The Dow should have been down 500 points Tuesday. And that's to say nothing of the fact that the market's current lofty valuation makes no sense in the first place.
The fact is, the brown stuff is now heading straight for the fan.
Didn't the odds of a major geo-political calamity just take a huge turn for the worse in the airspace over the Syria-Turkey border?
At the same time, wasn't today's GDP update just one more reminder that the global economy is sinking into a deflationary contraction? And that our so-called domestic recovery cycle is getting very long in the tooth and is essentially running on the fumes of inventory accumulation?
Yet the Wall Street gamblers and robo-traders seem to think that pricing this global accident waiting to happen at 22X reported S&P 500 earnings is no big deal. And that comes on top of the fact that the long-running corporate earnings expansion cycle is over, as attested to by both the GDP report and the Q3 SEC filings.
At $94 per share, S&P reported earnings came in 11% below last year's $106 per share. And that was before the most recent headwinds became evident.
To wit, Syria is rapidly taking on the complexion of the Balkans in June 1914. The resulting backwash of Islamic State terrorism and millions of refugees streaming deep into the interior of Europe threatens to elicit a political and economic lockdown and a potential Thermidorian Reaction.
The rise of rightwing nationalism, in fact, would end the European Union as we know it.
And this is occurring even as Asian exports to Europe plunge, dragging Japan into its 5th recession in seven years and China ever closer to a thumping hard landing.
So the market at 22X amounts to a bubble floating toward a pin.
And folks, there are sharp objects cropping up everywhere on the planet------starting with Tuesday's incident on the Syrian border.
This wasn't a minor stray pitch. It was evidence that a half-dozen lethally-armed outside combatants are lined-up in a circle firing capriciously into the hodge-podge of sectarian tribes, political factions and marauding militias that have metastasized within the boundaries of a shattered former state.
The idea that Russian planes threatened Turkey and deliberately violated its airspace is ludicrous. By the attestation of US officials themselves, the incursion was hardly measureable, if it happened at all:
US officials told NBC "They were in Turkish airspace only 2 to 3 seconds, a matter of seconds" before the Turkish F-16s attacked.
Two to three seconds?
Why in the world would Washington's Turkish "ally" in the fight against the Islamic State, and the NATO member located closest to the front line and with the largest military in Europe, put a near act of war on a such a hair trigger rule of engagement?
Alas, its because Turkey is not at war with ISIS. Instead, its megalomaniac President is in the midst of a monumental power grab designed to transform Turkey into a Gaullist dictatorship with himself at the helm.
To that end, his incendiary shootdown of a Russian Su-24 warplane was designed to pander to domestic constituencies sympathetic to the Turkmen villages in northwest Syria now being bombed by the Russians.
This egregious provocation, in fact, is out of the same playbook from which Erdogan bombed Kurdish forces on the Syrian border------even though the latter by all accounts have mounted heroic campaigns that ousted ISIS from Kobani last summer and from Sinjar more recently.
Moreover, it did not take long for the rest of the gong show to materialize. It seems that Alwiya al-Ashar, an anti-Assad rebel group consisting of or aligned with the Turkmen villages, attacked the parachuting pilots and a Russian rescue helicopter.
According to reports at least one of the pilots was killed and the Russian helicopter was destroyed by a TOW missile supplied to the so-called Free Syrian Army (FSA) either by Saudi Arabia and Qatar-----or more recently via direct US "paradrops" into Latakia province in the Syrian northwest.
The operative theory of the latter seems to be the hope that during this insane game of jump ball on the rubble of Latakia that the good guys will get the TOWs before the butchers in black robes do.
Yet it is not even clear where Alwiya al-Ashar's allegiances actually lie. Some of these so-called "Turkmen brigades" appear to be aligned with FSA, but others operate in close cooperation with al-Nusra front. For those without a war games roster, the latter is the al-Qaeda affiliate in Syria.
But here's the thing. There appear to be only about 200,000 Turkmen in the northwest corner of Syria or maybe double that number at the outside. They are non-Arab Sunnis who came as conquerors in the 11th century and whose communities have waxed and waned with the rise and fall of various empires and despots ever since.
But in more recent times, the Turkmen have apparently not been thrilled to be part of an Arab state confected by white Europeans, that is, Messrs. Sykes and Picot in 1916. So they have looked to Turkey for solace, especially in the face of the brand of secular Arab nationalism promoted by the Assad regime in Damascus during the last 40 years.
Indeed, since the so-called Arab spring in 2011, they have spawned numerous fighting brigades which seem to be all over the lot when it comes to Washington's fictional claim that there is a difference between "moderate" and "radical" anti-Assad rebels.
That's right. The fools in Washington are paradropping deadly TOW missiles into a no-man's land of so many different tribes, sects and brigades that we don't even know whether it was "our" Turkmen or the "jihadist" aligned Turkmen who destroyed a Russian rescue helicopter; and did so with "made in the USA" weapons that have been showcased on social media videos almost from the moment the incident happened.
The fact that friend or foe identification is impossible in this geopolitically fraught incident even among one of Turkey's smallest minority populations is telling. It means that the effort of Washington and its allies to destroy what was always the tenuous state of Syria has unleashed religious and ethnic demons rooted in the ages.
