China Threatens “Small Scale Military Operation” To Remove India From Bhutan Border

In the latest escalation between two nuclear powers, China has turned the war threat amplifier up to '11' by threatening India (in an article published a Chinese state-controlled newspaper) that it could conduct a "small-scale military operation" to expel Indian troops from a contested region in the Himalayas.

The latest standoff started in June, after Chinese troops started building a road on a remote plateau, which is disputed by China and Bhutan.  Indian troops countered by moving to the flashpoint zone to halt the work, with China accusing them of violating its territorial sovereignty and calling for their immediate withdrawal.

China then added a large number of troops to the region:

"The crossing of the mutually recognised national borders on the part of India… is a serious violation of China's territory and runs against the international law," Chinese defence ministry spokesman Wu Qian told a press conference quoted by AFP, adding that "the determination and the willingness and the resolve of China to defend its sovereignty is indomitable, and it will safeguard its sovereignty and security interests at whatever cost."

 

He also said that "border troops have taken emergency response measures in the area and will further step up deployment and trainings in response to the situation," without giving any details about the deployment.

Then it escalated with a Chinese Ministry of Defense official now warning explicitly that Indian troops must leave the contested area if they do not want war.

And now, it has become more specific, with The Independent reporting that Chinese and Indian media have taken a strident approach, with an article in the Chinese state-owned Global Times quoting a research fellow at the Institute of International Relations of the Shanghai Academy of Social Sciences saying China is preparing to initiate a "limited war" to push Indian soldiers out of the area.

Hu Zhiyong told the paper: "The series of remarks from the Chinese side within a 24-hour period sends a signal to India that there is no way China will tolerate the Indian troops' incursion into Chinese territory for too long.

 

"If India refuses to withdraw, China may conduct a small-scale military operation within two weeks."

 

He went on to say the military operation would aim to seize Indian personnel lingering in Chinese territory or expel them.

 

"India, which has stirred up the incident, should bear all the consequences," he added. "And no matter how the standoff ends, Sino-Indian ties have been severely damaged and strategic distrust will linger."

An Indian magazine's front cover last month showed a map of China shorn of Tibet and self-ruled Taiwan also ignited public anger on Chinese social media with thousands of angry posts.

"China has made it clear that there is no room for negotiation and the only solution is the unconditional and immediate withdrawal of Indian troops from the region," said a commentary by the official Xinhua News Agency.

 

"If China backs down now, India may be emboldened to make more trouble in the future," it added.

As we noted previously, this isn’t the first time that these two nations have been at each other’s throats over their borders. In 1962 their armies clashed, leading to defeat of the Indian army, and thousands of casualties on both sides. Based on the rhetoric coming out of Beijing’s state sponsored media, it appears that China is willing to replicate that conflict.

 

Is Trump Winning?

Authored by Robert Gore via Straight Line Logic blog,

Mainstream analysis has been wrong for so long, why start believing it now?

SLL has run a series of articles (“Plot Holes,” “Trump and Vault 7,” “Calling a Bluff?” “Let’s Connect the Dots,” “Powerball, Part One,” “Powerball, Part Two”) advancing interrelated hypotheses. We’ve asserted that President Trump is far smarter and the powers that be far stupider and weaker than current consensus estimates. Trump’s primary motivation is power. The nonstop vilification campaign against him has little to do with policy differences and instead reflects establishment fears that Trump will investigate, expose, and punish its criminality.

The upshot of these hypotheses: Trump is winning and has consolidated his power.

Reader reaction to this non-mainstream and admittedly speculative line of thinking has been mixed and often skeptical.

However, we’ll press on, because our hypotheses have yielded testable predictions, most of which have been borne out. From “Powerball, Part Two”:

To answer a question posed in Part One: if Trump has consolidated power both at home and abroad, don’t hold your breath waiting for a swamp draining. The most effective power is often power of which only a few know. Those he has by the short hairs would be most helpful to him—sub rosa—if they’re still in government. If such is the case, don’t be surprised if the Russia probe fades away, Trump’s nominal opposition consigns itself to rote denunciation, the Deep State sits still for his Middle Eastern policy changes, and he gets more of his agenda through than anyone expects.

