report

9th August 2011 LONDON CALLING FROM THE TOP OF THE DIAL: Great Financial Disaster - the game is on again BIG TIME! Surrealism Liquidity creation will shortly go absolutely nuts Exters Pyramid redrawn War (what is it good for?) and defence stocks Making it back to Coney

Helter Skelter Gentlemen start your engines

The S&P downgrade of US credit was long overdue but, paradoxically, came earlier than expected due to the horrendous track record of rating agencies. The monetary system (especially) and the global economy are coming apart and the opportunity for using metaphor in todays markets abounds. It is already tempting to start asking Who is John Galt?, but more on that another day. Recall the metaphor from the last Thunder Road: Helter Skelter are you ready for the ride? In contrast to the racial strife envisaged in Charles Mansons version, the Helter Skelter we are poised to experience: will come from economic and social unrest rising prices and widespread economic hardship. Like it or not, were all taking the ride. Todays over-liquefied world will shortly become dramatically more liquefied and the foundations of Von Mises crack-up boom are well advanced. One of the days Im gonna pull myself together, Soon as I finish tearing myself apart*

* search Grateful Dead Gentlemen Start Your Engines on youtube, its good

Contact/additions to distribution:

Paul Mylchreest [email protected]

In fact, having had trouble sleeping Three a.m. in the combat zone, gentlemen start your engines just about sums up the last couple of weeks. This is an incredible time to be investing and its about as different from a benign stock pickers market as its possible to get - well get back to that but not for quite some time. In 2007, I wrote about the coming debt crisis, weaving in

financial history, Kondratieff Cycles, manipulation of financial markets and economic data, the post-crisis need for massive inflationary stimulus, the destruction of fiat currencies and how geo-political strategy (including Mackinders Heartland Theory) would get caught up in the mix.

Sources: (the mighty) Redburn Partners,

CBS

When I wrote it, many people thought I was mad and I have to thank my friends at Redburn Partners for allowing it to be published. Had I been working for GS or JPM, it would never have left the building. Even at Redburn, which was (still is, I think?) an oasis of free-thinking in the broking world, I was criticised for being too macro and too big picture, but that was the POINT. The reality is that the greatest transfer in wealth in modern history unfolds, success or failure will be dominated by the bigger picture decisions on asset allocation. The key issues we face now are: B The continuing, tectonic clash between inflationary and deflationary forces across the world as we head towards some kind of collapse; B The disintegration of the Euro (currently moving into an advanced phase), the US dollar and other paper currencies, as the world transitions to a new currency system - with an enhanced role for gold at a much higher gold price, obviously; and B The geo-political crisis in the Middle East and North Africa (MENA). We are in the second half of the crisis and the game is on again BIG TIME! In the last couple of weeks, the forces of deflation have regained the upper hand over the (temporarily) weakening forces of inflation although that will gradually reverse as the usual suspects (the monetary dr*g dealers) respond. Whats happening is just a dose of reality after the nonsense which has been served up by so many strategists in bulge bracket banks, mainstream journalists and even some portfolio managers appearing on Bubble Vision. Indeed according to a contributor to Jim Willies Hat Trick Letter: To be absolutely stupid in an intelligent fashion seems to be the universal makeup of todays decision makers. In the first half of the year, you could practically hear strains of Johnny Nash oozing from major financial centres:

Thunder Road Report - 9 August 2011

I can see clearly now the rain has gone, I can see all obstacles in my way, Gone are the dark clouds that had me blind, Its gonna be a bright (bright), bright (bright) sun shiny day.

Sources: CBS, the optical nerves of a huge number of market strategists

Switching musical metaphors, while the consensus only saw the crescent, at least Thunder Road readers saw the whole of the f------ moon (!). Anyway, the illusion was fun while it lasted, but its back to riding the Helter Skelter. Youd have thought that the chart of debt/GDP for the worlds largest economy would have been enough to scare everybody to death (and that tiny reversal is NOT a trend, quite the reverse): US - total debt/GDP since 1912 - well beyond the peak of the Great Depression
400%

350%

300%

250%

200%

150%

100%

50%

0%

Its either normalcy bias, indifferent analysis, herd instinct or succumbing to the propaganda. Absent the coming mega-intervention, economic gravity would prescribe the most severe debt deflation since the dawn of the Industrial Revolution. Things are going to get really weird, really fast and it wont just be in financial markets, either.

