Sufis Are More Fun

Charts: The S&P 500 closed at 1095, down 1.2%. All 3 major indexes are below their 50-day moving averages. Today’s chart action supports the view that the recent rally has been a counter-cyclical pop within an ongoing correction. The bullish argument is that small caps are outperforming large caps and American stocks are outperforming the world index, so leadership is okay.

Fundamentals: Today’s sell-off was caused by a plunge in February consumer confidence. Joe Sixpack is feeling gloomy because the stock market has weakened as have home prices as measured by the most recent Case/Schiller numbers. It is problematic that Wall Street has been leading Main Street in this recovery, rather than the other way around. There is danger of a vicious cycle where the market falls, which hurts consumer confidence, which causes the market to fall, etc…

Geopolitics: Resistance is very stiff in Marja. Nevertheless, the Pentagon says in 30 days the battle will be over and preparations will begin for the Battle of Kandahar this summer. Kandahar is much bigger than Marja and presents bigger challenges. The Taliban had complete control of Marja but only controls parts of Kandahar, avoiding civilian casualties will be even more difficult. And avoiding civilian casualties is proving nearly impossible in Marja. Every civilian death ignites a firestorm of media attention. The rules of engagement for the current battle are the tightest ever. The Taliban is using this to its advantage; virtually every bad guy movement or action is done with human shields. The more Afghani soldiers doing the shooting, the less political damage there will be from civilian casualties. So a massive effort must be made to get the Afghan Army up to snuff before the Battle of Kandahar. Amazingly, the Pentagon is severely underfunded in its Afghan training program. Obama is still screwing around with healthcare reform rather than addressing this shortfall. He is a super-hawk only when he focuses.
The Somali Army has landed troops in several Al-Shabab controlled villages in central Somalia and opened an offensive. The good guys are reported to have arrived on rivers by boat. Al Shabab admitted that several attacks occurred and claimed it has already beaten the government troops and there is nothing left but mopping up. The bad guys are prone to exaggeration.
While fighting is occurring in the boonies, politics is occurring in Mogadishu. Ahlu Sunnah is acquiring formal authority within the Somali government, welding it into the good guy camp. Ahlu Sunnah is the most powerful good bad guy Islamic militia in Somalia, controls much of central Somalia, and is certainly involved in the freshly launched offensive. The CIA equips, trains, funds, and parties with Ahlu Sunnah. Its members are Sufis and share theological beliefs with the rulers of Sudan. This is why I think the recently announced peace deal in Sudan has CIA fingerprints on it. Al-Qaeda and the Taliban especially hate Sufi Muslims and vice versa. Harnessing Sufis for the good guy cause is a promising development. Of the major branches of Islam, the Sufis are the most fun, and terrific warriors to boot.