Whack-A-Mole!

Charts: The S&P 500 closed at 1140, up .17%. Volume patterns within this rally are okay but the total amount of volume has been freakishly low. The vast majority of investors are sitting on the sidelines, probably spooked by the chance that Obama-Care might pass and the reemergence of sovereign debt fears.

Fundamentals: Germany, Canada, and China are cutting government spending and all three will soon be running surpluses again. Big country spending cuts exert enormous pressure on small countries to follow suit. Of the Euro-zone peripheral countries Greece, Ireland, and Spain have slashed spending but rating agencies are saying Portugal hasn’t cut enough. So the sovereign debt crisis is now pivoting on Portugal. Obama-Care must fail before America can focus on freezing spending. Since America’s debt is so vast progress here would help everywhere.

Geopolitics: Russia’s KGB is now called the FSB; it killed 8 Islamic bad guy leaders and arrested 10 more a few days ago. The main leader of the Caucus Islamic separatist movement was killed. This is very good news. The FSB is hinting of new advanced technology, maybe a sign of CIA help.
Singapore’s spy agency warned of Islamic attacks on Southeast Asian shipping a couple weeks ago. Obviously acting on a Singaporean tip, Philippine Marines raided an Abu Sayyaf camp and demolished it, killing scores of bad guys. Russia and SE Asia are possible whack-a-mole destinations. The good guys in these areas are working to staunch a possible bad guy in-flow as the USMC advances across Afghanistan.
In Afghanistan, the Afghan Taliban attacked a smaller rival Taliban and has taken over a big chunk of its territory in northern Afghanistan, far away from Kandahar and Marja. This territory produces revenue for the bad guys in the form of religious taxes. The Afghan Taliban is getting ready for a short whack-a-mole move away from the coming onslaught against Kandahar.
In Nigeria, Muslim and Christian mobs battled each other, resulting in about 200 dead. This is not organized Long War fighting such as the Marines vs. the Taliban but something worse. Spontaneous fighting between Muslims and Christians in Africa taps into the deep historical roots of the LW, akin to the nearly century-long Sudanese Civil War. Africa is the ultimate destination for the bad guys once the Afghan war winds down and a truly gigantic whack-a-mole effect kicks in.

Specific Stocks: Korea Electric Power (KEP) is an integrated utility in S. Korea. It also leads a consortium of companies and builds nuclear power plants in emerging markets. Its power plant design cannot withstand the impact of a fully laden 747 power-diving into the reactor core. Western designed power plants are strong enough to withstand this sort of terror attack and consequently they are twice as expensive as KEP plants but not better in any other way. Emerging market countries don’t want to pay for all the extra steel and concrete to ward off an attack that is unlikely to ever occur. Here we have silly Western Long War phobia helping an Eastern company.