Thunder Road Report - 9 August 2011

2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 1950 1948 1946 1944 1942 1940 1938 1936 1934 1932 1930 1928 1926 1924 1922 1920 1918 1916 1914 1912

The author Tom Wolfe wrote a fascinating introduction to his bestseller Bonfire of the Vanities which was a fictional account of Wall Street excess and racial tension in 1980s New York. The novel focuses on the disintegration in the life of Sherman McCoy, a bond trader and Master of the Universe, after he and his mistress are involved in a hit-and-run incident leading to the death of a black teenager.

Source: Picador, Amazon

In his introduction, Wolfe lamented the difficulty for novel writers in the realism genre: There is nothing you can imagine, no matter how ludicrous, that will not promptly be enacted before your very eyes, probably by someone well known. We already have a surreal dimension as central bankers and politicians try to sell black as white and white as black in the unfolding drama: B Increasing amounts of debt, it is claimed, solve a debt crisis; B GDP can grow when spending is cut back, even though GDP measures aggregate spending; B Strangling Greece with Euro-membership is good for the country; B Berlusconi can sort out his budget deficit; B Spain is fine, dont worry; B The banking system is fine; B The rise in inflation is transitory; B The slowdown in the US is transitory; and B Perpetual war leads to perpetual peace, etc. In amongst the propaganda and disinformation, we can only be sure that governments and central banks will print more money. Look what happened on Friday, the ECB correctly characterized as the worlds most undercapitalized hedge fund by Zero Hedges Tyler Durden - agreed to buy Italian bonds just as markets were suffering a complete loss of confidence. It also amuses me every time the Swiss National Bank tries unsuccessfully to lower the value of the Swiss Franc when all it has to do is wait for the countrys banking system to do it for them, in a dramatic fashion. Meanwhile, liquidity creation will soon go nuts and with trouble bustin in were

Thunder Road Report - 9 August 2011

Gonna see what those racket boys can do (anybody could do what they do)

Last we heard from Bernanke, he didnt have a precise read on why the US economy is slowing. All together now Its the debt, stupid. He knows, its just the conjurers trick of diverting the audiences focus because more debt and money printing are his only tools (along with blatant market manipulation). Debt brings forward consumption, when will economists learn? We just had to wait for the situation to deteriorate sufficiently to provide cover for renewed stimulus. And it looks like weve almost arrived. Does the Fed Chairman really believe that we cant work this out? Its like the Grand Old Duke of York in reverse, where we all march down to the bottom of the hill so that the bearded inflation junkie can march us back up again. I loved Jim Rogers perfect characterisation of Bernanke in a recent CNBC interview: Since the first day Mr Bernanke went to Washington, I told you he was going to be a disaster. Hes never been right about anything in the 7 or 8 years hes been down there. I hope he doesnt come back with QE3, but thats all he knows. The only thing he knows is to print money. He doesnt understand finance, he doesnt understand currencies, he doesnt understand economics, he understands printing money and hes going to print more money whether we like it or not. Its the wrong thing to do, but thats what hell do. Exactly when it comes to printing money, central bankers are always shovel-ready. We remain on track for hyperinflation - the deflationary forces will precipitate the hyperinflation due to exponentially rising deficits, quantitative easing and all the bailouts. Obamas budget assumptions are based on CAGR in GDP of 3.2% from 2011-21 with no recessions the audacity to forecast incorrectly.The end result, as things currently stand, will be a non-linear collapse in confidence in the purchasing power of currencies. Chris Martenson published an interesting chart with the comment: If I were to be given just one chart, by which I had to explain why Bernankes printed efforts have so far failed to actually cure anything and why I am pessimistic that further efforts will fall short, it is this one.

Source: Chris Martenson

Thunder Road Report - 9 August 2011

It shows how the growth in total debt in the US economy has followed a parabolic trend since 1970 just after the collapse of the London Gold Pool when the US dollar became unpegged from gold. Total US debt has doubled five times during 1970-2008 from US$1.6 trn to US$52.4 trn. The last doubling took just under 10 years. Fitting an exponential curve to the trend in the data, Chris calculated an R-squared of 0.9889 an almost perfect fit. Since 2008, the actual data has deviated from the exponential trend as overall debt growth has stagnated and so has real GDP. The main takeaway from Chris Martensons chart is that its hardly surprising that there is so little momentum in the US economy when a resumption of trend economic growth seems to require exponential debt growth. That would imply that a further US$52 trn of new debt would need to be created JUST IN THE US during the next ten (or less) years in order to maintain trend economic growth. Now cast your mind back to that story which came out of the Davos World Economic Forum back in January 2011.

