Drones Resume Killing Bad Guys

Charts: The S&P 500 closed at 1013, up .7%. The index smashed into the 1010 resistance level in early going and was battered back. It regrouped and attacked again. It was battered back down. It shook off this blow, gathered itself for one last attempt in the afternoon, smashed into resistance and plowed through. 1010 is now a support level. Chinese stocks were down and are showing a mildly weak double top chart pattern. But almost all other world markets are up, so for now America is providing leadership, which is obviously bullish.

Fundamentals: The Commerce Department reported today that retail sales fell .1% in July vs. an expected increase of .8%. Excluding autos, retail sales fell .6%. Realty Trac reported foreclosures hit an all-time high in July. The NARA says that house prices are still falling, contradicting some data that says the opposite. France and Germany claim that their GDP ticked up fractionally in Q2, indicating that they are no longer in recession, but Euro-zone industrial production unexpectedly fell. The good news is that today’s treasury auction went better than expected as the government continues to successfully roll over its gargantuan debt load. So fundies were mixed.

Geopolitics: The Paki government says that a battle is raging in South Waziristan between an Army backed Taliban group and the core group of bad guys loyal to the dead super-chieftain Mehsud. In other words “good-bad-guys” are attacking regular bad guys and giving them a beating, which is terrific news. Reports of dead fighters range up to 70, probably an equal number of good-bad-guys and regular bad guys have been killed. On Tuesday a CIA drone tore apart a South Waziristan Taliban training camp, killing 8. Ten of the last eleven drone attacks have been in South Waziristan and all seem to have hit pay dirt, an indicator that the Paki ISI is feeding good information to the CIA. In Afghanistan, US Marines attacked a major Taliban stronghold in the south, Dahaneh, a town that NATO forces have not been able to get close to for years. The bad guys are fighting back fiercely with heavy machineguns and missiles. This battle represents that start of a new Marine Corp offensive before the upcoming Afghani election. Somehow we have a body count (gasp); the good guys have killed 10 bad guys so far. In recent days the Taliban has been setting off bombs throughout the country, killing dozens, part of their offensive before the election on August 20.

Specific Stocks: A few years ago Congress stupidly passed a law giving any company that mixed fossil fuels with biofuels to run their operations a 50 cent a gallon subsidy. Paper mills have been burning a pulp extract called black liquor since the 1930s (a biofuel), so recently they’ve started adding a little bit of diesel to their black liquor and voila the government started mailing them boatloads of cash. This year their stock prices have soared and are still soaring. The hitch is that Team Obama is trying to take away the subsidy. Here are three companies rolling in black liquor subsidized cash: International Paper (IP), Glatfelter (GLT), and Buckeye Technologies (BKI). If the subsidy isn’t removed they should keep rocking up.