Roubini Is Not A Pinhead

Charts: The S&P 500 closed at 1025, up .9%. The index is once again in the middle of a potential trading channel of 1018 and 1037. It needs to stay in this channel but so far so good. Leadership is good with tech, emerging markets, and industrials stronger than American financials. The charts are bullish for now.

Fundamentals: Today and over the last couple weeks there has been an increase in Merger and Acquisition activity, which is very bullish for stocks and the reason for today’s rally, but M&A activity might give only a temporary boost if it dries up. Gold inched upward and oil soared today on a weak dollar, not economic fundamentals. July consumer credit came in much weaker than expected as consumers put away their plastic and paid cash instead; while August consumer credit was probably better because we had strong same store sales from that month, July's numbers were pretty scary. Soaring oil prices due to excess liquidity and weak consumer spending are two things that Professor Roubini warned could lead to a double-dip recession. While many academics are pinheads, Professor Roubini is not.

Geopolitics: The Afghani Taliban is demanding an international human rights inquiry into the NATO airstrike against two stolen fuel trucks. And, amazingly, the bad guys will likely get their inquiry, which highlights a major challenge with this war. But first here’s what led to the airstrike. Bad guys stole two fuel trucks from a German military base and sped away. All German soldiers are under strict orders to never shoot bad guys unless fired upon and even then a German soldier must first try to escape. Any German soldier that shoots a bad guy (no matter what the circumstances) will probably get in trouble with spineless bureaucrats in Berlin. So the handcuffed German Army called in an American airstrike to kill these bad guys. If the German soldiers did nothing, the Taliban would smack them around like a kitten with a ball of yarn. It is criminal what German civilian leaders have done to the once proud German Army. Much of the blame can be placed on peacenik reporters.
Before the Iraqi surge the Pentagon largely succeeded in muzzling the press. In Iraq the US Army had to often throttle back the Iraqi Army for being too aggressive, a good problem. These conditions need to be recreated in Afghanistan. America needs to get more Anglo-Saxon (Canadian, British, and mostly American) troops plus Afghani troops in country and get hapless German troops out of the way if not out of the country. And more importantly, the press needs to be muzzled. So getting the extra 40,000 American troops is not enough, these other conditions must also be met.