There is too much to cover, so I will have to be selective here.
Central Banks and Stock Markets Unwinding
As we finally begin to unwind out of the financial crisis of 2008, we will enter a new one. It’s very possible that the US stock market has already peaked and could start a large correction, or crash, in the year ahead. This year will be a turbulent year for stock and bond markets, as they adjust to the unwinding of the unprecedented 10 year- era of low interest rates, spearheaded by the US Federal Reserve, as it winds back its balance sheet by slowing down gargantuan asset purchases and hiking interest rates. The UK will likely follow the US, leaving the Eurozone, Japan and Australia etc….to eventually follow suit. Central banks are a cartel that prefer to work in unison, so they do not want too much disparity across their policies. An era of rising interest rates is often dangerous as it pops many bubbles – particularly property and stock market bubbles, but also emerging markets could take a big hit as their dollar funding becomes more expensive. During the era of QE from 2008-2017, emerging markets indulged in cheap US dollar funding as rates were low. A low US dollar will offset that for emerging markets, but a strong dollar will worsen it. At the moment, the US dollar is looking fairly subdued (anything generally above 100 in the DXY index is considered ‘strong’; below it, ‘weak’). Then there is the bond (US Treasury) market, which will be affected by interest rates. The era of ultra-low interest rates has crushed bond yields to all time lows, in an attempt to spur on buying of equities (stocks), but also to make funding cheaper for a beleaguered US government which has gorged on excessive debt as a result of the financial crisis of 2008. Usually bond yields start to rise again as interest rates go up, and they become more attractive investment vehicles. But the Fed has to tread carefully here, not to make this too sudden. The markets will be reacting nervously.
The famous stock market volatility index, the VIX ‘fear index’, has exploded in the last week, topping 50. The most interesting thing however, was the timing. This occurred the day Trump’s new Fed chair, Jerome Powell, stepped into office on February 4th. Some are speculating this could be the Deep State warning Trump, or it could just be markets testing the new Fed chair. The VIX is traditionally negatively correlated with the S&P500 stock market index, meaning it is used as a hedge against falling stock prices by traders and asset managers. Anything above ‘20’ is considered high and a sign of a nervous market. What this means is that investors and traders are buying up more insurance on the S&P500 stock market index by way of put options, about 1 month ahead in the market. So it signifies nervousness in the short term future about stock prices. Investors tend to buy insurance only in times of expected volatility, and that usually means downward price movements. When stocks are going up, everybody is happy. It’s only when they start to go down that volatility becomes ‘bad’. What is clear however, is that the 200 day moving average trendline in the S&P500, which acts as a support, was defended by the ‘plunge protection team’ of central banks and their various arms, buying the dip right on the line. This indicates that the stock market is still being propped up. The big signal to watch for this year, is the moment the S&P500 floors the 200 day moving average trendline. This will be an advanced warning of a possible impending broader correction, or crash. So far, it has maintained this support, but that could change this year as markets digest the Fed’s new policy shift. It’s quite possible that the Fed has made agreements with foreign ‘buyers’ (central banks and financial institutions) to prop up the US stock market as it unwinds its own balance sheet. This will be desperate and only serve to buy more time, until the rest of the world catches up, and normalises rates. Either way, a crash is coming.
Crypto Markets Still Bullish but Regulation is Coming
What’s interesting is how cryptocurrencies are tied into the stock market by way of volatility. Bitcoin is traditionally a very volatile asset, as is the VIX. I’ve noted an interesting correlation between both of them, – as VIX goes up into dangerous territory, Bitcoin’s price goes down, and vice versa. There must be some association with volatility between them both that traders are deducing, or causing. This means that the stock market’s performance does affect Bitcoin and crypto-currencies, but there could be an eventual decoupling, because we haven’t yet witnessed a full-on stock market crash since 2008, and Bitcoin was only born in 2009. During the next stock market crash, I posit that its quite possible money could pile into crypto markets, and this will be bullish for crypto, helping to fulfill its often touted role as digital gold, as sadly the gold market is a very manipulated one. But we will have to keep an eye on that. The crypto market is already ahead of the stock market, in the sense that it has already crashed and corrected from December all-time highs. As weak hands are flushed out, there are still ample bargains to be had this month, as there were last month in January, usually the worst trading month of the year in crypto. There will be a recovery in crypto again, and the main trend this year is regulation, as they become more mainstream. The important thing however is that if there is a stock market crash this year, we now have an entirely new asset class called cryptocurrencies that weren’t around during the last crash of 2008, and they will almost certainly absorb some of the cash fleeing stocks.