And that's just for starters. The duplicity and treachery of the Three Crooked Amigos who pretend to be allies in the battle against ISIS-----Turkey, Saudi Arabia and Qatar-----seemingly knows no bounds.
As we have repeatedly pointed out, the so-called Islamic State is a rickety patchwork of dusty towns and dilapidated economies which narrowly hugs the Upper Euphrates valley in Syria and the wreckage of war-savaged Anbar province, Mosul and the empty desert expanses of western Iraq.
If the Three Amigos and Washington really wanted it gone, it would be gone because the Islamic State is entirely dependent upon them for weapons, money and survival.
Indeed, the butchers would become the butchered at the hands of their several million subjects were Washington and its allies to give up their regime change campaign against Assad, and give a greenlight to the Syrian state and its Shiite friends to finish the job.
The fact is, the only meaningful revenue being obtained by the Islamic State is from oil that is being sold to middle men in Turkey, and winked at by the government in Ankara. If Turkey were to close off its border to the oil trade, the financial wherewithal of the Raqqa government would dry up in a matter of months.
Likewise, virtually all of the Islamic State's weapons, aside from the massive trove of US weapons captured as Mosul and elsewhere in Iraq, have come across the Turkish border from the north; or they have been delivered to the various anti-Assad factions by the CIA and the Gulf States-----only to fall into the hands of the barbarians in black.
And the same thing is true of the 5,000 or so alleged European jihadists who have joined the fight in Syria. They got there from London, Brussels and Paris on Turkish Air.
Needless to say, cutting off the money and weapons would not require a single additional bomber run by either the US or French Air Force. And in the absence of western bombs falling on Sunni villages, the Islamic State's best recruitment arm would be disabled. Throw in a scarcity of money, and the Islamic State fighters would not get their $300 per month pay packet, either.
This rational scenario, of course, is not likely to happen any time soon, and for one overwhelming reason. The Washington War party has gone just plain stark raving mad when its comes to Russia and Mr. Putin.
It is not barrel bombs and the brutalities committed by Bashar Assad and his father that explains Washington's perverse efforts to destroy a secular state based on a coalition of religious minorities------Alawites, Christians, Druse, Kurds, Yazidis etc. The latter is infinitely preferable to the murderous Sharia-based theocracy of the Sunni jihadist who established the Islamic State.
Yet Washington is on the wrong side of that obvious choice owing to the historic alignment of Damascus with Russia, and due to Obama's shrieking nest of R2P zealots led by UN Ambassadors Samantha Power.
So we end up with yesterday's farce from the White House. French President Hollande came to Washington hat in hand looking for allies in what he now describes as his all out war on terrorism.
That is, a war that only a few weeks ago consisted of France's military assault on the Assad regime-----a campaign of infinite stupidity that helped create the vacuum in which ISIS has thrived and which fostered the bloody-minded revenge motivations behind the Paris attack. Those barbarians did not pick Paris for their evil deeds by throwing a dart at the map of Europe.
No, the Assads, Russians, Iranians, Hezbollah and Shiite government in Bagdad have not mounted terrorist attacks on Europe or threatened them. That's the dastardly work of their enemies------the Islamic State and its enablers in Turkey, Saudi Arabia and Qatar.
Accordingly, the first order of the day yesterday at the White House should have been a public bitch-slapping of Erdogan by the leader of the free world and his French supplicant.
It was Erogan's treachery that facilitated the rise of ISIS; and it is now his petty political ambitions that threaten the Russian-led campaign to restore the Syrian state, and which also could precipitate a hot military confrontation between NATO and Russia.
The butchers of Raqqa must have been tickled pink by the sight of what actually transpired in Washington. Namely, Obama's defense of Turkey's right to start a war over a two second infraction of its air space, and the joint statement by the two alleged "leaders" that Russia was welcome to join the war on ISIS as soon as it throws its historic ally, and the constitutionally elected President of the sovereign state of Syria, under the bus.
What that means in practical terms is that world is heading down a path to the wrong war-----a NATO/Russian confrontation that is utterly unnecessary.
Meanwhile, the soft underbelly of Europe will remain exposed to new terrorist attacks mounted from a barbaric proto-state that survives only due the flow of money and weapons from Washington and the Three Amigos, and due to the War Party's demonization of the very forces----- Assad, Putin and their Iranian allies----that could extinguish it militarily.
Nor was that the only lunacy on this matter coming from the White House. Nearly every week there is an announcement of new Washington arms sales to Saudi Arabia. Over the past two decades, in fact, the Saudis have purchased up to $200 billion of weapons and armaments from the US.
Not only has this enabled the Saudi's to function as the arms merchants of the middle east and to foment anti-Shiite insurrection in Yemen, Iraq, Iran, Syria, and elsewhere in the middle east, it also permits Riyadh to continue to export Wahhabi religious extremism throughout the region.
Stated bluntly, were Washington to threaten the Saudi princes with an arms embargo, the supply of money, weapons and religious zealotry emanating from Saudi Arabia and fueling the Sunni jihadist movement would dry up in short order. The unspeakably corrupt and decadent House of Saud literally depends on the steady replenishment of spare parts for the F-16s on which their rule depends.
At the end of the day, you do not have to get very far down the rabbit hole of the War Party's middle eastern policy fiasco to recognize that this madness is going to end in something fairly horrific.
And in that context, buying the dip at 22X amounts to madness itself.