(Complementary excerpt of Gene's Wednesday Daily Briefing text, but not audio-video voice-over-chart technical analysis, provided daily at our www.ingerletter.com web site. Incidentally, an additional website is established to acquaint visitors with our work, and in this time of terror or natural web-Server risk, www.geneinger.com provides back-up access, only if ever needed.)
Gene Inger's Daily Briefing. . . . Tuesday, June 19, 2007:
Good evening;
The deepest political changes . . . for the last several hundred years might seem to be an exaggeration if one is domestically oriented in considering that sharp remark. I noted during the course of my opening MarketCast this morning that the controversy is increasingly grasped on a bipartisan basis, and it absolutely relates to our future as well as provides further understanding on what's evolving from the Balkans to Asia as well as throughout the Middle East / Persian Gulf region, and probably Asia too. This fluid situation is not unprecedented, in preamble years before major wartime erupted.
What's behind this 'growing awareness' is the gaping hole between 'empowerment' of course, as relates to not only the disenfranchised masses in the world these days, for sure; but I'm thinking to a surplus in 'hope' for instant gratification as they 'discover' a lot of things that we in the West (or the advanced East) take for granted. That doesn't always mean they are or were exploited, but it does reference resentment of 'control', as most monarchies that aren't legitimate republics, or certainly all the Islamo-fascist dictatorships, or even the battle between people that yearn for a future (George Bush isn't wrong about most people preferring democracy and a better life, but missed the reality that it only takes a small number of fanatics to impose a cap on aspirations, for some time). [The majority of this first-time discussion is reserved for ingerletter.com]
Most dangerous are these 'gangs' masquerading as political parties or even as terror groups; which of course are such as Hamas and Hisballah. Even Fatah isn't quite so moderate as the media (all too quickly) labels them; but at least they are attempting a maintenance of a Nation-State structure.
This may be the key: the idea that (particularly in formerly colonial Middle East and of course much of Africa) borders were mechanically or artificially drawn; thus societies at this point don't have that much history, and they often have groups living within the confines of 'borders' that really are a different society. (Examples reserved, as while our members are sophisticated and not touchy about discussing reality, we tend not to delve into the pragmatic realities of these issues aside our ingerletter.com views).
Sure, Ike didn't; but JFK got involved (should he have?). Even in post-war debates on Vietnam, everybody dated it from JFK's light-advisory infusion rather than from reality that he inherited a failed-state syndrome from the Eisenhower Administration. Sure it was years later than the involvement escalated, but the problem was misunderstood at the start, so we wonder if there are presently-applicable lessons to be learned from the experience. [We explore particular countries, and the financial implications a bit.]
Bottom-line: we won't delve into publicly now; but may should serve as a warning as I ponder the deterioration of Nation-States in the civilized world (think EU; clearly it is not perfect, but they're not slinging bombs at each other); the flawed effort to subtly disenfranchise the American people by virtue of the unnoticed (but remarkable) parts of NAFTA (including the trafficking not of people but of actual truck traffic.. as I noted before the story about the 'tollway' through Texas, which omitted the story's meat that relates to Mexican trucks driving for hundreds of miles before the first 'port-of-entry' in the United States); all as part of what some believe is an organized intention to erode our sovereignty, while not acknowledging it ongoing, despite obvious holes in border-control and enforcement, which we tend to think is not simply based on naiveté, cost, or out-of-control alien invasion, but 'intended consequences' of agreements that are in the Congressional Record, but never discussed in this Nation's media. Tripartite nation anyone?
In the case of the region from the Balkans to Asia; and the Middle East; no solution is contemplated. Attempts to resolve the situation by 20th Century means are failing and that is increasingly evident. It has leaders (not just here either) extremely nervous, as they worry about borders being redrawn based on 'religious fanaticism', rather than a geographic, sectarian, or even economic-based series of interests. This is dynamite!
(Specific countries and regions referenced.) This must become international in scope, for if not, there is going to be an explosion, and years (if not decades) of chaos. That will be a risk anyway, including Africa; but it may actually not undermine our markets in a long-term way; provided 'exogenous' events don't prevail. That risk is increasing. The majority of economists, globalists, and market analysts, don't see or ignore this. I am normally a bull, and historically have called virtually every major upside move for the past nearly-40 years. And I'm still an optimist by nature; so it's not experience or age that tempers my zeal for chasing this market, though we have been bullish over the past several weeks again, correctly expecting the higher prices in the Averages. Of course this has nothing to do with being one of the 'lonely bulls' back in 2002, at a time when we (from then for several years going forward) calling 'accidents biased to the upside only'. Presently, upside accidents is not exactly an ingerletter.com focus.
