Goat Herding or Al-Qaeda?

Charts: The S&P 500 closed at 1126, up .5%. This is the second day above the key Fibonacci number 1120, so far so good. The American Assoc. of Individual Investors said that 38% of its members are bullish on stocks. The lower the number the better because excessive optimism from retail investors is a sign of a market top. 38% is a good number, showing plenty of healthy skepticism.

Fundamentals: The weekly jobs report came in strong and durable goods orders were also strong. The dollar seems to be stabilizing. Commodities and emerging markets were strong and with a stable dollar we can better trust these moves to be fundamentally based. The only bad news is yield on the 10-year note keeps sky-rocketing. It started the week at 3.5% and ended at 3.8%, a nasty jump. Thank you Sen. Harry Reid (what a jerk) and Obama-Care.

Geopolitics: Let’s say you make a good living leading a small but profitable Islamic insurgency in a third world country. The greatest question you face is whether to become an Al-Qaeda franchisee or remain independent. Al-Qaeda raises hundreds of millions of dollars for their franchisees, provides fighters, weapons, advice and leadership. Becoming a franchisee could catapult your insurgency into the big league and is probably your only chance at genuinely carving a Taliban-style nation-state out of your home country. But there is a downside. Signing up with Al-Qaeda puts you on the CIA and US Special Forces radar. The superpower will start tearing into your network if you sign on the dotted line. And this new enemy makes you more dependent on Al-Qaeda. The Arabs might try to take over your rebel group, put someone else in charge, and kill you. This is the dilemma facing the Islamic insurgency in southern Thailand. Unlike the nearby Philippines, the bad guys in Thailand are thought to have no connections to Al-Qaeda, strictly homegrown with all the pluses and minuses that implies. If Thai insurgents chose to remain independent it would be bad news for Al-Qaeda, weakening their brand.
Recent events in Yemen would speak to refusing to sign on the Al-Qaeda dotted line. On Wednesday, 25 Al-Qaeda operatives were arrested in targeted sweeps. Today CIA directed airstrikes killed 30 Al-Qaeda leaders and fighters in various parts of Yemen. Al-Qaeda in the Arabian Peninsula (based in southern Yemen) is taking it on the chin. How would you like the Thai Air Force bombing your rebel movement to Kingdom-Come? Independence is probably the best choice. Maybe even cutting a deal with your home government and going back to goat herding would be smart.