Source: The Telegraph

The Davos attendees calculated that the whole world needed to double the amount of debt outstanding AN ADDITIONAL US$100 TRILLION - during the next decade, making the fanciful assumption that the prevailing monetary system will actually survive (no chance). With US debt accounting for half of the total debt outstanding worldwide, the numbers from Chris Martensons work and those coming out of Davos appear to be in synch. You realise that Bernankes US$600bn QE2 programme from 1 November 2010 to 30 June 2011 was the proverbial drop in the ocean - and here we are. Theres an alternative way of approaching this issue of debt-driven growth which some people refer to as the marginal productivity of debt (MPD). I wrote about this in the Gold War report, but back then didnt give it the profile which it now requires. MPD can be defined as the incremental nominal GDP generated by an incremental US$1.00 of new debt. This is a chart for the US from 1938-2010:

Thunder Road Report - 9 August 2011

The marginal productivity of debt in the US economy 1938-2010

3.00

2.50

2.00

1.50

1.00

0.50

0.00

In 1938, as the US was recovering from the Great Depression, only US$1.00 of incremental debt was associated with an increase in nominal GDP of US$2.61. At that time, the economy was bouncing back largely of its own accord, e.g. likely helped by inventory rebuilding and utilisation of savings as confidence returned. By the early-1950s, each additional US$1.00 of nominal GDP required a similar amount of additional debt. The trend has continued to deteriorate in almost continuous fashion for more than half a century. Now each dollar of additional debt only add 20 cents to nominal GDP, alternatively US$5.00 of debt are required for every US$1.00 of growth in nominal GDP. I apologise because Ive mislaid the name of the author who penned the following it was written some years ago but has never been more relevant: Once the forces of a long wave decline are in motion, they will tend to persist even in the face of substantial money supply injections like a car skidding backward downhill while its wheels continue to spin uselessly in an uphill direction. Eventually, the inflationary forces catch fire again and the car, once again, lurches upward, but with greater difficulty and a higher rate of inflationary friction. Sooner or later, additional money printing produces no economic motion only higher prices and the economy figures its inevitable economic decline. As governments print more and more money and the debt racks up, they approach the non-linear event described by Ernest Hemingway in The Sun Also Rises: How did you go bankrupt? Two ways, gradually and then suddenly. In the first Thunder Road Report I mentioned Exters Pyramid. John Exter (1910-2006) was almost unique a central banker (two stints at the US Federal Reserve) in the modern era who believed in sound money and that paper currencies should be backed by gold. Exter thought of the post-gold standard financial system as an inverted pyramid resting on its apex, emphasizing its inherent instability compared with a pyramid resting on its base. Within the pyramid are layers representing all of the different asset classes, from the most risky at the top, down to the least risky at the bottom. The asset occupying a tiny position at the bottom, and supporting the whole system, is gold.

Thunder Road Report - 9 August 2011

1938

1940

1942

1944

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Exter argued that during period of crisis, funds will flow downwards through the asset classes from the more risky in the base towards gold in the apex. As he explained in a 1991 interview with the Moneychanger, Franklin Saunders when a crisis strikes: creditors in the debt pyramid will move down the pyramid out of the most illiquid debtors at the top of the pyramid.Creditors will try to get out of those weak debtors & go down the pyramid, to the very bottom. Here is his drawing of the inverted pyramid as he saw it (with apologies for the quality) in the late-1980s when the riskiest assets were Savings & Loans (S&Ls/thrifts), third world debt and junk bonds, etc. John Exters Pyramid

Ive redrawn Exters pyramid to show how I see the flow of funds out of all kinds of paper assets, like cash and deposits, all varieties of debt obligations, and derivatives into real money, i.e. physical gold and silver (and the related equities although that is a source of great pain for me at the moment).

Thunder Road Report - 9 August 2011

Even gold and silver ETFs which are either un-backed or where the backing is questionable (and we all know which ones) could come to grief. Look at Eric Sprotts gold and silver ETFs which are trading at premiums of 2.1% and 19.4%, respectively. Investors believe that Eric Sprott is an honest man and his funds really do own the gold and silver bullion they claim. Other funds trade at a discount. While Bernanke may not be quite as stupid as he sounds, its important to realize that many powerful bankers and politicians, and the more powerful people behind them, are far from stupid. You would be nave if you didnt believe that the end game is as obvious to them as it is to us. The most powerful of these people are long-term planners and skilled at turning crises to their own advantage. Indeed, the modus operandi, used time and time again, is best summarized as:

