War, Gold, and Markets
On Monday afternoon John Kerry came on TV at about 2 pm to tell the world that there was undeniable proof that the people in Syria were killed via chemical attack. Because of the vest network of satellites with high definition cameras trained on so many parts of the earth we can literally see where missile launches take place and can then figure out who would have been in the region when it happened.
They say they have this proof. The Syrian people are gassing Syrian people. Thus the markets pulled back as everyone gets tense over the idea of lobbing missiles around in a very dangerous area. I can fully understand the tension. The way the world is structured, the Mid East oil is important to every G20 nation and having "war" in that area bothers a lot of folks.
I don't know if the gassing was a false flag, the real thing or done by aliens. I'm not sure it matters that much. There are a multitude of "reasons" that the US is indeed involved with this, and we're going to go in in some fashion. I think the real question is this...how big does this become? Syria has said that if we send in missiles, they're going to send missile into Israel. Now if they do that, will Israel respond? If they do, will that drag Iran into the fray, and soon we have a massive escalation in the area? These questions are not out of line with possibility.
I tend to think the big question on everyone's mind is the one no one wants to truly talk about. When does something happen that goes "too far?" When does that dirty nuke we've all feared blow up? When does someone in any one of the militaries involved "lose it" and decide to do the unthinkable? We all pray it doesn't happen and yet we fear its possibility.
This is why oil gained 3 dollars Tuesday. This is why gold gained 26 dollars Tuesday. Everyone is concerned that this situation could expand into something incredibly bigger than anyone wanted. I understand that concern because it is real indeed. From early 2010 when the idea of the "Arab Spring" really began, we've seen continuous tumult throughout the entire region. To date, rulers have been forced from power in Tunisia, Egypt (twice), Libya, and Yemen; while civil uprisings have erupted in Bahrain and Syria.
On top of that we've seen major protests that have broken out in Algeria, Iraq, Jordan, Kuwait, Morocco, and Sudan; and with minor protests have occurred in Mauritania, Oman, Saudi Arabia, Djibouti, Western Sahara and the Palestinian Authority. So as you can see, the entire region has been awash in turmoil.
Ever since the incredible media technology revolution of the late 90's into the early 2000's, people in all areas of the world started getting their first glimpses of what life was like in other countries. The young wanted to know why they didn't have the opportunity they saw in the US or Japan or South Korea. They wanted changes at their Governments so they could have these opportunities to grow, expand, gain wealth, etc. They've since risen up in all those areas, determined to have more "freedoms". I made a wise guy remark one time in an article back in 1998 saying that when these young Mid Eastern kids get a look at the fast cars, beautiful homes and scantily clad women on broadcast TV, their area was in for a shock. Little did I know just how close to right I was with that comment.
So on one hand we have a very real issue facing the market from the perspective of an all-out war breaking out. If that was the only thing to worry about, it would certainly be more than enough. But unfortunately it isn't "just" the only issue. The emerging markets have been getting shellacked lately. India, the Phillipines to name a few. We have new fears that Greece is going to have no choice but to get yet another bail out and what about France? If you do the math, they're already insolvent too. Speaking of insolvent, our Treasury man Mr. Lew just told us that we'll exceed our own debt ceiling again in October, and he can't avoid it despite all of his special actions. So we've got to listen to Congress bicker about jacking up the debt ceiling or shutting down Government again. Not to mention the "QE taper" that has been a headline maker for weeks now.
Obviously there's some major challenges in front of us right now. I suspect that in the very short term we are indeed going to hear about missile launches taking place from our warships in the Mediterranean. While in the past as odd as it sounds the market has often rallied when an actual military strike takes place, we're at a time unlike any before. The entire world is fiat currency now, and frankly... broke. What might have spurred markets higher in the past, might not work the same way today.