China Yuan Oil Futures and De-dollarization
We have heard much talk of the vaunted Chinese Yuan oil futures, something the Chinese establishment has been planning for decades apparently. And we are nearing their release, scheduled for March 26th, off the latest news. I’ll simply direct you to the website of the actual Chinese exchange that will trade them here, so you can keep an eye on the actual product and not just rumours or news. The exchange is the Shanghai International Energy Exchange, an offshoot of the Shanghai Futures Exchange. Being the world’s top crude oil importer, China faces an imperative decision to have an oil benchmark of its own. It’s a no-brainer for top dog oil importer to be paying US dollars for oil when it could be invoiced in native Yuan currency instead. This will act to accelerate the de-dollarisation that is happening slowly, but surely in Eurasia. The big event to look out for will be the day when China de-pegs its Yuan from the US dollar. That’s when the US Treasury market and US dollar will lose a giant hand in propping them up. I doubt that will happen this year, however. If anybody wants an interesting read on why China has prospered through Globalization while the West has waned, this is a good read (from Chinese sources hence the Chinese perspective).
US Empire will Chest-Beat but the Decline Continues
The US is mired in self destruction, and the Deep State will try to pin any stock market crash on Trump, if one does happen. The US in 2018 will try to sow more chaos and division to maintain its sliding global hegemony. We will see more sanctions against Russia, Iran and North Korea, even as South Korea and North Korea are holding talks. This is not good enough for the US, as it seeks to justify a permanent military presence on the Korean Peninsula and this means keeping up the narratives about crazy Kim and hence provoking him. Ultimately, the best way to kick out the US from the region is for both Koreas to unify. There will be a much lesser need for US troops in this backdrop. Over in Ukraine we may see further incitement against Donbass as the US and its European lackeys try to scuttle the spirit of the Minsk agreement, but the empire has chosen losers in this fight, so the war is already lost here. In Afghanistan the US will continue to try to create a zone of tempered chaos on route to China’s OBOR, however just as Pakistan is pivoting away from the US and towards China and Russia, Afghanistan may soon follow.
In Syria, the US is cornered, but still able to do damage. The end-game is the partition of Syria by using useful idiots such as Syrian Kurds, who are fighting for the Anglo-Zionist empire, and wrongly thinking they will be given a State in return. This is simply not possible, given how many hostile states surround this Kurdish region. What the US is seeking is to maintain a military outpost to offset any ‘Iranian ambitions’, which of course means doing the bidding of the paranoid Zionist state. The US and Russia I believe have broadly deconflicted in this region. What ever illegal military outpost the US wants to maintain in Syria will never be very secure in this cornered part of the country. Russia needs to address this illegality at the UN, and work with Syria to offer the Kurds a much better deal, and way out of the corner they have foolishly painted themselves in.
