Europe and the Mideast continue to be the forces which will create a real risk for the world. While the ECB continues to support banks and to keep Spain and others alive, the reality is many large companies and investors are pulling out of southern Europe, further assuring that this part of Europe will have a very prolonged struggle to revive their economies to a level which will be sustainable long term. They are now in a sort of death spiral. The more deficit reduction and austerity, both of which are necessary, the more the economies wither, and the more companies close down and shy away. That, of course, means even fewer job prospects and capital investment, and less tax revenue to pay the massive debt. This creates more unemployment and more entitlement program needs and drain on government resources. And on and on down we go. Unlike Japan where the culture is not one generally known for rebellion and massive social upheaval, the southern Europeans are a very different breed. The most frightening part is the situation can devolve so much as to create uncontrolled social unrest and that can lead to bad people coming to power and then there is no way to predict what could happen. Maybe Spain and Greece will pull it out, but they will be so burdened by loans from northern Europe and the IMF, that it will be a generation possibly before there is real sustained growth of the type that really revives those countries. That drag on the rest of Europe will be a anchor dragging down potential growth in the stronger countries. France is now going into a situation where there is no growth and the Hollande government is introducing classic socialist remedies like higher taxes, more regulation and reducing the retirement age, all of which is driving out investment and further diminishing future prospects for growth. With a huge Muslim population, and a history of street riots, there is a potential for major unrest again happening and that could be a further damper on investment and job growth. In short, while some think Europe is turning the corner and is a place to invest, I retain my admonition against investment in Europe. I do not believe the Europeans have solved their issues, and the risks of bad things happening is still high. The risk reward still makes no sense to me.

I continue to draw your attention to the real world problem of the Mideast. Syria is going down this week or next, but very soon. The rebels are now in the process of attacking Damascus and will soon force the departure or death of Assad. Then all hell breaks loose. Obama kept finding foolish arguments for doing nothing- if we arm the rebels we don’t’ know who they are (so they got arms from Al Queda in Libya), we will just cause more violence and death (is 40,000 dead not enough), we will instigate civil war (what name would you put on it now), we will go through the UN and Kofi Annan ( he was real effective). The latest is don’t dare use chemical weapons. Well they mixed the gas and loaded it on bombs already so our opportunity to proactively stop the potential of these weapons falling into the wrong hands is greatly diminished. Now we have no choice but to send in special forces along with Israel and others. It will take a fairly large force now, and be far more dangerous to our forces now that the weapons are ready to fire. Had Obama acted early we might have been able to save tens of thousands of lives and had our forces at much less risk. We have lost control. The rebels have now said publicly that the US abandoned them when they really needed help so stay out now when we are winning.

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