Good morning. Here’s your Early Warning for Wednesday, 10 October 2018. (All times Central.)
HurricaneWatch: Hurricane Michael strengthened to a Category 4 storm and will make landfall on the Florida panhandle today. Petroleum producers have already cut production by 40 percent and natural gas by 28 percent as a result, sending oil to $75/barrel. Additionally, Tropical Storm Nadine has formed in the east Atlantic, off the Azores, and could make a run towards U.S. shores.
White House
The President is scheduled to hold meetings with DHS Secretary Kirstjen Nielsen and FEMA Administration Brock Long, then have lunch with Secretary Mattis. President Trump ends his day with a trip to Erie, Pennsylvania for a fundraiser and Make America Great Again rally.
State Department
Secretary Pompeo is scheduled to give remarks at the U.S.-Mexico CEO Dialogue then meet with officials from U.S. Agency for International Development.
Of Note: The Assistant Secretary of State for International Security and Nonproliferation will be in Singapore, Vietnam, and Thailand this week (09-12 October) to discuss nonproliferation issues concerning North Korea.
Defense Department
Defense Secretary Mattis has no publicly scheduled events.
Of Note: The Association of the United States Army (AUSA) annual meeting is this week. Dubbed as the “largest land warfare tradeshow in North America,” the annual meeting features top U.S. Army officials speaking on a wide range of topics. Significant reporting will appear in Thursday’s Strategic Intelligence Summary.
Deployments: The Wasp Expeditionary Strike Group was last reported as underway in the South China Sea. The Iwo Jima Amphibious Ready Group (ARG) was last reported as underway in the Atlantic to participate in Trident Juncture 2018 in Norway. Along with the Iwo Jima ARG are Marines from the 24th Marine Expeditionary Unit who will be joining 700 Marines already in Norway. Trident Juncture 2018 will begin on 15 October, but most of the exercise will take place between 25 October and 07 November.
These are the last publicly reported locations of these ships. Conflict requiring an aircraft carrier/carrier strike group not appear imminent.
The Carl Vinson (CVN-70) was last reported as being in port of San Diego.
The Abraham Lincoln (CVN-72) was last reported as being in port at Norfolk.
The John Stennis (CVN-74) was last reported as having returned to port in Bremerton, WA.
The Harry Truman (CVN-75) was last reported as being in the north Atlantic after arriving in port at Portsmouth, England over the weekend. The carrier strike group will participate in the upcoming Trident Juncture 2018 exercise in Norway.
The Ronald Reagan (CVN-76) was last reported as being in the Philippine Sea.
The George H. W. Bush (CVN-77) was last reported as having returned to port in Norfolk.
Congress
Significant House Activity:
- Nothing significant to report.
Significant Senate Activity:
- The Homeland Security and Governmental Affairs Committee will hold a hearing on threats to the homeland.
- The Armed Services Committee will hold a hearing to examine Air Force readiness.
* Only events pertinent to national security are listed.
** Significant reporting will appear in this week’s Strategic and National Intelligence reports.
Economy/Finance
Market watchers continue to monitor the 10-year (3.2%) and 2-year (2.9%) Treasury yields as a sign of what’s to come. The cross over, what’s referred to as flattening yield curves, has been a reliable leading indicator of recession.
Meanwhile, the International Monetary Fund (IMF) is warning of another financial crisis in the future. Specifically, the IMF and other economists are watching U.S. corporate debt levels, which are near 30-year highs. Unlike the housing bubble burst of 2008, they’re closely observing what’s potentially a U.S. corporate debt bubble. IMF economists report that global debt now stands at $182 trillion. IMF also issued a warning on U.S. assets: “Asset valuations appear to be relatively high in some markets, notably in the United States.”
Additionally, we should be talking about the student debt bubble. Looking over U.S. “financial assets”, checkable deposits and currency makes up about 11 percent of the total asset holdings while student loans make up a whopping 45 percent. When a bank, or in this case the U.S. government, makes a loan, the money lent out becomes an “asset”. All this is to say that 45% of the U.S. Government’s assets (outside of future tax revenues) consist of student obligations to pay back the borrowed money. That’s over a trillion dollars now. Scary.
President Trump is no fan of the Fed’s plan to raise interest rates right now because rate hikes temper economic growth. Yet Dallas Federal Reserve President Robert Kaplan says he wants three additional rate hikes in December, March, and June. After three rate hikes this year, analysts expect the Fed to raise rates again in December before deciding on further policy action.
Weather
HurricaneWatch: Hurricane Michael strengthened to a Category 4 storm and will make landfall on the Florida panhandle today. Petroleum producers have already cut production by 40 percent and natural gas by 28 percent as a result, sending oil to $75/barrel. Additionally, Tropical Storm Nadine has formed in the east Atlantic, off the Azores, and could make a run towards U.S. shores.
(This map is updated every Thursday.)
What I’m Looking at this Morning
How the Pentagon learned to embrace Russia’s hybrid warfare concept
DHS prioritizes relationships with military
Notable Quotable
“[D]ata is the new oil. Someone told me the other day I should say data is the new bacon. I think it’s everything, and especially for the intelligence community when our whole purpose is to know the truth, see beyond the horizon and allow our leaders to act before events dictate. Our whole history is predicated on the ability to go and find information that allows us to know a little bit more a little sooner.” – Susan Gordon, Deputy Director of National Intelligence
