I must admit, the buying that happened yesterday seemed a bit stronger than warranted. Just the idea that the Fed will have more wiggle room if inflation remains low is not a reason for the market to jump back into record territory. True, underneath the Fed nonsense is the economic story, which goes something like this …
- Homebuilder sentiment jumped to its highest level in nearly nine years in September, with builders reporting a sharp pickup in buyer traffic since early summer. The surge in confidence underscores the economy’s firming fundamentals. For now, however, inflation remains tame.
In any case, the lack of follow up in today’s market suggests traders can only take this soft bullishness so far. As I have stated recently, the market needs a catalyst, a real catalyst to extend itself another leg higher. That remains so, even after yesterday’s run toward record territory on, well, nothing really.
I am bored with the market again. It lacks any real energy. True, the small caps are showing life again, which is a good sign for another leg up, but the energy there is only tepid. Then again, the tortoise does win the race after all. The Russell 2000 is almost 200 points higher than its 52-week low compared to just about 50 off its 52-week high. That is progress slow and sure.
Maybe this month in the market is an exercise in caution. After all, it is September, the dreaded month, the month of despair, according to the stats marched out by the self-appointed marcher-outers of such things. But what if September doesn’t pan out to be the month of despair? Watch out for October, then, as we all know how bad that month can be. See, I told you I was bored.
Okay, so let me take you somewhere else, a not-so-pleasant place, but a place in the news nonetheless – the Middle East. I want to go there because of a confluence of three news stories this morning and a personal encounter that actually has me concerned.
First, off Islamic State (IS) released a new video titled “The Flames of War.” The message to us in this video is “the war has just begun.” Second, the FBI just announced that this same notorious group of ideological nutcases raises over a million dollars per day from smuggling, selling black-market oil, and ransoming innocent people. In that same story, we are told that since the US airstrikes on IS in Iraq, recruitment for the cause has increased. I will get to that in a moment.
The third story, confluent with the other two, is that Syria just announced three more chemical weapons sites previously not mentioned in any documentation given to the bodies overseeing the destruction of its chemical weapons facilities. True, the admission that they exist is good, but how many more are there that the world does not know about? This brings me to IS in Syria, where it is reported they now control as much as a third of that country. What if they get their hands on some of the deadly stuff? Belay that. It has been reported that they might already have some, which brings me to the increasing recruitment and my personal encounter.
A couple of months ago we had a small dinner party at our house. In attendance were four teenagers. One of those, an articulate, smart, and somewhat intellectual 15-year-old boy, spoke about the war in Syria. He expressed support for the “rebels” and he expressed disdain for the lack of US support for “the cause.” Specifically, though, he expressed support for IS. He saw them as liberators.
Now here is my worry. Even after explaining to that young man that IS is a group that wants to turn back the cultural clock to the 7th century in the most violent way imaginable, he still did not back off from his support. In other words, because IS is quite good with exploiting social media, they are capturing the hearts and minds of the ideologically immature, the impressionable youth who want to believe in a cause.
Now combine that ability to recruit with the fact that this horrible group has financial support from wealthy nutcases who believe as they do, that they have captured tons of high-powered weaponry in their sweep across Iraq and Syria, that they have the power to recruit some 6500 people a month, and that they might have, or might get control over some very deadly chemical weapons and you have, as they announced in their video, a war that has just begun.
I don’t know where this will all lead, nor do I know if any of this concern will affect the market in the near term. It’s just that when I start piecing the factual and anecdotal evidence together, the picture I see is not a pretty one, and it suggests I need to keep a sharp eye on the progress of the war against these jihadists.
And there is the other part of this – the US, Britain, France, and Germany, as well as some 13 Arab countries are now moving to stop this threat militarily. In fact, it is a war that has just begun and wars, real wars, always concern me.
Trade in the day; invest in your life …