Even the Washington Post has admitted the Russia probe is “crumbling.”  Trump and Sessions know Special Prosecutor Robert Mueller won’t find much because there’s nothing there, although there may be a sacrificial offering or two to propitiate the investigatory gods. Trump read Sessions the riot act via Twitter and a Wall Street Journal interview about not investigating Hillary Clinton, intelligence community leaks to the press, and Ukrainian efforts to sabotage his presidential campaign. He’s been roundly condemned for publicly criticizing Sessions, but here’s a speculative leap: perhaps publicly criticizing Sessions was not really what Trump was doing.

Perhaps Trump was giving his attorney general political cover to pursue investigations against high-profile Democrats who cannot help Trump, sub rosa or otherwise. Investigations of Hillary Clinton, former Attorney General Loretta Lynch, Susan Rice, Samantha Power, Fusion GPS, and Debbie Wasserman Schultz would demoralize the Democrats, preoccupy and harass key players, expose criminality, and electrify Trump’s base. Providing Sessions further cover, twenty Republican representatives have sent a letter to the Attorney General and Deputy Attorney General Rod Rosenstein demanding the appointment of a second Special Counsel to look into potentially illegal acts by Clinton, Lynch, and former FBI director James Comey.

After recusing himself from the Russiagate investigation, which he knows is pointless, and being “scolded” by Trump, Sessions is now a sympathetic, squeaky-clean figure; even Democrats have expressed support. He has far more latitude to pursue the investigations his boss wants him to pursue. Most of the ensuing criticism will be directed at Trump, which will bother Trump not at all (although there will undoubtedly be answering Twitter blasts).

Trump has quietly (when Trump does anything quietly, take note) made two sea changes in US policy in Syria. At the G20 summit, he negotiated a cease fire with Vladimir Putin for southwest Syria. Last week he ended a CIA program that armed Syrian jihadists fighting Bashar al-Assad’s regime. Both changes are anathema to the US Deep State, the mainstream media, and US allies Saudi Arabia, the Gulf States, Israel, and Turkey, yet other than “rote denunciation,” they have been surprisingly docile. The latter change could presage abandonment of a pillar of US foreign and military policy since President Carter supplied arms and other aid to the mujahideen in Afghanistan during their successful fight against the Soviet Union. The US may be out of the business of arming Islamic insurgents against regimes it seeks to change.

Deft – by this analysis – as Trump has been, his biggest challenge lies ahead.

The government is bankrupt, and demographics will push it ever-deeper in the hole.

 

The global economy is struggling under monstrous and unsupportable debt.

 

Fiat money something-for-nothing has a sell-by date, sooner or later the stock market and economy will head south.

 

Historically, there’s been a tight correlation between stocks, the economy, and presidential popularity.

Can Trump dodge this bullet? Here’s another speculative leap: he is already laying the groundwork. He’s claiming credit for the stock market’s rally since he was elected. That may not be as foolish as it seems. When the market and economy falter, he will claim they went up on hopes for his program, and will blame Congress and the Federal Reserve for dashing those hopes.

Most people blame the Republican-controlled Congress, not Trump, for the failure to repeal and replace Obamacare. Trump proposes, but Congress disposes and Trump has made sure everyone knows that Congress is responsible. In the same vein, he signed the veto-proof Russian sanctions bill while at the same time excoriating Congress for passing it. He has an easier job making his case than a President whose party controls Congress normally would. Trump is a Republican in name only and ran just as hard against the Republican establishment as he did against Hillary Clinton.

Look for him to lambast Congress when it botches tax reform and the debt ceiling. He could be hoping for such miscues. Debt ceiling contretemps may set off financial market conniptions. Trump will sigh and tweet: If only Congress had passed my health care and tax reforms and given me a clean debt ceiling increase, none of this would have happened. If the Federal Reserve continues to raise its federal funds target rate and shrinks its balance sheet, he’ll include Janet Yellen in his tweets.

These hypotheses yield testable predictions. Mueller’s investigation will come a cropper, but investigations of high-profile and no sub rosa value leakers and Democrats – up to and perhaps including Hillary Clinton – will lead to indictments and either plea bargained settlements or convictions. Trump will take credit for the stock market until it reverses. He will continue to harshly criticize Congressional failures and blame them when financial markets and the economy head south. This may come to a head if Congress fails to pass a clean debt ceiling increase by the end of September. Trump will also point his finger at the Federal Reserve. This is a high risk strategy, given the longstanding psychological linkage between presidential popularity, the strength of the economy, and stock market indices. It’s probably the only strategy available to Trump. Time will tell if it works.

The war in Syria has crested; ISIS, though still capable of substantial mischief, has lost. The refugee flow has already reversed, an estimated half a million refugees have returned, which, as noted in “Powerball, Part Two,” gives European leaders some breathing room. Assad will stay in power unless Russia, not the US, sees fit to remove him. The embers of conflict will smolder for years, but Trump will not be fanning them by arming anti-Assad groups or escalating US military involvement. He will continue to use shows of force and diplomatic maneuvers to try to resolve other hot spots—North Korea, Iran, the South China Sea, Ukraine, Afghanistan—and will shy away from exclusively military solutions. He is deeply displeased with the war in Afghanistan and is calling for a rethink that may ultimately lead to withdrawal.

All this is speculative, but it continues a line of analysis whose predictions have been for the most part confirmed. However, borrowing from the ubiquitous financial disclaimer: past performance is no guarantee of future accuracy.

Zero-Emission Vehicle Credits: The One ‘Product’ That Tesla Actually Earns A Profit On

As we pointed out last week when Tesla reported its Q2 earnings, making products that actually generate a return on capital for shareholders isn’t a strong suit of the Silicon Valley powerhouse.  In fact, Elon Musk managed to burn through a record $1.2 billion of cash in Q2 alone, or roughly $13 million dollars every single day.

 

But, as Bloomberg points out today, there is at least one product where Tesla manages to earn a staggering margin of roughly 95%.  It’s called a Zero-Emission Vehicle (ZEV) credit and it’s pretty much the only reason that Tesla managed to ‘beat’ earnings in Q2.

I’m referring to zero-emission vehicle, or ZEV, credits. California and several other states require that a certain proportion of the vehicles sold by an automaker emit no greenhouse gases. These cars earn the automaker credits, and if they don’t have enough to meet their quota, they can buy extra ones from someone who does. As Tesla only makes vehicles that run on batteries and emit nothing, it usually has a surplus for sale.

 

The profit margin on these is very high, perhaps 95 percent. The implied $95 million of profit equates to about 58 cents a share. Tesla reported a loss of $1.33 per share this week — beating the consensus forecast by 55 cents.

 

This isn’t the only time ZEV credits have played a big role for Tesla. Looking back to early 2013, selling credits has given Tesla’s earnings extra oomph in many quarters, likely taking them above consensus forecasts in some (on an implied basis, assuming that 95 percent margin):

 

After selling $0 worth of ZEV credits in 1Q 2017, Tesla managed to sell $100 million worth in 2Q with roughly $95 million, or $0.58 per share, flowing straight to the bottom line.

Of course, this isn’t the first time that ZEV credits played a huge role in padding Tesla’s earnings.  Who can forget Q3 2016 when a $139 million in sales pushed Tesla’s earnings into positive territory for the first time in years?

One notable period there is the the third quarter of 2016. This was the one where CEO Elon Musk exhorted his employees to “throw a pie in the face” of Tesla’s critics by delivering thumping results. It worked, although at the cash-flow level it also owed quite a bit to suppliers.

 

But ZEVs provided a big tailwind: At $139 million, Tesla booked more revenue from selling the credits that quarter than any other. Using my margin assumption, they added 84 cents per share to earnings, turning a loss of 13 cents into a profit of 71 cents.

 

In short, as taxpayers we’re all doing our part to help the environment by enriching one eccentric billionaire in Silicon Valley…which presumably makes sense to some politicians in Sacramento.

