for weeks before Hamas even made its move.
As some of you know, the author is a long time member of the US mining industry. The US mining industry is under even larger attack than normal under the Biden Administration. I have added the following meme, which is some dark humor:
On to the economy. The following chart of Purchasing Managing Index results per country shows that the entire world is seeing a pronounced hit to economic activity. The exception of note is Russia, for which the economic sanctions imposed by the G7 were a work of intellectual and practical brilliance!
Gunjan Banerji posted the following chart to Twitter (none of this “X” nonsense for me!) showing that one third of the Russell 2000 public companies are “zombies”:
In the US economy, small businesses make up the large majority of property lessees. Small businesses are dying in large numbers. The following chart shows the number of companies unable to pay commercial rents is now 40 percent. Bidenomics sure is working!
Continuing on the theme of Bidenomics, it appears the sole objective of Bidenomics is to destroy the core US economy. Bidenomics has many active collaborators in this objective, including an American billionaire who just
“announced this week an additional $500 million commitment to end coal-fired generation in the U.S., block all new natural gas plants, and slash gas plant capacity by half by the end of the decade. “
This is at a time when China is adding every coal fired electrical power plant that it can. China is even opening a new 1100 kilometer rail line dedicated to hauling coal from Inner Mongolia. The US and the rest of the West is committing economic suicide.
In talking of committing suicide, Visual Capital compiled the following graphic showing the largest shareholder losses in the US equity markets, of all time. Number 21 is Doordash and Number 23 is Snowflake (who the heck would buy shares in a company called Snowflake?)
To end this newsletter, let’s briefly discuss the ongoing huge human tragedy that is Ukraine. Everyone has “Ukraine fatigue,” and they are very tired of even hearing the name “Ukraine.” However, if you refer to PMI chart as above, Ukraine is a key determinant of the world economy at this point. The US and NATO continue to double down on the biggest losing hand in the last century. I have argued that actual NATO personnel have been fighting in Ukraine for some time. As an example, Sputnik reported that a Leopard 2 tank was destroyed complete with a crew of German Bundeswehr personnel in the Zaporozhe region. “Legend” is a member of the Russian reconnaissance group that achieved this:
“When we curbed another offensive and ATGM-ed [destroyed with an anti-tank guided missile] the Leopard, we moved out to the burned vehicle hoping to seize the ‘tongue.’ Then we saw that the crew’s driver-mechanic was severely injured and the others were dead. Once he awoke, the mechanic started yelling ‘nicht schießen’ [“do not shoot” in German],” the commander of the reconnaissance group said.
According to Legend, the driver stated that he was not a mercenary but a German service member and that he and the rest of the crew were members of the same Bundeswehr unit.
The alleged German service member named his brigade and revealed its deployment position while receiving medical aid, the commander said, adding that he died from his wounds minutes after he was found despite efforts to save him.”
Here is the link to the story:
The killing in Ukraine has to end. It appears that Russia has prepared sufficiently for the last effort to crush Ukraine. Ukraine has lost huge numbers of men (and some women) in this war. I personally place the Ukrainian KIA at least 600,000, and possibly as high as 700,000. The Russian Ministry of Defense is deliberately downplaying Ukrainian losses since January 1st, as the enormity of the losses continue to mount. As the Ukraine is running out of armor, artillery and ammunition, the Ukrainian command continues to force its troops to attack the Russian positions on foot in “meat assaults.” The losses are horrendous. Nationalist units are positioned behind the almost untrained Ukrainian troops to shoot down any troops who try to retreat. The Ukrainians routinely leave their wounded in the fields to die, and when tranches are captured by the Russians, Ukrainian corpses abound.
Here is another tally of Ukrainian losses, as published by Rybar:
It is also clear that the US and the other NATO members have stripped their stocks of weapons and ammunition clean in order to keep the war going, with the Ukrainian troops dying in large numbers. The ruling elite do not care. The Ukrainians are about out of field artillery, and they are using HIMAR rockets for routine artillery strikes now. HIMARs are expensive and the US stocks were small. The US supposedly supplied a total of about 280 M777 artillery pieces to Ukraine. In fact, the number of M777 units supplied to Ukraine is several times this number. Every day, the Russians destroy at least one or two M777s, and sometimes as many as six units. This clearly means that the US has denuded its military stocks of weapons, just as new war may be starting in the Middle East. I pray the Hamas conflict doesn’t broaden out, but as I pointed out at the start of this newsletter, there are many reasons for it to enlarge.
I will end this newsletter with two memes from unknown sources. These are on the “light” side: