NATO reportedly wants 40,000 more German troops for defense against Russia

NATO wants Germany to contribute seven more brigades, or roughly 40,000 troops, to boost collective defense against Russia, Bloomberg and Reuters reported on May 28, citing their sources.
The news comes amid mounting tensions between the alliance and Russia and an increasingly uncertain U.S. commitment to European security.
The alliance's overall demand for the number of brigades provided by member states could go from 80 to between 120 and 130, an undisclosed senior official told Reuters.
Germany agreed to provide 10 brigades to NATO by 2030. It currently fields nine brigades — each comprising around 5,000 soldiers — including one new formation stationed in Lithuania.
Though no firm date for implementing the changes has been set, 2030 has been mentioned as a preferred deadline, Bloomberg reported.
Allied defense ministers are expected to discuss the matter during a meeting in Brussels next week.
Russia's full-scale invasion of Ukraine in 2022 prompted European countries to hike defense spending in order to revive their military capabilities, which atrophied after decades of disarmament following the Cold War.
The matter gained more urgency after signals that the U.S., the most powerful military in NATO, plans to scale down its presence in Europe as President Donald Trump shifts strategic focus to the Asia-Pacific region.
Ukrainian foreign intelligence (SZRU) chief Oleh Ivashchenko recently warned that Russia will be able to replenish its forces between two and four years after the war in Ukraine, allowing it to launch aggression against Europe.
Read also: If Germany sends Taurus missiles to Ukraine, Russia has a major Crimean Bridge problem
We've been working hard to bring you independent, locally-sourced news from Ukraine. Consider supporting the Kyiv Independent.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

CNBC

14 minutes ago

• CNBC

CNBC Daily Open: Have Trump's strikes on Iran bolstered or eroded his credibility?

United States on Saturday conducted air strikes on three of Iran's nuclear sites, entering Israel's war against Tehran. The timing was unexpected. On Thursday, U.S. President Donald Trump said he was still considering U.S. involvement and would arrive at a decision "within the next two weeks." Financial and political analysts had largely taken that phrase as code word for inaction. "There is also skepticism that the 'two-week' timetable is a too familiar saying used by the President to delay making any major decision," wrote Jay Woods, chief global strategist at Freedom Capital Markets. Indeed, Trump has commonly neglected to follow up after giving a "two week" timeframe on major actions, according to NBC News. And who can forget the TACO trade? It's an acronym that stands for "Trump Always Chickens Out" — which describes a pattern of the U.S. president threatening heavy tariffs, weighing down markets, but pausing or reducing their severity later on, helping stocks to rebound. "Trump has to bury the TACO before the TACO buries him ... he's been forced to stand down on many occasion, and that has cost him a lot of credibility," said David WOO, CEO of David Woo Unbound. And so Trump followed up on his threat, and ahead of the proposed two-week timeline. "There will be either peace, or there will be tragedy for Iran far greater than we have witnessed over the last eight days," Trump said on Saturday evening. But given Trump's criticism of U.S. getting involved in wars under other presidents, does America bombing Iran add to his credibility, or erode it further? The U.S. strikes Iran U.S. President Donald Trump on Saturday said the United States had attacked Iranian nuclear sites, pushing America into Israel's war with its longtime rival. Secretary of Defense Pete Hegseth said Sunday that "Iran's nuclear ambitions have been obliterated." The decision to attack Iran engages the American military in active warfare in the Middle East — something Trump had vowed to avoid. Iran calls attacks 'outrageous'Iran's Foreign Minister Abbas Araghchi on Sunday said Tehran reserves all options to defend its sovereignty and people after the "outrageous" U.S. attacks on three of its major nuclear enrichment facilities. Iranian state-owned media, meanwhile, reported that Iran's parliament backed closing the Strait of Hormuz, citing a senior lawmaker. The U.S. on Sunday called on China to prevent Iran from doing so. Stock futures in U.S. retreatU.S. futures slid Sunday evening stateside as investors reacted to Washington's strikes on Iran. On Friday, U.S. markets mostly fell. The S&P 500 lost 0.22%, its third consecutive losing session, while the Nasdaq Composite retreated 0.51%. But the Dow Jones Industrial Average eked out a 0.08% gain. The pan-European Stoxx 600 index ticked up 0.13%, but ended the week 1.5% lower. Oil jumps but bitcoin slumpsOil prices jumped Sunday evening in the U.S., its first trading session after Saturday's strikes. U.S. crude oil rose $1.76, or 2.38%, to $75.60 per barrel, while global benchmark Brent was up $1.80, or 2.34%, to $78.81 per barrel. Meanwhile, bitcoin prices briefly dipped below the $99,000 mark Sunday, its lowest level in more than a month, before paring losses. It's now trading around $100,940, down 1.5%. [PRO] Eyes on inflation reading Where markets go this week will depend on whether the conflict in the Middle East escalates after the U.S.' involvement. Investors should also keep an eye on economic data. May's personal consumptions expenditure price index, the Federal Reserve's preferred gauge of inflation, comes out Friday, and will tell if tariffs are starting to heat up inflation. How regime change in Iran could affect global oil prices Senior Israeli officials said this week that their military campaign against Iran could trigger the fall of the regime, an event that would have enormous implications for the global oil market. There are no signs that the regime in Iran is on the verge of collapse, said Scott Modell, CEO of the consulting firm Rapidan Energy Grop. But further political destabilization in Iran "could lead to significantly higher oil prices sustained over extended periods," said Natasha Kaneva, head of global commodities research at JPMorgan, in a note to clients this week. There have been eight cases of regime change in major oil-producing countries since 1979, according to JPMorgan. Oil prices spiked 76% on average at their peak in the wake of these changes, before pulling back to stabilize at a price about 30% higher compared to pre-crisis levels, according to the bank.

Yahoo

21 minutes ago

• Yahoo

America slides into totalitarianism — and it won't be easy to reverse

We've seen a spike over the last few years in the use of the word 'authoritarianism.' This is the predictable result of the recent rise of authoritarian regimes which, to a greater or lesser extent, work to subvert and dismantle the institutions and practices of democracy and the rule of law. A survey of more than 500 political scientists found that they believe the United States is headed towards authoritarian rule. A majority of Americans, according to a PRRI poll, now believes Donald Trump is 'a dangerous dictator.' (It remains an enduring mystery why this majority didn't stumble onto this conclusion before the November election). There is, of course, another term for modern dictatorial regimes, one that gained considerable currency during the Cold War after the 1951 publication of 'The Origins of Totalitarianism' by Hannah Arendt, but which has somewhat fallen out of favor. How does authoritarianism differ from totalitarianism? There is no precise description of either; like other political terms, they are subject to questionable definitions that often depend on the viewpoint of whoever is using them. Marxist writers shunned the word 'totalitarian'; Nazi Germany was invariably referred to as 'fascist,' while the Soviet Union was a 'people's democracy.' But 'totalitarian' was a favorite term of anti-Communists throughout the Cold War. Based on descriptions of dictatorial regimes over the past century, the distinction seems to be this: Totalitarianism is authoritarianism intensified. Whereas authoritarianism may leave society outside the political realm more or less intact, totalitarianism makes a total claim on civil society. In its most extreme form, as in North Korea, there is virtually no private sphere where persons can gather and exchange ideas outside the regime's surveillance and control. Another difference is that authoritarian regimes often have no developed ideology beyond hatred of the political opposition. Totalitarian ideology can be elaborate, if syncretic, and can incorporate disparate, even contradictory ideas (including convoluted and childish conspiracy theories) to produce a kind of comprehensive worldview or substitute religion. Totalitarian leaders tend toward charismatic styles and have a genuine bond of loyalty with their followers, who often express extreme, exaggerated enthusiasm for the leader and his movement. The followers are in fact the key to totalitarian movements, without whom the charismatic leader would simply be a barroom bloviator. Whereas the typical authoritarian dictator often comes to power amid economic or political crisis, frequently by way of a coup, the charismatic leader is swept into power on a populist wave. The 'crisis' he exploits is a deep-seated cultural one, but also a personal one in the life of the follower. As Eric Hoffer's 'The True Believer' (published the same year as Arendt's book) observes, the disposition to follow a charismatic leader was 'seeded in the minds' of his true believers long before he arrived on the scene. These followers may not constitute the majority of a population; indeed they rarely do. But if they reach 30 to 40 percent, their dogmatic persistence may successfully overcome the majority, many of whom are timid or apathetic, and set the political tone for a society. The famous line of William Butler Yeats, 'The best lack all conviction, while the worst are full of passionate intensity' applies to political behavior. By contrast, many authoritarian leaders are colorless, possessing little or no charisma: Consider Francisco Franco, Antonio Salazar, the Greek colonels, Leopoldo Galtieri, Augusto Pinochet, Park Chung-hee. They often do not have any coherent or developed ideology, other than opposition to the left. They obtain key support from wealthy interests, but rather than a fervent mass following they count on a divided, apathetic or acquiescent population to gain and hold power. In a sense, these are true reactionaries, whereas totalitarianism tends to have a revolutionary element. Authoritarians will of course use violence to preserve the status quo, and their rule over societies is repressive, but everything is designed to keep a lid on things. Whether from a calculation of how best to maintain the status quo or from simple lack of imagination, authoritarians generally do not want to rock the boat. It is difficult to imagine most of them as objects of a personality cult. This sort of authoritarianism also characterized the last decade or so of Communist rule in eastern Europe. As a student in Europe, I recall encountering Poles, Hungarians, Yugoslavs and other Eastern bloc nationals living in Western Europe — not as exiles, but as contract workers or students. These were not idealists building Communism; it was difficult to be an idealist under the leadership of grey nonentities like Polish Gen. Wojciech Jaruzelski or East Germany's Erich Honecker. Perhaps the lone exception in Eastern Europe was Romania, where Nicolae Ceaușescu — who had broken with Moscow years earlier — maintained a rigid dictatorship and cult of personality up until he faced a firing squad. On the other hand, the core of the totalitarian mindset is an alienation from the world, and particularly from one's own society. This alienation breeds a twisted utopian mentality that not only rejects modernity, but also tradition and the actual past in favor of a cartoonish pastiche that misapprehends both the past and the present. As that description implies, totalitarianism is a crisis of modernization. In the early 20th century, totalitarianism was best known in countries that had superficially been modernized, but remained regressive in crucial ways. Italy and Russia offer textbook examples: Different as they were and are, both nations had rapidly advanced in some industrial sectors and metropolitan regions, while conditions in rural areas were primitive and there was considerable social discord and festering injustice. The horrendous bloodletting of World War I bloodletting removed all inhibitions against a total, violent resolution of social conflict. Germany was in many ways the archetypal example: It was a world leader in industry (especially chemicals, metallurgy, and machinery), and by some distance at the forefront of scientific research. (Early in the 20th century, Germans were awarded more Nobel Prizes for science than citizens of any other country.) Its universities were the best in the world. Yet that impressive modernity was set against a politically powerful but backward agricultural sector, a rigid social structure left behind by petty feudal princedoms of the Holy Roman Empire and, above all, a retrograde political system. The Reichstag, or national parliament, was grossly gerrymandered in favor of the upper classes, and the government was not responsible to its lawmakers, but rather to a capricious monarch. With one foot at the leading edge of modernity and another in a mythical past, Germany could produce world-class physicists like Werner Heisenberg, but also agrarian-medievalists like the Artaman League, whose backward-looking, völkisch ideas were apparently so congenial to the Nazi party that the league was eventually absorbed it into Adolf Hitler's movement. One could fill a library with all that has been written about Hitler as the archetype of the charismatic totalitarian leader, full of violent hatred, reflexive deceit and a taste for destruction that eventually unmasked itself as an annihilating nihilism. But despite the morbid fascination he continues to evoke in our collective historical memory, Hitler is less interesting — and less important in the long run — than the people who voted for him, regarded him as a messianic national savior and fought to defend his rule till their country was in ruins. Or for that matter, consider Josef Stalin, who was patently less charismatic than the German dictator, yet was worshipped by countless Russians — along with millions of foreigners who should have known better — and whose death occasioned a paroxysm of public weeping that, according to Alexander Solzhenitsyn, even extended to inmates of the Siberian gulag. To this day, an official cult of Stalin endures, deployed today to motivate Russians to serve as cannon fodder in Vladimir Putin's Ukraine war. Countries like Germany and Russia suffered a crisis of industrial modernization, with wrenching change, uneven development and the atomization of the individual in a newly created mass society. I submit that the United States is undergoing a similar social process in its transition from an industrial society to a digital society, and is in danger of suffering an extended totalitarian experience rather than a brief bout of Constitution-flouting. America presents a paradox similar to that of early 20th-century Germany: It leads the world in science and technology (at least until this year), its elite universities are the finest anywhere, and its major cities are hubs of wealth and economic vitality. Yet much of the American interior, as any intelligent foreign visitor would notice, is economically and culturally backward: systematically underdeveloped, with decaying or inadequate infrastructure and limited educational opportunities. Its residents' lifespans are comparable to people in developing or 'Third World' countries. What's even more significant is the backward mindset of a significant proportion of the population. No developed country has anything close to America's population of religious fundamentalists: believers in angels, demons, miracles and prophecies, all wrapped in a determined provincialism. Their perception of reality more closely resembles those of people in Iran or Nigeria than citizens of developed democracies. This pronounced preference for the mystical and the supernatural, rather than observable fact, among so many Americans — which has enriched generations of televangelists — has rendered an electorally crucial segment of the population receptive to the fantastic promises, nonstop lies and relentless demonization integral to the totalitarian message. As Arendt observed about the supporters of earlier totalitarian systems: The effectiveness of this kind of propaganda demonstrates one of the chief characteristics of modern masses. They do not believe in anything visible, in the reality of their own experience; they do not trust their eyes and ears but only their imaginations, which may be caught by anything that is at once universal and consistent in itself. What convinces masses are not facts, and not even invented facts, but only the consistency of the system of which they are presumably part. The consistency of the system should not be confused with the consistency of the rules of logic; the only 'consistency' is that the leader is always right. As I have previously described, millions of potential followers of totalitarianism in America have taken mental refuge in a shallow cynicism that is actually a disguise for extreme gullibility. This allowed Trump to take credit for having developed COVID vaccines, while at the same time encouraging his acolytes to embrace COVID denial and rejection of vaccines. Here is Arendt again: In an ever-changing, incomprehensible world the masses had reached the point where they would, at the same time, believe everything and nothing, think that everything was possible and that nothing was true. Mass propaganda discovered that its audience was ready at all times to believe the worst, no matter how absurd, and did not particularly object to being deceived because it held every statement to be a lie anyhow. The totalitarian mass leaders based their propaganda on the correct psychological assumption that, under such conditions, one could make people believe the most fantastic statements one day, and trust that if the next day they were given irrefutable proof of their falsehood, they would take refuge in cynicism; instead of deserting the leaders who had lied to them, they would protest that they had known all along that the statement was a lie and would admire the leaders for their superior tactical cleverness. What are the systemic factors that have resulted in so many people in the so-called leading country of the so-called free world being so vulnerable to totalitarianism? The short answer is that its institutions rotted from within. Contemporary America has operated under a Constitution that is well over 200 years old, has been substantially unchanged for over a century and under current circumstances is virtually unamendable. This Constitution has archaic features like the Electoral College — unheard of anywhere else since the dissolution of the Holy Roman Empire in 1806 — and grotesquely gerrymandered electoral districts (a hangover from the 'rotten boroughs' of 18th-century England), as well as a Senate that privileges rural states, much as the rural Prussian junker class politically dominated imperial Germany. These anachronisms and inequities are further exacerbated by the unaccountable malefactors of the wealthiest classes, who are able to thwart any fundamental reforms that might weaken the popular urge for a radical or totalitarian solution. As has been frequently noted, the rise of social media (often controlled by these same malefactors) has operated as an informational Gresham's Law, with genuine information systematically driven out of existence by disinformation, myth and mindless diversion. Just as earlier totalitarians dominated the first generation of electronic media, the current crop of dictators rule digital platforms.A fundamental flaw in America's early development was of course slavery, which functioned as a rigidly totalitarian state within a state. From the beginning, acute foreign observers like Alexis de Tocqueville noticed that beneath all the self-flattery about rugged individualism, Americans had a tendency towards conformity that could lead to a tyranny of the majority (or a sufficiently dogmatic minority). In the 1960s, political scientist Richard Hofstadter wrote that America had periodically been swept by waves of conformist anti-intellectualism: One can trace ... the emergence of what I would call the one-hundred per cent mentality – a mind fully committed to the full range of dominant popular fatuities and determined that no one shall have the right to challenge them. This type of mentality is a relatively recent synthesis of fundamentalist religion and fundamentalist Americanism, very often with a heavy overlay of severe fundamentalist morality. Political absolutism has been a chronic temptation throughout American history. But its most recent extreme outbreak is unique in that the intellectual ground had been prepared by religious fundamentalist theocrats and white supremacists for more than four decades. This is reminiscent of the fact that while the German-speaking lands had had an authoritarian basis for centuries, the radical, violent nationalism of the Nazis was preceded by 40 or 50 years of writings by failed intellectuals like Paul de Lagarde, Julius Langbehn and Moeller van den Bruck (who coined the term 'Third Reich'). They brought authoritarianism to a new and mystical level, paving the way for Hitler. An internet search of the most influential American political books of the last half-century will reveal such works as Noam Chomsky's 'Manufacturing Consent' or Naomi Klein's 'The Shock Doctrine.' But however accurate their depictions of politics and society, how influential were they? I submit that Tim LaHaye and Jerry Jenkins' 'Left Behind' series (which apparently traumatized a generation of adolescents), and William Luther Pierce's 'The Turner Diaries' (the Popular Mechanics of race-war incitement) were vastly more impactful, both politically and culturally. One could also mention Margaret Atwood's 'The Handmaid's Tale,' although what Atwood intended as a warning has been embraced by America's ayatollahs as a blueprint. With that ideational foundation already in place on the political right, the current descent into national madness began in the period between the Sept. 11, 2001, terrorist attacks and the early years of the military occupation of Iraq. The Bush administration's false pretext for so-called preemptive war against Iraq was thoroughly in the tradition of Joseph Goebbels' Big Lie or George Orwell's Newspeak. What was notable, however, was not that the general public, which could hardly find Iraq on a map, readily fell for the Bush-Cheney lie campaign. Erstwhile flagships of liberal thought, like The New Yorker and The New Republic, swallowed the falsehoods like hungry barracudas, and self-styled public intellectuals like Christopher Hitchens sullied their reputations forever by writing propaganda questioning the patriotism and good faith of opponents of the war. The true Rubicon that Americans crossed was on the question of torture, or 'enhanced interrogation,' in the Bush administration's Orwellian terminology. Torture is a barbaric practice condemned since the Enlightenment, proscribed even in our 18th-century Constitution and condemned in international law. But even after the wars in Iraq and Afghanistan demonstrated no evidence that torture 'worked' in eliciting usable information, nearly two-thirds of Americans supported its use. Now that Trump has asked the Supreme Court to declare both the U.N. Convention Against Torture and its federal implementing statute void, we cannot assume that his position on the matter is unpopular. The U.S. is now distinctly moving toward the principal goal of the totalitarian project: erasing the distinction between civil society and the state. The Trump regime is eagerly working to insert itself into every facet of American life, from effectively taking over private universities and dictating their curricula to banning books from the Naval Academy, dictating prices to retail businesses, attempting to change cartographic nomenclature (like 'Gulf of America') and vetting exhibits at the Smithsonian Institution, which is not formally a part of government and has had an independent policy on exhibits for the last 178 years. Another feature of totalitarianism is omnipresent surveillance. Since the 1970s, there have been numerous privacy laws enacted to protect ordinary citizens, and government databases are not systematically interlinked. But the Trump regime has contracted with the notorious tech firm Palantir to do just that. Palantir was of course co-founded by Silicon Valley oligarch Peter Thiel, a Trump supporter and co-conspirator with Elon Musk in the DOGE project. Some nonfederal entities, eager to curry favor with Trump, have gotten into the act. The University of Michigan hired thuggish private contractors to spy on and harass students (before reportedly retreating). How long will it be until a major university bans the teaching of evolutionary biology, acting in the same spirit as German universities under Hitler, which proscribed 'Jewish physics'? Historian Ian Kershaw has written that Hitler had thousands of 'little Hitlers,' Gauleiters, district leaders and block wardens throughout the German provinces who were not only happy to do his bidding, but sought to anticipate his will with their own initiatives, a scheme called 'working towards the Führer.' Trump has his little Trumps at the state and local level as well; I live in Virginia, a supposed purple state, where 121 books have been banned in the school libraries of various counties. These include such racy and controversial fare as 'The Adventures of Tom Sawyer' and 'Romeo and Juliet,' as well as (irony alert) Orwell's '1984.' At what point will this ban extend to public libraries, or to Barnes & Noble? The little Trumps are also present as interpreters for the journalists and social scientists who make the trek to Trump Country to understand the locals. Inquiring as to whether the Trump regime's cuts to Medicaid and social services, along with the higher retail prices caused by tariffs, might lead overwhelmingly pro-Trump inhabitants of impoverished eastern Kentucky to think again, a visiting sociologist was told by a local mayor that their loyalty was unshakable. "You know how proud and stoic Appalachians are,' the mayor told Arlie Russell Hochschild. 'We know how to take a little pain. People may have to suffer now to help make America great later. Trump's tariffs could raise prices, but that will force companies to gradually relocate to the U.S.' In other words, he was saying that his own community was too stupid to understand their own material interests. A demographic notorious for voting according to the price of gasoline or eggs would gladly further impoverish itself for the sake of Trump's vision, or so the mayor claimed. Any well-read person is likely to consider the rise of the modern nation-state to be a distinctly mixed bag, as the history of the last two or three centuries has demonstrated. But it arose concurrently with the Enlightenment, and one of its less remarked-upon features was the idea of the state as an entity above the interest of individuals, a kind of neutral arbiter. There were of course nascent political parties in those days (usually called 'factions'), and the usual horde of lobbyists, job-seekers and influence peddlers. But the state and its functions, like the post office, weights and measures, or even the nurturance of science and letters (as with the French Academy) were, at least in theory, above politics and venal ambition. Only in such an atmosphere could anyone get the idea that the law should nominally treat all people equally (even as economics divided them into classes), or that an abstract notion called human rights might exist and apply to everyone. Only under a neutral state, above or beyond partisan conflict, could dreamers theorize about constitutions and parliaments representing the interests of the nation. Even English monarchs were not above the constitution (if it was an unwritten one), as James II and Edward VIII discovered. What Trump and his gang are perpetrating is a regression from the modern nation-state to personal rule, in which the autocrat effectively owns everything in the territory he controls, clientelism runs rampant, and ordinary people are subjects rather than citizens. But there are significant differences between then and now: Under the feudal system, the lord had, in principle, certain obligations to peasants in addition to his right to command them. The modern totalitarian leader feels no such duty to law, custom or decency. He represents warlordism in a business suit instead of a thawb. It has become conventional wisdom that America's elite institutions – the entities with the most at stake in preserving what's left of an open society, even one as flawed as ours — have surrendered to the Trump regime with breathtaking (and disgusting) alacrity. From law firms to elite universities like Columbia and Michigan to billion-dollar businesses damaged by Trump's tariffs to major media organizations, they have chosen capitulation even when resistance seemed both more rational and more effective. As I write this in the aftermath of the 'No Kings' protests (the same weekend that Trump tried to stage a North Korea-style military parade to his own glorification), it has become equally conventional wisdom that ordinary people are resisting: in congressional town halls, spontaneous demonstrations and other forms of resistance. This is of course encouraging. But is it enough? For all the failures of our elites, they were not responsible for the 77 million votes Trump received last November. The battle for democracy will not be staged by the elites or against them, but at the mass level. The lesson of Trump's first term was soon forgotten in the popular mind, and overcoming his second regime will be an order of magnitude more difficult, especially as his followers are more numerous, more deeply entrenched in the governmental system and radicalized to a far greater degree than they were the first time around. Not long after I wrote the previous paragraph, I learned that a Minnesota state representative and her husband had been assassinated and a state senator critically wounded in a 'targeted political attack.' We have accelerated from Trump's perceived opponents receiving death threats to political murder. How long will it take our so-called thought leaders to recognize what has been staring them in the face since at least the Charlottesville neo-Nazi rally in 2017: Trump and his Republican followers and enablers are only symptoms of something much deeper? Our national crisis will not be correctly perceived, let alone solved, until we recognize that the root of the problem lies in that supposed repository of virtue, the American people. The prestige media's rote expeditions to rural diners in Iowa to discover the Real America are wearing distinctly thin at this juncture, because what lies at the core of Trump's support is a not-insignificant fraction of would-be totalitarians who possess the same mentality as those who lynched Black people in the Jim Crow South, mobbed Jews during Kristallnacht and beheaded professors during Mao Zedong's Cultural Revolution. It will be a long, hard road back to decency and sanity.

CNBC

31 minutes ago

• CNBC

What stocks to buy and when to buy in Monday's Iran-driven market

He bombed. Two words and the world went akilter. We get that. Visions blind us: a blocked Strait of Hormuz; $100 per barrel oil; a de-stabilized Iran and mullah revenge; our troops in harm's way; and no end to Israel-Iran missile volleys. Monday's reaction in the market? Always the same. Big institutions sell stocks, which are so-called risk assets, even as we know from the rise in the S & P 500 all of these last 40 years that stocks are hardly risky. No matter, the institutions want cash. They always want cash. They don't know any better. They want to sell the high price-to-earnings ratio stocks and look for safety. They are the drivers of the lower bond yields we will get, especially the 10-year Treasury. To which I say to these institutions, "Whoa there, cowboy." That's been the playbook for them ever since 1982. It's been wrong every time except 2007 when the Great Recession struck. Why did selling fail as a strategy every time but once? Because all of the major waves of selling in the wake of some incident of uncertainty were caused by momentary risk that did not ultimately threaten stocks, or the banking system — or, ultimately, the economy. This time is no different, unless the Strait of Hormuz is closed by Iran. Following Saturday's President Donald Trump -authorized strikes at three Iranian nuclear sites, Iran is said to be considering such a move. On Sunday, Secretary of State Marco Rubio called for China to prevent Iran from closing the Strait of Hormuz, which is one of the most important trade routes for oil in the world. Crude prices rose in Sunday trading, and U.S. stock futures were lower. I think a conflict with a deeply hobbled non-nuclear, fourth-rate power, that is the current Iran does not create systemic risk even with higher oil. Let's take that off the table. This is not China. This is not on par with a seizure of strategically important Taiwan, which China has threatened to do, or a shutdown of all rare earth materials, which are dominated by China and needed for manufacturing in sectors including autos, semiconductors, and defense. Iran isn't a trading partner. It isn't even much of a trading partner with Russia or China. It lost its proxies through a stealth war against Israel that you could argue they have been winning for ages, simply because they are a terrorist condoning regime. They are no longer winning. They are losing big and seem hellbent on reducing their state to rubble. Given the apparent extent of the damage at the heavily deepened Fordo nuclear site, I also want to take existential risk off the table. Iran has not and will not be allowed to create a nuclear weapon. Israel seems to be able to anticipate everything they do, as Israel seems to have someone(s) infiltrated at a high level. I will not take the Strait of Hormuz off the table because it's the only gambit left of the terrorist regime. We will play that out momentarily — but, spoiler alert, it's not a meaningful plot. I don't detect a possibility of regime change in Iran, however, despite what some of the Western press says, because "the people" there are not going to rise up. And, the Western types are not going to push to overthrow. So, what works then for the CNBC Investing Club's portfolio? Monday's schematic The stock market is controlled, in moments like these, by the S & P futures markets, which overwhelm the opening bell in New York, as they have every time since the 1987 crash. It's axiomatic. It doesn't matter if it is mistaken, which it is. It's just what happens. The S & P futures sellers don't know a health care stock from a semi. They are using the futures as a hedge for their long-side portfolio. So are the hedge funds, except some will use the futures as a way to get short — bet against the market. The money goes into bonds, which due to their inverse relationship, means bond prices go up and bond yields go down. We know that tends to be positive for stocks. Some will choose to buy traditional safety stocks. Again, a mistake. There are now too many flaws. When a Procter & Gamble or a Johnson & Johnson doesn't offer protection — and, they most certainly do not, stay away. Think of how horrendous the food and drug stocks really have been. Most of these are nightmares. Our plan involves knowing and accepting the constraints forced upon us by the overwhelming negative power of the S & P futures out of Chicago. Selling doesn't let you get any palatable prices for your stocks. The good prices were Friday's close. You can sit on your hands and do nothing, which can work in times of uncertainty. Or you can buy, but you have to remember that there will be big institutions that will, all day long, be selling the stocks you want to buy. They will bury you. Here's why: Their sell orders will be huge. The prices they will get on the first parts of their orders will be ugly at the start of the day because of the negative power of the S & P futures sellers. Their sell orders are so large they will be "worked" all day. The traders handling these orders at the brokerage houses, like a Goldman Sachs or JPMorgan, are now you're enemy because they need to demonstrate their selling prowess. That means getting a price for their client that is, in aggregate, better than the closing price of the day. The best way for a trader to handle large sell orders on days like Monday is to skillfully sell when buy bids build and walk away for a bit to let bids build. That's careful selling. Cat and mouse. The worst way to do it is to sell all day at any price and then save a big chunk of the client's sell order for the closing bell, blowing the stock to smithereens. That causes a price that is the low of the day. Therefore, the trader will be giving the customer an average price that is better than the self-controlled, marked-down closing price. The client is oblivious and grateful for an average price that is better than the closing price, even as the execution was sub-optimal. All they know is they "did better" than the closing price. That's why it is so hard to buy on the first day of any sell-off. No matter what you do, whatever price you pay, you will most likely have a loss at the end of the day because of that process. Knowing this, you can't be heroic at the opening. Those who do will try to catch what they think will be the low of the day. When stocks start sinking again, as they almost always do, these opportunists will end up trying to scalp for pennies and will be gone by 10:30 a.m. ET. They will most likely be losers. Day trading stinks. Now, I am presuming if you are a Club member, you aren't on margin, or you wouldn't be reading this. Who wants to read an article by someone who has nothing but contempt for you? If you do have cash, and because the S & P Short Range Oscillator , a market momentum indicator that I have trusted for decades, is flat and will most likely be negative by the end of the day, I am going to err on the side of buying. After all, as long-term investors, one day of trading is not make or break for us. We're in the market for the long haul. If you don't have cash on hand, you sell some of your losers and use the day to reposition. What to buy It's very counterintuitive. The institutions sell the highest multiple stocks. They do so because they are up a lot. Those are the ones we want. These sell-offs give us a chance to get a better average cost basis. Our only obstacle here is that Micron Technology reports this week — and I fear, after this run, that it won't be good enough. Still, I will scan to see what we can buy that will matter. We can buy some industrials. They have been rock solid, and given that we don't see a recession on the horizon, that might be a great bet. I also think that the dollar store stocks will finally come in, and Club name TJX Companies will finally stop going down. Intriguing. Low multiple tech like Bullpen name Cisco Systems or the redoubtable IBM makes sense. I like the data center. I like Club name Amazon as well as Netflix and Tesla with a flat-fee robotaxi. The "normal" winners, the J & J and P & G's, just don't work anymore. After J.M. Smucker two weeks ago, forget food, especially General Mills , which reports this week. FedEx reports, too, making it tough to buy any transports. How about the oils. I would prefer to be a seller, not a buyer. We are pumping roughly 13.5 million barrels a day . We can up that by a million barrels on command from Trump. The Russians are pumping like mad. Who knows what Iran is doing, but it's probably trying to sell as much as it can to pay the bills. Do we really think the Saudis are against what Trump did Saturday? They are grateful and will sell whatever is necessary to keep oil down. Which is why I think that the Strait of Hormuz is not a sustainable worry. It's a big reason why I would be a buyer of the rest of the market. When to act Everyone I know is worried about a big down day. So, I am worried about a big up day. We will know what happens if the selling dries up at 2:45 p.m. ET. Why then? If nothing bad has happened by then, some sellers might walk away. The margined sellers are done. If the selling slows down, shorts will start covering, and some intrepid longs will wade in. There is time for a rally to build, and it won't be met by new sellers because there isn't enough time. If a rally starts earlier than 2:45 on Monday afternoon, it will be overwhelmed by sellers who are grateful for better prices. If it starts much later than 2:45, there won't be time to mount a rally before the 4:30 p.m. ET close. So, if you do wade in, think about waiting an hour after the 9:30 a.m. ET open and some by 3:30 p.m. ET — the latter being hard for us because of the constraints of the Club, which puts our trade alert deadline before 3:15 p.m. ET, because we always wait 45 minutes to execute our trades to give members a shot at the best prices. Be prepared for a long day. Be prepared for plenty of rumors. Be prepared for the Trump haters to say everything is going to be wrong. Be prepared to buy. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.