It’s common knowledge that US soft power is maintained through infiltration of mainstream media by various agents, as well as infiltrating Internet giants like Google, Youtube, Twitter, Facebook etc..and using them to filter out undesirable content and opinion. As the US empire circles the drain, we will see such enterprises towing US ideology even more. For example, former CIA director John Brennan, recently took on a role at NBC media. Facebook, Twitter and Youtube continue to censor anti-imperialist content. Western publications like the Guardian, Economist etc…censor opinions not in line with CIA directives by blocking accounts, filtering out IP addresses from countries they deem threats, retreating into subscriber-only access and outright elimination of commenting (The Economist a few days ago ceased allowing any commenting even from subscribers, likely due to the barrage of negative opinion against its outlandish propaganda). The US has now torn off the mask of pretence that none of it was ever really about genuine democracy, capitalism or human rights, but rather, propping up vassal states and weaponizing democracy and the US dollar to maintain an imperialist empire of extortion, racketeering and thuggish, lawless bullying. We will see more policy failures and domestic infighting in 2018, as well as various attempts in North Korea, Ukraine, Syria, Lebanon, Afghanistan, Libya, Iraq and Iran to stoke further tension and deny China, Russia and Iran security around their spheres of influence. A one-track pony show afterall, does only one thing best. The big question is when will an ‘American Spring’ come home to roost and when will the American people finally have enough of their nation being hijacked by parochial interests? These problems unfortunately cannot be addressed at the ballot box alone.
Syrian War is Winding Down but Partition Still on the Cards
I have a hunch that what Erdogan is doing in Syria is to ultimately secure a buffer zone within Syria to ‘Arabize’ Kurdish lands. How will he do this? I believe with the consent of Syrian authorities. Turkey is hosting over 3 million Syrian refugees, which are taking a large strain on its resources to say the least. He will want to send them back to Syria eventually. He could be aiming to send them back to Idlib, Afrin or the Jarablus pocket. This will not only rid Turkey of refugees, but also help Arabize Kurdish lands, and form a buffer zone. This will however, need to work by eliminating Jihadi terrorists first, and Erdogan will need to understand to stop propping up Al Nusra and other groups to make this happen.
For the Syrian State, its goal is to prevent any attempts to partition the country. This also aligns with Russian and Iranian objectives, and Turkish objectives. Israel and the US are the only powers who seek the opposite strategy. Idlib will be reduced down to a manageable chunk, so the bulk of the fighting can be contained and finally minimized after such a gruesome war. The Kurdish issue will need to be resolved at the round table, and lucrative oil fields around Deir-el-Zor (Al Omar being the biggest oil field in all of Syria) that the US is seeking to monopolize need to be eventually back in Syrian hands. This is an important resource to fund the future reconstruction of Syria. The US obviously prefers this to be in the hands of its Kurdish proxies, but this must not be allowed.
All up, 2018 will signal the end of the bulk of the fighting in Syria, bar some black swan event such as a deliberate stoking of tension. Syria needs to start healing and rebuilding as soon as possible. Most people are tired of the fighting except of course foreign paid mercenaries. The Syrian people found themselves in the unfortunate position of being at the centre of a vicious international geopolitical power struggle that cynically treated their country like an expendable toy in the process. Such are the grim realities of geopolitics in an era of Western imperialism, that will hopefully be countered with the rise of Eurasia.
Europe is Splitting
Europe is splitting and the most visible fault lines apart from Brexit and Club Med are the Visegrad 4 countries taking a stance against the Western-bloc power elite in many issues especially immigration and economy. The Visegrad 4 have started to lean towards China, as it begins to offer them better deals than Brussels. Italy is a country to watch this year as elections take shape in March 2018. Italy along with Greece remain the weakest financial fault lines in Europe, both bagholding vast mountains of debt that could easily plunge the continent into another crisis as soon as funding runs dry. An atmosphere of rising interest rates will only portend more risky times in Europe, as the underlying crisis was never truly resolved. Europe has been emasculated as a military power, but now finds itself at a crossroads, caught in the middle between the interests of an aggressive US empire and a rising Eurasia, as both seek to capitalise on its huge consumer and energy markets. As the US continues with its rogue, thuggish behaviour, Europe must realise that its interests are fundamentally not in line with US interests. This year we will also see a widening of US-European interests and strategy especially around Russia, Iran, China and the broader Middle East.