PROBLEM, REACTION, SOLUTION

For example, Problem (9/11), Reaction (the public, cheered on by the mainstream media, says do something, protect us, etc) and the authorities provide the Solution (never-ending war, regime changes, occupation of Iraq & Afghanistan and reduced civil liberties, etc.). World Trade Center 7, anybody? For the financial system, the whole kicking the can down the road thing is clearly just steering us towards a much bigger crisis as per this quote from Friedrich August von Hayek (thanks Ronni Stoeferle): To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirectiona procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. You must expect that that the very same bankers and politicians who contributed to this crisis will try to bring in a new global currency since it fits the bigger agenda. The following message sent to the Chairman of the Gold Anti-Trust Action Committee, Bill Murphy, which he published on 21 October 2008 (I think I could make an educated guess regarding the identity of the very, very, very rich guy): Bill, Your quote today from Carroll Quigley came strangely after a talk I had yesterday with a local businessman I meet at mass. He likes to go out to the St. Benedict Center, Harvard, Mass., where he knows one of the fathers really well. Well, it turns out one of the parishioners there is the bodyguard of a very, very, very rich guy who spends his life mostly on his yacht, putting in here & there, and having the local heads of state, including the US president, drop in on him. So the guard goes with him everywhere, and accompanies him to a meeting held some two years ago at which the subject for discussion is a financial crisis being planned for two hears hence as a preliminary to the introduction of a world-wide currency and financial system. The guard is a good Catholic American, so he tells his rich boss that he doesnt like being associated with what hes heard, and if the guy is agreeable, is ready to hand in his resignation. Oh, not to worry, says the rich guy. As for needing to tell people what youve heard, tell anyone you like. No-one will believe you anyway Best, Frank The idea of a world/global currency in the minds of those we would least want in control of it, if it ever came to pass, is decades old. In fact, here is John Exter: the idea has always been widespread. Long after Fed Chairman William McChesney Martin retired, I heard him at a meeting advocate a one-world currency, so this has been in mens minds for many, many years. Theyre trying now to establish a single currency in Europe. I dont mind that so much, if Europe wants it, but this present world-wide fiat paper money -- what I call IOU nothing money -- is going to break down. Were headed for the worst economic catastrophe in all of history. Obviously the best one- world money would be gold, the good old gold standard

Thunder Road Report - 9 August 2011

William McChesney Martin was the longest serving Fed Chairman in history, occupying the post for almost twenty years from 1951-70, which encompassed the collapse of the Bretton Woods quasi-gold standard. The thought of a world currency in the hands of a small un-elected group of bankers brings Mayer Amschel Rothschilds quotation to mind: Give me control of a nations money and I care not who makes the laws The thing about TPTB is that their code of conduct requires them to at least hint at/foreshadow whats coming. While denying the return to a gold standard, I thought it was interesting that Robert Zoellick, President of the World Bank, US Treasury, CFR, ex-advisor to Goldman Sachs and Enron, one of Bushs Vulcans, Bilderberg attendee and advocate of the Iraq war (pretty much a full house) called for a new monetary system in November 2010 in which: The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Nice and vague at this point, but do you think that insiders arent heavily invested in gold and silver? Lindsey Williams said: The elite of the world are padding their pockets with gold and silver I wonder who was accumulating bullion during the great bear market from 1980-2001. My guess is that it was people with a very long-term perspective of financial history and a long-term agenda. As we move into the second part of the Great Financial Disaster, gold and silver - real money - are the go to assets. Besides gold and silver, the lower levels of Maslows hierarchy of needs or, looked at another way, strategic assets, will increasingly force their way to centre stage in portfolio construction. In this regard, other key asset classes include things like Energy (especially crude oil), Food/Agriculture, and Security, i.e. defence. Lets try to make it back to Coney - metaphorically speaking (!):

Source: promotional materials from Paramount Pictures 1979 movie

If you think about it, the investment case for all the above (and the globalists agenda) would be enhanced by an escalation of the conflict in the Middle East and North Africa (MENA) due to a combination of inflation, threats to oil supply and increased military spending. Although I havent bought any yet, Ive started thinking about the big defence stocks. First of all, here are are a couple of hypothetical thoughts: B The outlook is so bad for the worlds economy and its financial system that an event/events to distract the mainstream media-fixated consumer, I mean citizen, might shortly be deemed necessary; and B A disruption to Middle Eastern oil supply, leading to soaring oil prices, could be portrayed as an external shock, a convenient scapegoat for rampant inflation - the inevitable outcome of insane monetary policies.

