“Sell in May and Go Away” came early this year. Do you think Yellen had something to do with that?

The extraordinary central bank policies of the last few years have been a “strong tonic” (to say the least!) for global stock markets with speculative markets outperforming “investment grade” ones as the rally persisted. Market Psychology increasingly became, “What, me worry?” as investors were taught to “Buy the Dip” and margin debt soared to all-time highs.

This “irrationally exuberant” condition lasted until about a month ago when the more speculative markets reversed… for instance, the Russell 2000 is down ~ 9% from its early March All Time Highs. The investment grade share indices slumped a bit in March but rallied back to make new all-time highs, by a whisker, on Friday April 4/14 following the employment report. But on that day they also turned lower, joining the more speculative markets in a broad based sell-off. At the April 11/14 close the DJIA was down 616 points (~4%) from its All Time Highs, all of the major American and European stock indices were red YTD, while the Toronto market was a notable exception up roughly 4% YTD.

Meanwhile  investment grade bonds have had a strong rally YTD.

Many markets have been driven to speculative excesses and are due for a correction. It feels to me as though the necessary “correction” has started and that the “Sell in May and Go Away” trade came early this year. The more speculative the markets, the more “overbought” they became and the more “breath-taking” their correction is likely to be.

The volatile “churning” we saw in the stock indices last week may be symptomatic of a reversal, a turn in the markets may have a single identifiable cause or the market may seem to roll over for no particular reason. In my view Market Psychology needs to get into a “Condition” where it is ripe for a correction and then the littlest thing can act as the catalyst for a reversal. In terms of any “little thing” I’m wondering if somewhere in the back of the Market’s Mind there is worrying thought that Yellen doesn’t like the “Inequality” that has been created by the huge, Fed induced, stock market rally… and that “dove or no dove” she may have her own reasons for tapering.

Where’s the Trade?

Last week, when commenting on the bizarre market condition that had taken Spanish 5 year bond yields below American 5 year Treasuries we asked, “Where’s the trade?”  Answering my our own question we acknowledged that we can’t pick the end of an extremely powerful trend (the rush of speculative money into hot markets) BUT… we said that if we were a portfolio manager we would reduce  exposure to stocks and increase exposure to investment grade bonds. In other words, get defensive. We maintain that view.

We also said that we liked the US Dollar and it fell against most currencies this past week on the idea that the Fed is not going to tighten as soon as previously thought. That presented us the opportunity to establish short call option positions in Euro, AUD and CAD.

Our caution about trying to pick a top in the stock market kept us from getting short stock indices. From an emotional point of view not making money from a short stock position was more painful than actually losing money on a trade! But as a dear old friend loves to say, “There’s a rumor going around that the markets will be open again next week” which means that the past is the past and there will be good trading opportunities in the future!

A specter is haunting the world … and it’s NOT the specter of communism. Or the collapse of capitalism.

It’s the specter of the ramping up of the war cycles I’ve told you about — bloody regional and civil wars like we haven’t seen since the 1930s … wars that may soon wreak havoc with your finances … further erode your civil liberties … and maybe even endanger your personal safety.

From Istanbul to Rio de Janeiro, Syria to India, Thailand to Ukraine — the world’s Internet-connected masses are rising up against incompetent, corrupt, increasingly authoritarian governments … and the results will NOT be pretty.

For most of this century, I’ve been reporting on the global financial markets while based in Bangkok, Thailand. Reporting from the world’s hot spots.

Living in Southeast Asia, just a few hundred miles from China’s southwestern border, has given me a unique perspective on world events and access to news about imminent wars that is rarely, if ever, reported in U.S. media outlets.

And I can tell you firsthand that the most significant economic events of your lifetime are about to unfold.

I’m talking about a series of cascading regional wars that are about to break out overseas. About hundreds of millions of people — in the Middle East, Europe, Asia and South America — who are going to revolt against the economic misery imposed by their authoritarian governments.

These regional conflicts and civil wars are going to do two things:

First, they are going to unleash the full fury of heavily armed, increasingly authoritarian governments — new Big Brother states all over the world — that now track nearly everything we write, say, buy or even think.

Second — and most surprising of all — this new cycle of warfare will also coincide with some of the greatest market booms of our lifetimes — booms that too many ordinary investors will miss out on due to bad advice and even blind panic.

I know this will strike many people as counter-intuitive … that an era of global warfare and government repression could also result in enormous wealth.

And I know a lot of people will fail to make the connection between these two apparently contradictory events.

But it’s extremely important that you have a road map to guide you through what’s about to happen.

If you follow the crowd and make the wrong moves, you could end up losing literally everything you’ve worked all your life to create.

But if you invest in the few key investments that will likely explode during an era of increased global conflict — you could end up making more money in the next few years than you’ve made in the past two decades.

For many years now, I’ve studied

the relationships between economic

trends and warfare.

I’ve come to believe that there are regular patterns that occur in the spheres of economics, society and global conflicts that can be observed — and often predicted — with shocking accuracy.

Now, my research suggests that rising global economic and social tensions will erupt into a series of regional and civil wars over the coming months and years.

It’s already beginning … and believe me, it’s about to get much, much worse.

Here’s what I see happening …

CONFLICT #1: A MAJOR war in the Middle East, possibly among Israel, Syria, Lebanon, the United States and Iran, that could make the Iraq War look like a minor skirmish.

The Syrian civil war, which has already claimed 100,000 lives, is increasingly drawing in nations across the Middle East, creating a regional conflict that threatens to pit world powers against each other.

And don’t kid yourself: Iran’s recent friendly gestures are pure deception. When you add in the additional wild card of Iran — struggling for years to build a nuclear weapon to use against Israel — the possibility of a catastrophic Middle East war increases exponentially.

CONFLICT #2: A war between China and Japan over the South China Sea, dragging in Vietnam, Malaysia, the Philippines and possibly even the United States.

Most Americans know almost nothing about what is happening right now in Southeast Asia, but the situation is growing increasingly unstable. “The risk of conflict in the South China Sea is significant,” reports the U.S. based Council of Foreign Relations.

And as scary as this scenario might be, it’s not the only war that could erupt in Asia:

CONFLICT #3: The North Korea wild card that could trigger World War III.

In response to threats from North Korea on Seoul and Washington, the U.S. and South Korean governments have recently signed a new joint security agreement, laying out contingency plans and responses against North Korea should war break out.

According to The New York Times, the joint agreement insists on the right of both countries to “immediately and decisively respond to any North Korean provocation.”

Military conflict is not limited to Asia, however.

CONFLICT #4: Europe is about to break in two — split between rich countries at the core and bankrupt countries on the periphery.

This is one area of the world where most Americans DON’T expect any military conflict … yet there are numerous signs that civil wars could soon break out again in Europe … similar to the bloody genocide that occurred in the Balkans in the 1990s.

Or that Russia could soon invade Ukraine … Latvia … Estonia … Georgia and other former Soviet Union satellites.

“The world is at a crossroads in history,” writes Britain’s Daily Mail newspaper. “Vast, untamable economic forces are remaking the landscape of international affairs.”

As bad as the Great Recession has been in the United States, it pales in comparison to the full-scale depression now occurring throughout Europe, especially in the east and south.

Economic austerity measures, imposed by the central EU government and insisted on by Germany, are sparking ultra-nationalist, potentially neo-fascist movements across the Continent.

Riots have broken out in bloody protests in Athens, Rome, Madrid, Paris and, most recently, Istanbul.

And just as the Great Depression led to fierce nationalism and eventually to outright war in Europe in the 1930s, so, too, the recent economic tensions worry experts in Europe.

“Russia has threatened NATO with military strikes against Poland and Romania if missile defense radar and interceptors are deployed in Eastern Europe,” reports the Daily Telegraph.

The paper quotes General Nikolai Makarov, Russia’s most senior military commander, that “a decision to use destructive force preemptively will be taken if the situation worsens.”

CONFLICT #5. Egypt is once again on the verge of civil war. Worse, some of the richest oil countries in the world are now at each other’s throats because they each support opposing sides in Egypt.

CONFLICT #6. Nuclear-armed Pakistan is descending into chaos, with the Taliban gaining strength in the Northwest and ethnic warfare spreading in the South.

CONFLICT #7. Ethnic warfare is spreading in two other oil producing countries — Iraq and Nigeria.

And this is just the tip of the iceberg. Other deadly conflicts are popping up all over the world.

Buddhists are attacking Muslims in Myanmar. Muslims are battling Hindus in India.

Muslims are rebelling against Han Chinese in Western China.

And all over the Middle East, Shia Muslims are at war with Sunni Muslims.

Everywhere, anyone with wealth is asking: How can I get my money out of here? Where can I find safety? How do I get my money to the safest large economy in the world — the United States? What big-cap American stocks should I buy?

Now, here is the critical point:

As a result of all this rising global chaos — and despite the meagerly growing U.S. economy — tens of billions … and then HUNDREDS OF BILLIONS of dollars will pour into the safety of U.S. markets from overseas, sending the U.S. stock market soaring.

And into other key assets, namely, gold, silver, and other precious metals and commodities.

We are not yet at that point in time where these markets will explode. Stocks are finally staging that much needed pullback that I’ve been warning you about.

And gold and silver are forming nice bases, trying to avoid one more leg down.

But stay alert: With the cycles of war ramping up more quickly than even I had expected, big market changes — and huge profit opportunities — are right around the corner.

Best wishes,

Larry

– See more at: http://www.swingtradingdaily.com/2014/04/14/the-true-specter-haunting-the-world-right-now/#sthash.WAp2og3V.dpuf

1. RISING THREAT OF INTERNATIONAL WAR by Martin Armstrong

As a general rule, the most successful man in life is the man who has the best information

Imperialism Déjà Vu

Fact; The world’s resources are finite.

Fact; Supply is constrained and demand keeps growing along with the world’s population.

Fact; A sustainable and secure supply of raw materials and energy is becoming the number one priority for all countries.

Major powers are scrambling for as much of the world’s resources as they can control. Exploration and drilling intensify daily. Previously inaccessible or unprofitable areas are targeted – the days of easy access to the globe’s resources no longer exist.

Unseen wars in previously unheard of places – soon to become front page news – are beginning for resource control. Peace today, harmonious relations tomorrow are nothing but fleeting illusions.

Hydrocarbons, mineral resources, fresh water and arable land are finite.

Understand someday peak oil and gas proponents will be proven right.

Understand arable, productive farmland is disappearing from overuse, desertification and urbanization.

Understand the world’s current population of 7 billion people use 60 percent of our annual renewable freshwater supply.

The world’s population is projected to hit 10 billion by 2050 – global demand for food and water is expected to increase by 50% and 30% respectively by 2030.

“It should be pointed out that when we speak of wars in the last third of the twentieth century we are talking about civil wars. Between 1965 and 1999 if we look at those wars in which more than a thousand people were killed a year, there were seventy-three civil wars, almost all driven by greed to control resources—oil, diamonds, copper, cacao, coca, and even bananas.” William K. Tabb, Resource Wars

Try and imagine the coming pressure on governments in regards to sourcing resources on a national scale. The world’s most powerful nations are staking claims, through aggressive diplomacy, wherever vital reserves of resources can be found. It isn’t enough.

Nations are going to go to war over natural resources. Conflicts are inevitable.

South & East China Sea

China has been involved in territorial disputes with Japan and Taiwan over the Senkaku islands, and Vietnam over the Spratly islands.

China has also ramped up its naval presence in the South China Sea. Why? China’s energy starved and the areas off the coast of the Philippine province of Palawan are oil rich. In mid-2012, the Philippines and China came dangerously close to an armed conflict over the Scarborough Shoal in the South China Sea.

China’s increasingly contentious showdown with Japan in the East China Sea could prove to be even more dangerous. At issue are disputed Islands (Senkakus to the Japanese, Diaoyu to China) and the fishing rights and natural resources those islands would deliver to their owner.

The standoff has already resulted in several direct confrontations between China and Japan.

The U.S. has treaty obligations to Japan. Secretary of Defense Chuck Hagel recently warned China that any attack on the disputed islands would “fall under our security obligations.”

India-China Border

Chinese dam-building on the upper reaches of the Brahmaputra River has raised fears in India that Beijing might one day turn off critical water supplies.

India’s state oil company, Oil and Natural Gas Corp., accepted an invitation from Vietnam to explore for oil and gas in the disputed South China Sea escalating an already intense drama.

Both India and China are pushing to gain a foothold in the Arctic. Melting ice is opening passages for shipping and creating the conditions for a boom in the extraction of fossil fuels and minerals.

Both countries are building up their navies to project influence, and China’s presence in the Indian Ocean is expected to grow.

“India will be concerned by a growing Chinese naval presence in the western Indian Ocean, which it has always considered its preserve. It has tolerated a significant U.S. presence there, but it has never considered the U.S. an enemy.” David Shinn, a former U.S. ambassador in Africa

Arctic

The Arctic Council is made up of the eight Arctic nations: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States. These countries work through the Arctic Council to lay ground rules for governing the Arctic – the Council acts as a key vehicle for hashing out the not inconsiderable strategic stakes.

“With the Arctic ice melting, the region’s abundant supplies of oil, gas and minerals have become newly accessible, as have shortened shipping routes and open water for commercial fishing, setting off a global competition for influence and economic opportunities far beyond the nations that border the Arctic.” Yale.edu

China has recently won observer status on the council as has India, Italy, Japan, Singapore and South Korea.

Water War

Data scientists recently downloaded from a pair of NASA gravity-sensing Grace satellites show ground water is increasingly in short supply.

The biggest losses show up as red hotspots. Almost all of those red hotspots center on the major aquifers of the world. Grace shows us that groundwater depletion is happening at a very rapid rate in the arid and semi-arid parts of the world.

And the losses are staggering.

Parts of Turkey, Syria, Iraq and Iran along the Tigris and Euphrates rivers have lost 144 cubic kilometers of stored water. The majority of the water loss, about 60 percent, is due to reductions in groundwater.

There’s 600 million people living in the extremely dry 2,000 km stretch of land that extends from eastern Pakistan across northern India and into Bangladesh.

NASA’s Grace satellite measurements show a loss of 54km3 of groundwater a year.

At 54km3 of water loss per year, Lake Ontario (water volume of 1,639km³) would be dry in 30 years. A cubic kilometer of water equals about 264 billion gallons.

A 2005 Organization for Economic Co-Operation and Development Issues Brief suggested that conflicts and violence over access to water would likely increase because, “competition for water exists at all levels and is forecast to increase with demands for water in almost all countries. In 2030, 47% of world population will be living in areas of high water stress.”

In a 2012 report, the US director of national intelligence warned that overuse of water – as in India and other countries – was a source of conflict that could potentially compromise US national security. “Our Bottom Line: During the next 10 years, many countries important to the United States will experience water problems—shortages, poor water quality, or floods—that will risk instability and state failure, increase regional tensions, and distract them from working with the United States on important US policy objectives. Between now and 2040, fresh water availability will not keep up with demand absent more effective management of water resources. Water problems will hinder the ability of key countries to produce food and generate energy, posing a risk to global food markets and hobbling economic growth. As a result of demographic and economic development pressures, North Africa, the Middle East, and South Asia will face major challenges coping with water problems.”

The Pacific Institute, which studies issues of water and global security, found a fourfold increase in violent confrontations over water over the last decade. “There is a long history of conflicts over water resources, extending back thousands of years into myths, legends, and ancient history. But even now, in the modern world, disputes over access to water, the use of water as a weapon, and the targeting of water systems during conflicts remain all too common. It has been argued that water resources have rarely, if ever, been the sole source of violent conflict or war. But this fact has led some international security “experts” to ignore the complex and real relationships between water and security, which remain a major challenge. Indeed, our work suggests that the risks of water-related violence and conflict is growing, not diminishing, as population, resources, and economic and environmental pressures on scarce water resources increase. Many of these risks are materializing at the sub-national level rather than as disputes among nations, but even at the national level, there are growing concerns about tensions in Africa and parts of Asia that share international rivers but lack international agreements over how to manage those waters.”

Nations are going to increasingly compete for the world’s diminishing resources.

China is a surging military power, Russia is a resource powerhouse but politically corrupt and economically crippled. Japan is rebuilding its military. The U.S. is treaty bound to protect Japan and South Korea and will protect the Philippines in the face of Chinese aggression. Proxy conflicts in Africa, and elsewhere, between and among, U.S., Chinese, Indian and European backed forces will intensify in the future.

The Arctic will be an area of growing resource interest and rising conflicts.

A year ago, leading German industrial companies (to name four – BASF and Bayer who emerged from now infamous IG Farben, ThyssenKrupp, formerly two separate companies. Thyssen and Krupp both supported Hitler, the Volkswagen Group was founded on Hitler’s initiative) launched the Resource Alliance (Rohstoffallianz) for the purpose of securing the supply of selected raw materials for its shareholders and corporate members.

Germany’s Resource Alliance is advocating the use of military force to secure raw materials to keep Germany’s industrial machine chugging along.

Imperialism is the process whereby the dominant politico-economic interests of the time expropriate, for their own enrichment, the land, labor, natural resources and markets of others.

World War II gives us an excellent example of imperialism. The Nazi state gave German business cartels the opportunity to plunder the resources of occupied Europe.

Conclusion

Will future historians write that Iraq (oil), Libya (more than oil, Libya has one of the largest fresh water systems in the world contained in four major underground basins), Afghanistan and Syria, both literal gold mines of mineral wealth were the first battlegrounds in a continual war over resources?

Increasingly it’s going to be a resource centric world. Major powers will confront resource rich areas, in the left hand will be aggressive diplomacy – WE will build you bridges, schools, hospitals, transportation and power infrastructure in return for long term off take agreements for your resources. The right hand is understood to be a military club. Proxy conflicts, rebels, insurgents and civil war if you don’t agree or deal with someone else.

It isn’t if, it’s when do confrontations already underway, and the coming future conflicts spin out of control?

China’s after oil in the South China Sea and again it’s China but versus Japan in the East China Sea, both of whom are starved for energy.

India’s short of water, China controls the flow.

Russia annexes the Crimea, Putin’s eventual goal – the vast natural resources of the Ukraine. In 2008 Putin stopped NATO from signing up Georgia and Ukraine into its membership action plan. He then moved against Georgia. In 2013 he interrupted Ukraine’s signing of an association agreement with the EU. Now he’s annexed the Crimea and is on record stating that Ukraine is not a country but a territory and insists it should be divided. If Putin is successful in his bid for Ukraine what’s next? The Baltic states come to mind.

The German industrial complex, the Rohstoffallianz, is openly advocating imperialism.

An escalation in tension, and an increase in resource driven conflicts is certainly on my radar screen. Is the truth behind what’s increasingly going to drive future armed conflicts on your radar screen?

If not, it should be.

Richard (Rick) Mills

Richard lives with his family on a 160 acre ranch in northern British Columbia. He invests in the resource and biotechnology/pharmaceutical sectors and is the owner of Aheadoftheherd.com. His articles have been published on over 400 websites, including:

WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com and the Association of Mining Analysts.

Please visit  www.aheadoftheherd.com

If you are interested in advertising on Richard’s site please contact him for more information, rick@aheadoftheherd.com

 ***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

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