Tuesday, October 20, 2009

Makeen Surrounded by Paki Army

Charts: The S&P 500 closed at 1091, down .62%. The Dow is holding above 10,000 and the broad index is showing lots of support. Bonds have stopped moving in unison with stocks, returning to a traditional inverse relationship. The bubble mentality is receding. The market will have to be buoyed going forward by fundamentals.

Fundamentals: Government interventions into the private sector can be unpredictable. The private sector fundamentals for Brazil are strong but late Monday Brazil’s government unexpectedly imposed a tax on foreign investment to plug a budget gap from big election year giveaways. Brazil’s government thinks that taxing foreign investors is a painless way to raise revenue but the unintended consequence is that Brazil’s stock market tanked today, oops. On a bigger scale, the US government has decided to engineer a recovery by re-inflating the housing bubble. With virtually zero government subsidies, the US private sector is expanding in tech, export industries, and energy; this is what a true private sector recovery would look like if left unmolested by Uncle Sam. Today housing starts came in flat, calling into question whether the government’s recovery strategy is working. This was the cause for today’s sell-off.

Geopolitics: On day 3 of the S. Waziristan campaign, the Paki Army has seized and secured three more Taliban towns; among them a town specializing in training and equipping suicide bombers. The Army has rolled faster than expected to surround the key city of Makeen, H. Mehsud’s headquarters. Resistance is savage on the outskirts of this city and the Army is pounding the bad guys with massive artillery barrages. The Army’s lightening advance is slowing down. 4 good guys have been killed and 56 bad guys killed in the last 48 hours. 38 of these bad guys have been killed outside of S. Waziristan. Fighting in other tribal regions is heavier than expected. Taliban civilian terror attacks throughout the country continue at a fevered pace. And the Taliban has cleverly sent suicide bombers into Iran in an attempt to give the Paki Army a new foe. Pakistan is now embroiled in a diplomatic row with Iran.
Afghan President Karzai has agreed to a second round of voting after the first round was declared fraudulent. It would have been better if Karzai had agreed to a power-sharing arrangement with his opponent, Abdullah. An election in winter is almost impossible, so the voting will probably take place in spring, leaving a power vacuum in place for months (not good).

No comments:

Post a Comment

 
-- Google Analytics