Thunder Road Report - 9 August 2011

10

Because what Im talking about here is:

Source: Columbia Records/written by Edwin Starr, youtube

Major General Smedley Butler, the most decorated US Marine in history and, paradoxically, a high profile critic of Americas military adventurism published a book in 1935 titled War is a Racket. In the book, Butler detailed numerous examples, mainly from World War I, of how corporations, backed by public funding, were able to make huge profits. Here is his most famous quote and thanks to Gerald Celente for drawing it to my attention: War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes. A profitable racket is suitable preface for considering the big defence stocks, which have been underperforming the broader stock market for several years as the US defence budget (roughly equivalent to the rest of the world combined) has been cut back. However, the chart below shows how Lockheed Martins share price, for example, has begun to wake up from its slumber, although BAE Systems is still lagging: Lockheed Martin and BAE System relative to local markets - 5 years

Source: Datastream

Thunder Road Report - 9 August 2011

11

What I find interesting is that Lockheed has outperformed since the beginning of 2011 despite the high profile reduction in the US defence budget by US$400bn over the next decade. As things stand, the budget for the next several years looks something like this: Projected US Defence Spending (US$bn) 2010-2016
800 700 600 500 400 300 200 100 0 2010 2011E 2012E 2013E 2014E 2015E 2016E

Source: US Department of Defense

Obama said on 13 April 2011 that the US Defense Department should aim for an additional US$400bn of savings by 2023. No doubt, the majority of any planned savings (which could easily be reversed) will be slated for the later years and beyond the Obama Presidency, even if he wins a second term. US customers, primarily the government in one form or another, accounted for about 85% of both Lockheed Martins sales in 2010 and about 25% of BAE Systems. According to the latest projections, UK defence spending is expected to be broadly flat through to fiscal 2014/15: Projected UK Defence Spending (bn) 2010/11-2014/15
40 35 30 25 20 15 10 5 0 2010/11 2011/12 2012/13 2013/14 2014/15

The UK accounts for about 50% of BAE Systems sales. Despite the horrendous budget deficits, the gloom surrounding defence spending in places like the US and UK could prove to be a little overdone IF it gets overtaken by events well see. There are also nations, like Saudi Arabia, where defence spending is on a rising trend and given the threat to the ruling regime,

Thunder Road Report - 9 August 2011

12

the growth trend will likely remain in place. Saudi Arabia accounted for about 13% of BAE Systems sales in 2010. Order books of the defence contractors also provide some visibility on future revenues: The balance sheets of these companies are strong despite having been large buyers of their own stock. B Lockheed Martin had net debt of US$1.763bn at the end of June 2011 versus shareholders funds of US$3.288bn and 2010 EBITDA of US$4.846bn. Lockheed purchased a substantial US$3.7bn of stock (49.5m shares and c.13.2%) between the beginning of 2010 and the end of June 2011. B BAE had net debt of 1.122bn at 30 June 2011 versus shareholders funds of 5.234bn and 2010 underlying EBITDA of 2.179bn. BAE bought back 500m (4.0%) of its shares in 2010 and is planning a further 500m in 2011. With strong balance sheets, its worth considering at the historic yields of these companies Lockheed Martin is trading on 3.8% and BAE Systems on 6.8%. BAE raised its 2011 interim dividend to 7.5p (7.0p). While BAEs recently H1 2011 results were in line with estimates, Lockheed raised its 2011 earnings guidance following its Q2 results. Based on consensus estimates, PE ratios are: PE ratios Lockheed Martin BAE Systems Share Price 256p US$68.90 2010 6.3 9.6 2011E 6.5 9.2 2012E 7.2 7.8

If there is an escalation of the conflict in the MENA region, it is hard to imagine that the major defence stocks wont outperform. So lets consider this possibility. Im making the assumption that you have read the last Thunder Road Report (email me if you havent). By way of a quick recap, I recounted the intelligence supplied by former Prudhoe Bay chaplain, Lindsey Williams. Amongst other very accurate information gleaned from his insider sources, Williams predicted the fall in the oil price from US$147/bbl to under US$50/bbl in 2008, the breakout of the oil price in the fourth quarter of last year and the outbreak of the Middle East crisis three months before it happened. His precise words on the Alex Jones show on 21 October 2010 were: The elite want a Middle East crisis within three to four months time. They want a conflict in the Middle East. As I said in the last report, Lindsey Williams sources told him that the crisis will progressively draw in other countries in the region - Saudi Arabias leadership will be the last to be deposed - and that disruption to the oil supply from the region will ultimately take the oil price to US$200/bbl by the end of 2012. It is Lindsey Williams track record, as well as other intelligence (see below), that leads me to take this possibility seriously. Using Wikileaks disclosures published in the Daily Telegraph and New York Times, I showed how western interests had been working behind the scenes to promote uprisings in places like Egypt and Libya since 2008. The Arab Spring was nothing like as spontaneous as the vast majority believe.