China Unveils New Weapons – From Stealth Fighters To ICBMs

Authored by Jeffrey Lin and P.W.Singer via PopSci.com,

As part of the People's Liberation Army's 90th anniversary celebration – it was founded on August 1, 1927 –  President Xi Jinping (in military fatigues) hosted a giant parade at the Zhurihe Training Center.

Zhurihe – Zhurihe certainly has enough room to hold all the people and equipment for a parade with thousands of soldiers, hundreds of tanks and armored vehicles, and dozens of ICBMs. -Xinhua News Agency

Here, PLA's most elite forces demonstrated how far China has come in modern warfare. CCTV broadcast the session, which means a domestic and global audience of millions saw the army's showcase of tanks, stealth fighters, artillery, and ICBMs.

A group of ZTZ-99A heavy main battle tanks marched among the first parade units, followed by a variety of tracked ZDB-04A and wheeled ZBL-09 infantry fighting vehicles. The military procession then followed with PLZ-07 and heavy PLZ-04 self-propelled howitzers, PHL-03 heavy rocket launchers, and ZBD-003 airborne IFVs.

Tanks and Tanks Again – The ZTZ-99A is China's heaviest and most armored tank, with a weight of 60-plus tons. In the background, you can see the transporter erector launcher (TEL) vehicles for the CJ-10 cruise missiles. -Xinhua News Agency

Combat support vehicles were not forgotten. Combat engineering vehicles, BZK-006 UAV launch vehicles, communications vehicles, and even fuel tankers followed.

There was plenty of air power, too. A trio of J-20 stealth fighters flew over the parade, followed by Y-20 heavy transport aircraft, KJ-2000 AEW&C aircraft, J-16 strike fighters, J-15 carrier fighters, and J-10B fighters. The latest H-6K bombers, along with H-6U aerial tankers and Y-9 transports, also made an appearance.

J-20 – Three J-20 stealth fighters led the aerial portion of the PLA's 90th anniversary parade. -Xinhua News Agency

Z-10 attack and Z-18 transport helicopters showed up, flying in formations shaped like "90," as well as the Chinese characters for 8-1 (a reference to August 1), with the Z-18 transports landing to disgorge airmobile infantry.

The highlight was likely the public debut of not just one, but 16 DF-31AG intercontinental ballistic missiles (ICBMs). The DF-31AG is an improvement over the 7,146-mile-range DF-31A ICBM. It carries a larger, reinforced missile canister likely carrying a more powerful missile with increased range or payload. The DF-31AG also uses an all-terrain 8X8 launch vehicle, enabling it to go off-road, which will make it much harder to find compared to its truck-launched predecessor. 

DF-31AG – Sixteen DF-31AG ICBMs marched in the parade. China likely has more DF-31AGs in addition to those, thanks to a recent, rapid build-up of Chinese nuclear forces. -Xinhua News Agency

The presence of 16 new ICBMs (there are likely other DF-31AGs not present at the parade), along with several dozen other ICBMs, shows that China's nuclear global strike capacity is growing in size and capability. 

Guns and Rockets – PLZ-05, PLZ-05 howitzers, PHL-03 heavy multiple rocket launchers, along with AFT-10 missile launchers in the background, are becoming the go-to fire support options for Chinese mechanized brigades and divisions. -Xinhua News Agency

Other missiles present: the DF-31A ICBM, the DF-26 intermediate-range ballistic missile, and the DF-16 short-range ballistic missile. Surface-to-air missiles were well represented by HQ-9B and HQ-16 SAMs, as well as LD-2000 and PGZ-07 anti-air cannons. The surface-attack options were represented by CJ-10 cruise missiles, YJ-62 and YJ-83 anti-ship missiles, and YJ-12 supersonic anti-ship missile.

The fact that the parade took place not in Beijing, but in Inner Mongolia, was symbolic. Zhurihe hosts the PLA's annual Stride exercises. These wargames pit the resident "Blue Team" (a mechanized infantry brigade that uses NATO tactics) against visiting PLA units. These wargames are played in a variety of urban, hill, and open-area locations, often under intensive conditions, including simulated nuclear battlefields.