Early Warning for 25 October 2018 – Forward Observer Shop

Early Warning for 25 October 2018

Good morning. Here’s your Early Warning for Thursday, 25 October 2018. (All times Central.)

White House

The President is scheduled to receive his intelligence briefing, deliver remarks on drug pricing, deliver remarks on the 35th anniversary of the Beirut Barracks bombing, and then host two fundraisers in Washington, D.C.

State Department

Secretary Pompeo: Nothing significant to report.

Defense Department

Defense Secretary Mattis and other senior officials have no publicly scheduled events.

Deployments: The Wasp Expeditionary Strike Group was last reported as underway in the East China Sea. The Iwo Jima Amphibious Ready Group (ARG) was last reported as underway in the north 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 began 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 does not appear imminent.

The Carl Vinson (CVN-70) was last reported as being underway in the Pacific Ocean.

The Abraham Lincoln (CVN-72) was last reported as being in port at Norfolk, but will be transitioning to a new home port in San Diego.

The John Stennis (CVN-74) was last reported as being underway in the eastern Pacific as it begins its shift to a new homeport in Norfolk.

The Harry Truman (CVN-75) was last reported as being in the Norwegian Sea. The carrier strike group is participating in the 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.

* Indicates changes to last reported location or other amplifying information.


Significant House Activity:

  • Nothing significant to report.

Significant Senate Activity:

  • Nothing significant to report.

* Only events pertinent to national security are listed.
** Significant reporting will appear in this week’s Strategic and National Intelligence reports.


An overlay of two economic numbers indicates we could be looking at another housing bubble. The chart below shows (1) the Federal Housing Finance Agency’s House Price Index against (2) the Owner’s Equivalent Rent of Residences, which measures how much homeowners could charge for the renting of their homes. During the last housing bubble, the spread was about 40 percent higher than the housing price index, and we’re seeing a similar growth in that spread today. After the last housing bubble, then-Federal Reserve chairman Ben Bernanke bet on American psychology by re-inflating home values and the stock market. The “Bernanke Put” stipulated that as long as Americans felt good about rising home values and market portfolios, they would behave in a way that would spur economic growth; i.e., a quick return to consumerism. The question is whether or not the Bernanke Put just re-inflated the previous housing bubble. This indicator lends some credence to another housing bubble, but it shouldn’t be taken as definitive proof of one.  [source]

Energy analyst John Kemp released a reason to expect global trade/economic slowdown. He writes on Twitter: “SOUTH KOREA’s KOSPI-100 equity index is usually a good proxy for changes in global trade growth so the enormous decline in the index strongly suggests global trade will slow in the months ahead.”

Earnings growth is slowing down for publicly traded S&P 500 companies. For three straight quarters, the number of beaten earnings estimates has declined, while earnings estimate misses have increased over the same period of time. Traditionally, a corporate earnings recession is a reliable leading indicator of economic recession, although we’re not there yet. It’s something I continue to watch because what we’re seeing now is in line with expectations of a recession within the next 24 months.

President Trump’s economic advisor Larry Kudlow appeared in a Financial Times interview, where he blamed China for the lack of progress on trade negotiations. “We gave them a detailed list of asks, regarding technology for example, [which] basically hasn’t changed for five or six months. The problem with the story is that they don’t respond. Nothing. Nada. It’s really the [Chinese president Xi] and the Chinese Communist party, they have to make a decision and so far they have not. Or they have made a decision not to do anything, nothing. I’ve never seen anything like it,” Kudlow said. The Trump administration is planning to increase the tariff rates from 10 to 25 percent in early 2019 unless the two sides find a way out.

Kudlow also warned about the economic impacts if the Democrats taking back the House. “The thing that worries me the most is a blue wave in two weeks. I don’t believe that’s going to happen but if it were to happen then the risk is they will overturn our policies and we will stop the boom… If they screw up the boom, we go back to 1-2 per cent growth.”


HurricaneWatch: The National Hurricane Center reports one disturbance east of the Caribbean with a 60 percent or higher chance of further development as of this morning. About 38 days remain in “hurricane season,” which ends on 30 November. [source]

Drought Map

The latest wildfire map will appear each Monday.

What I’m Looking at this Morning

Ret. Gen: U.S. war with China is likely within 15 years

Russia warns U.S. of ‘counterstrike’ risk

Navy releases new operations plan

Notable Quotable

The United States is in “a time of the politics of the apocalypse — an all-or-nothing view of the difference between winning and losing an election and of holding power or not holding it. … This has been on the rise for a long time.” – Washington Post’s Dan Balz

Mike Shelby is a former military intelligence NCO and contract intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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