Thunder Road Report - 9 August 2011

13

Furthermore, it seemed that the surge in Saudi Arabian diplomacy, e.g. with China, Pakistan and Malaysia, coupled with the deterioration in Saudi-US relations, suggested that the Kingdoms rulers are conscious of the threat. Now lets review some more recent intelligence material. Its becoming almost imperative to check Alex Jones website, infowars.com, on a daily basis to find out whats (really) going on in the world. This is from 15 June 2011: Infowars.com has received alarming reports from within the ranks of military stationed at Ft. Hood, Texas confirming plans to initiate a full-scale U.S.-led ground invasion in Libya and deploy troops by October. The source stated that additional Special Forces are headed to Libya in July, with the 1st Calvary Division (heavy armor) and III Corps deploying in late October and early November. Initial numbers are estimated at 12,000 active forces and another 15,000 in support, totaling nearly 30,000 troops. This information was confirmed by numerous calls and e-mails from other military personnel, some indicating large troop deployment as early as September. Among these supporting sources is a British SAS officer confirming that U.S. Army Rangers are already in Libya. The chatter differs in the details, but the overall convergence is clear - that a full-on war is emerging this fall as Gaddafi continues to evade attempts to remove him from power. Backing this up was a comment on 1 July 2011 by Dmitry Rogozin, the Russian envoy to NATO, to the state news agency RIA Novosti that NATO is probably preparing a ground invasion to overthrow the Gaddafi regime in Libya: I think that now we are witnessing the preparation stage of a ground operation which NATO, or at least some of its members are ready to begin, In light of the above information, there was a very thought-provoking piece of news from CNN on 19 June 2011. This described a large military exercise which took place along the Eastern Seaboard of the United States last month. The exercise (code-named Mailed Fist) involved US Marines, the Navy and the Air Force. CNN commented that: The exercise is designed to test the capability of every type of Marine Corps aircraft, including MV22 Ospreys and F/A 18 Hornets, as well as some Navy ships and Air Force planes. The drill will stretch from Quantico Marine Base in northern Virginia to the Navys Pinecastle Bombing Range in Florida. With thousands of Marines and other service members involved, its the biggest such drill ever on the U.S. East Coast. Three days later, a story on the Politico website noted how the marines were being re-acquainted with amphibious landings: The team is among nearly 10,000 Marines taking part this week in a massive training exercise along the East Coast. The exercise, known as Mailed Fist, is designed to reacquaint a force used to ground combat in Afghanistan and Iraq with its basic amphibious mission. In the opinion of author and journalist, Webster Tarpley: This drill appears designed to train for amphibious landings on the coast of the Mediterranean, as in Libya or Syria. Now lets move on to James P. (Jim) Tucker, who is the doyen of Bilderberg investigative journalists, and has inside sources among the participants. As you probably know, this years meeting took place from 9-12 June 2011 in St Moritz in Switzerland. Five days later, Jim Tucker confirmed on the American Free Press website that the plan is to escalate the MENA conflict. Tucker quoted Keith Alexander, director of the NSA (US National Security Agency) saying at the meeting: It will have to be a big war involving several countries to advance our goals of a global economy.

Thunder Road Report - 9 August 2011

14

Please note those last seven words in light of some of the discussion above. The agenda has to be accelerated because, as Zbigniew Brzezinski warned them at a meeting of the Council on Foreign Relations in Montreal last year: The other major change in international affairs is that for the first time in all of human history, mankind is politically awakened. That is a total new realitymost people are consciously aware of global inequities, inequalities, lack of respect, exploitation. Lindsey Williams made an interesting comment: The last thing in the world they want is the American people (and the rest of us Paul) to wake up. Its little wonder that the audience of the Alex Jones Show (see infowars.com), via internet and radio, is now in the millions worldwide and growing like wildfire. A lot of what he says is resonating with people when they try to make sense of whats happening. Back to Brezinski and he was being deadly serious in 1970 when he wrote: The technotronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values (think things like liberty and morals Paul). Soon it will be possible to assert almost continuous control over every citizen and maintain up-to-date complete files containing even the most personal information about the citizen. These files will be subject to instantaneous retrieval by the authorities. I dont know if you remember the scepticism about Barack Obama in the first Thunder Road Report around the time of his inauguration. It seems a long time ago now, but the audacious hope (thanks to propaganda and outright lies) was that he would be a cross between JFK and MLK. I noted in that report that Zbigniew Brzezinski was one of his advisors (handlers?) during his campaign. Indeed, back in 2007, Obama described Brzezinski as: one of our most outstanding thinkers. Here is more from Jim Tucker on this Bberg years meeting: Bilderberg has forgiven Barack Obama for hesitancy about what is now his war. They understand the political delicacy in Washington but, as one said, hes a good soldier and hell follow orders. Obama has become one of the biggest con tricks pulled on a population in world history. Do you think they are all in the same gang, or what?