There's good reason to be cautious for the next few weeks. This market could easily plunge another 700 DOW points, and then if Bernanke actually does taper on September 18, we could see even worse declines. Luckily for us we bought gold and silver back in June and it's been on a tear ever since. I believe we've seen the bottom on both and any dips should indeed be bought. But as far as stocks go, I'm not anxious to load up here folks. There's a time when sitting still and doing nothing is the very best play and I can't think of a better time than now.
NOTE> For all of you who have sons or daughters in the services, my heart goes out to you. It is never an easy time knowing your kids are in the military when we're obviously close to engaging in yet another theater of operation. God bless.
The Market...
It's been an interesting few days in market land that's for sure. Last Thursday the market looked like it had hit a short term bottom. The transports turned up, the S&P retook its 50 day moving average, the DOW got up and over 15K, the stochastics turned up.... All in all it looked perfect for a multi day bounce.
Then Monday hit. We had been up about 30 points for most of the day and then Kerry hit the airwaves talking about Syria and the chemical attack. The ONLY message you could take away from the speech was that the US was indeed going to get itself involved. So, we went from up nicely to down almost 70.
But that was just the warm up game for Tuesday. By Tuesday morning all manner of hell had broken loose. The emerging markets were puking over the idea that the US was going to taper the QE, the airwaves were chock full of news about how we were going to be tossing missiles into Syria, Syria was telling anyone that would listen that they're going to blow up Israel if we shoot at them. The futures looked bad and for a good reason. They were ready to sell in droves.
So we lost 172 points on the day. It seemed to cap off a week of stock fund selling that saw a tremendous amount of flight from stock funds. Like 12 billion worth. People are quite confused. They don't want bonds because rates have been rising, and they're losing their investment capital as the bonds fall in price. They don't want to be in stocks because of the so called taper and chances for a real market correction. I understand their concern.
Today we awoke to quiet. Not quiet in the markets... they were in a bit of a funk from overnight as Japan had a lousy outing and emerging markets were slapped around. But quiet as far as the Middle East not getting Tomahawk missiles lobbed into it.
It was my hunch that today they'd put in a green session. The thinking was that we had some form of info that said the missiles weren't going to fly until at least Thursday , so they had a green light to try and reverse at least "some" of the damage the last few weeks has given them. So sure enough we spent most of the day up about 50 points. Granted, during the Obama Speech at the MLK rally they goosed the market for him and at one point we were up 90. But we ended the day up 48.
Okay, so what happens now? We got one weak bounce day.... Is there more? I think not and here's why. We're told that missiles "could" fly as early as Thursday. I don't believe they will but that fear could/should keep a lid on their animal spirits. I imagine they "could" give us a green Thursday, but I wouldn't expect much.
Friday becomes a whole different animal. This weekend is a 3 day event for the Labor Day holiday. Usually 3 day weekends see the Friday actually close green. Why? While everyone fears that something could happen, more times than not nothing ever does and the people that are short get scorched. So they tend to cover their shorts on the Friday ahead of it.
But this animal is of different stripes. If the bombs aren't flying Thursday and/or Friday they WILL probably fly Friday night or Saturday. I'm not sure anyone's going to want to be too long for that lovely situation. So while tomorrow they might eek out another green day for us, I tend to think that Friday will be flat at best, down a hundred or more at worst.
There's no question we're in an interesting time here folks. Lots of things hitting at once, from Syrian war to debt ceilings, to taper talk, to failing emerging markets to you name it. They want to keep the smiley face on the market, but some of the smile is really wearing off. We've still got 3 weeks to wait and see if Bernanke and Co. are going to play the taper game, so each day will bring us more discussion of that mess.
So by all means keep your ears open folks. Pay attention to the things that develop over in the Mid East. There's some big players making statements over there, from us, to the Russians and even the Chinese have made a few comments. Iran and Syria say they'll take out Israel. Russia says they don't want us beating up their clients. Saudi Arabia is trying to bribe Russia from staying out of things. It's a mess and while we all want to think we can play well together...things can indeed go south.
Take care all, I'll see you all on Sunday!
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