But my favourite is the one below on the right hand side - its so subtle:

Thunder Road Report - 9 August 2011

15

The intervention in Libya for supposed humanitarian reasons was clearly nothing more than a bait and switch with the purpose all along being to depose Gaddafi. After all, Libya is outside their control and has oil and gold reserves. Pepe Escobar, writing in the Asia Times on 29 June 2011, detailed the geo-political significance: NATOs definition of winning implies Benghazi as the new Camp Bondsteel - the largest US military base in Europe, which happens to double as an independent state under the name of Kosovo. Cyrenaica is the new Kosovo. Balkanization rules. This is a sort of dream scenario for the compound NATO/Africom. Africom gets its much-wanted African base (the current headquarters is in Stuttgart, Germany) after participating in its first African war. NATO extends its crucial agenda of ruling over the Mediterranean as a NATO lake. After Northern Africa there will be only two Mediterranean non-players to take out: Syria and Lebanon. The name of this game is not Libya; its Long War. While not endorsing any dictatorship, its worth just reflecting on the economic and cultural situation in Libya. Unlike many other nations in the MENA region, its oil wealth has filtered down to the populace and Libya has the second highest GDP/capita on the African continent. Lets compare womens rights in Saudi Arabia with Libya. This is what Wikipedia has to say about Saudi Arabia: All women, regardless of age, are required to have a male guardian. Women cannot vote or be elected to high political positions. Saudi Arabia is the only country in the world that prohibits women from driving. Regardless of all that, Saudi Arabia remains our trusted allyfor now. Here is Wikipedia on womens rights in Libya: Central to the revolution of 1969 (when Gaddafi came to power Paul) was the empowerment of women and the removal of inferior statusLibyan women have had the right to vote and to participate in political lifeWomen have also made great gains in employment outside the homeWorking mothers enjoyed a range of benefits designed to encourage them to continue working even after marriage and childbirth, including cash bonuses for the first child and free day care centres.

Thunder Road Report - 9 August 2011

16

Lets consider religious freedom in Saudi Arabia. Here is a quote from a US State Department report released on 17 November 2010: Saudi Arabia has no religious freedom in theory or practiceThe public practice of non-Muslim it religions is prohibited. Now compare it with Libya and get a load of this quote from the American-Israeli Cooperative Enterprise (my emphasis) in 2010: the government generally respected most minority religions but STRONGLY OPPOSES MILITANT FORMS OF ISLAM. And this from the UKs Independent: Al-****and other j*had* groups have opposed Gaddafi since he cracked down in the late 1990s on the Islamist Libyan Islamic Fighting Group which sought to replace his regime with an Islamic state. So Libya is on our side in this (partly fabricated IMHO) war. Furthermore, Libyan rebel leader, AbdelHakim al-Hasadi, confirmed in an interview with an Italian newspaper that some of his men had previously fought against US and allied troops in Iraq. About 25 of these men, he said: today are on the front lines in Ajdabiya (in northeastern Libya Paul) A more accurate term is al-CIA-da when you think about its origins. Here is Wikipedia: The origin of al-**** as a network inspiring the t word (Paul) around the world and training operatives can be traced to the Soviet War in Afghanistan. Then theres that insightful interview with Brzezinski in the French weekly news magazine Le Nouvel Observateur for its 15-21 January 1998 issue: Q: The former director of the CIA, Robert Gates, stated in his memoirs (From the Shadows), that American intelligence services began to aid the Mujahadeen in Afghanistan 6 months before the Soviet intervention. In this period you were the national security adviser to President Carter. You therefore played a role in this affair. Is that correct? Brzezinski: Yes. According to the official version of history, CIA aid to the Mujahadeen began during 1980, that is to say, after the Soviet army invaded Afghanistan, 24 Dec 1979. But the reality, secretly guarded until now, is completely otherwise: Indeed, it was July 3, 1979 that President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. And that very day, I wrote a note to the president in which I explained to him that in my opinion this aid was going to induce a Soviet military intervention. Q: When the Soviets justified their intervention by asserting that they intended to fight against a secret involvement of the United States in Afghanistan, people didnt believe them. However, there was a basis of truth. You dont regret anything today? Brzezinski: Regret what? That secret operation was an excellent idea. It had the effect of drawing the Russians into the Afghan trap and you want me to regret it? Q: And neither do you regret having supported the Islamic [integrisme], having given arms and advice to future terrorists? Brzezinski: What is most important to the history of the world? The T*lib*n or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the cold war? Back to Libya and what about the mass demonstrations in Tripoli in support of Gaddafi which have gone unreported by the western media. Here is US talk show host Lionel (Michael William Lebron) on the whole Libyan debacle:

Thunder Road Report - 9 August 2011

17

Which country are we living in, number one. (Number) two where are the mainstream media? Where are these narcotized, zombified sock puppets? What are they talking about? Whatever we might think of Gaddafi, we are being played for idiots. To make matters worse, the Nobel Peace Prize-winning Obama is running roughshod over the War Powers Act which requires Congressional Authority for military action lasting more than 60 days. Obama has used two ridiculous arguments to justify by-passing Congress: B Libya is not technically a hostile action because there are no ground troops in Libya. Lets ignore the special forces, intelligence personnel, cruise missiles fired from warships and almost 4,000 bombing sorties; and B He cited authorization from UN Security Council Resolution 1973, which permitted member states to protect civilian populated areas which were threatened with attack - an interesting switch in authority from national to global. A couple of brief thoughts: B Regarding the first infantile argument, some very heavyweight lawyers in the US establishment and the military disagree with Herr Obama indeed none other than the Pentagons own general counsel and the Justice Departments Office of Legal Counsel; and B The second argument about the humanitarian aim of the mission has clearly been superseded with the attempts to kill Gaddafi and scores of attacks in and around Tripoli where he has strong support. This is a classic example of disregarding the democratic process within sovereign nations and directing policy from a supranational organization. Its not just Iraq, Afghanistan, Pakistan and Libya, the conflict has now spread to Yemen. This is from a Washington Post story US drone stake in Yemen is first since 2002 on 5 May 2011: Two al-****a operatives were killed in the attack in the remote, mountainous Yemeni governorate of Shabwa early Thursday, a Yemeni security official said. Drones operated by the U.S. Joint Special Operations Command were redeployed in Yemen last year as part of a secret U.S. effort to reinvigorate the hunt for al-****a operatives in the country. Previous strikes in Yemen over the past 18 months involved cruise missiles fired from naval craft off Yemens coast The redeployment of the drones coincided with a significant expansion of the CIAs presence in the country Here is Webster Tarpleys view: The purpose of the entire Yemen destabilization is to open an avenue of attack against Saudi Arabia, Yemens immediate neighborPrince Turki al-Faisal, a leading figure of the royal family, signaled Riyadhs broad-based rage against Washington with a June 7 op-ed warning Obama that there will be disastrous consequences for U.S.-Saudi relations if the United States vetoes UN recognition of a Palestinian state. The CONFLICT IS ALREADY ON FIVE FRONTS! Currently the biggest obstacle to an escalation in the MENA conflict appears to be officials from some European nations, like Italy, France and Norway (prior to the recent tragedy), getting cold feet on the Libyan campaign, publicly anyway. In turn, this has drawn criticism from the US and UK, like this from British Defence Secretary, Liam Fox: When we look at the sometimes pathetic contributions being made by some countries inside NATO, the European elements of NATO cannot expect the U.S. to come to our aid on every occasion. Far too many of our European partners are still trying to get a free ride and they should regard Libya as a wake-up call.

Thunder Road Report - 9 August 2011

18

Just because the enthusiasm of some of the Europeans appears to be waning, doesnt necessarily rule out bilateral US/UK action. We also need to watch for an event (false flag?) which could be used as a pretext for invasion. I havent pulled the trigger on the defence stocks yet but Im watching them closely within what are deeply unpalatable circumstances. On that note, the last word goes to Smedley Butler: I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the r*ping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents. War has shattered many young mens dreams Made them disabled bitter and mean, Life is too precious to be fighting wars each day War cant give life, it can only take it away War written by Edwin Starr In investment terms, we can make it (!):

Source: promotional materials from the Paramount Pictures 1979 movie

Thunder Road Report - 9 August 2011

19

Author: I started work the month before the stock market crash in 1987. Ive worked mainly as an analyst covering the Metals & Mining, Oil & Gas and Chemicals industries for a number of brokers and banks including S.G. Warburg (now UBS), Credit Lyonnais, JP Morgan Chase, Schroders (became Citibank) and, latterly, at the soon to be mighty Redburn Partners. Lyrics from The Clash, Bruce Springsteen, Grateful Dead, Johnny Nash, Edwin Starr, cover fron Vogue Disclaimer: The views expressed in this report are my own and are for information only. It is not intended as an offer, invitation, or solicitation to buy or sell any of the securities or assets described herein. I do not accept any liability whatsoever for any direct or consequential loss arising from the use of this document or its contents. Please consult a qualified financial advisor before making investments. The information in this report is believed to be reliable , but I do not make any representations as to its accuracy or completeness. I may have long or short positions in companies mentioned in this report.

Thunder Road Report - 9 August 2011

20