Fault: the Administration mostly just for not grasping the depth of change, and trying to address problems narrowly and without comprehension of 21st Century dynamics. Also 'unintended consequences' of a noble effort: bringing information access to most of the world. Previously the Arab masses, the Asian masses, and the African masses (mostly still so), were only aware of their community, and if they were 'worldly', what was going on in the next village; or possibly their provincial capital. No longer.
Now it is common to find hand-cranked battery-charging generators and some type of link to the Internet, which exposes the youth to a world they didn't know existed. That is the 'television' of the modern age; but augmented. Now they can study and delve a good bit into what's going on everywhere, or realize how remotely detached they are from the (envied?) modern life. They resent this, and in this way the 'global village' so many champion becomes the 'global quagmire', because there is not enough wealth, or jobs, or capacity to absorb populations, or even sufficient resources such as land that's not arid, much less energy; to support this kind of worldwide uprising of what I will call 'aspirational resentment'. Most of the world is younger than it once was, and it is restive. Stir in the West innocently stoking envy, (we'll reserve the rest of this for a thorough discussion with ingerletter.com members and link from our new web site for visitors at geneinger.com who with one-click can join us at ingerletter.com as of now; also there normally aren't new current comments at geneinger.com except rare event of the other site being down; the reason these hosts intentionally are cross-Country). I do not want to say this is preparation for wider war or events; but is lite redundancy.
China essentially did it right; and slowly from the government's perspective (even that was not perfectly executed, too many were actually executed; many flaws developed; but revolutions did get clipped.. though that one would have been pro-democracy). It was important because it mirrored (in my opinion) the same condition of aspirations. (Comments on this or how China deflected a potential catharsis, are reserved here.)
That is not occurring in the Middle East or Persian Gulf. We actually tried to help I'm thinking; but with inadequate force or understanding; and without international aid for the level of intensity needed. And there was not the history and culture of a China. Of course Iraq (and Iran for that matter) have old cultures; but now we're not dealing as in the past with 'oilmen or rug merchants', we're dealing with fanatics with agendas.
It is possible that others have addressed these subjects; I haven't had time to explore this elsewhere (but will try). I do know that Henry Kissinger has debated Zbigniew Brzezinski on the subject; with elements of both positions having merit. But I'm trying to go beyond that, and contemplate what it means for markets. It means (reserved).
I also suspect that the 'Gilded Age' investment mentality obscures this reality (core reserved for ingerletter.com), but doesn't change the facts of societal decline as bits and pieces of this filter through the political discussion, but absent a cohesive broad understanding of what's at stake. Could what's at stake even be Western Civilization.
MarketCast (intraday + evening Daily Briefing) remarks in audio-video . . observed risks of these factors as trending toward a head, while basic ways to address our own forecast in the past few sessions was just this: 'enjoy it while it lasts'. Tonight's very special 'geopolitical' discussion..on nothing less than the future of our world.. will now migrate to an assessment of the intraday volatility, then chart analysis in audio-video.
Three things happened to roil markets, which nevertheless failed to derail a forecast intraweek rally commencement from the morning low. These items in my view were:
1) former (young members will remember) Fed Chairman Paul Volker expressed fear that markets are extended; that inflation's rising; or that most Americans aren't saving adequately; which while these are 'givens' we believe, may again conjure-up whether this is part of a new regulatory theme of sorts, to dampen excess speculation (and/or knowledge of efforts to impede 'private equity' and LBO deals, via taxation moves, or anything similar), as it follows the lines of former Chairman Greenspan, and of course the present Chairman, Mr. Bernanke, who has expressed similar ongoing concerns;
2) Now, just day after managers of a troubled Bear Stearns internal hedge fund presented lenders with a last-ditch plan to reinvigorate the fund with additional financing, creditor Merrill Lynch pushed forward with plans to sell hundreds of millions of dollars in collateral assets out of the fund, according to traders. I suspect this too relates to an argument we've made that the game increasingly was being threatened by evaporation of 'free money' (or nearly so) leverage in setting-up those deals, and that as carrying costs increased, the economics for the deals, decreased. We don't know if this contributes to a 'credit crunch' that we've speculated about for several weeks, but it could point in that direction;
3) Implications of bond executives familiar with the Bear fund collapse afraid that if it liquidates the balance of holdings we are experiencing subliminal growing risk about billions of dollars worth of losses across hedge funds or dealers, at some point (doesn't automatically correlate action; I'll say more to members).
Daily action . . . indeed expected markets to turn back-up, in an attempt to revive at least temporarily flagging momentum, which was expected aside the Oil price rise as well as aside the increased 'threat matrix' related to ABC's terrorist-plan reports (last) evening, which highlights the potentially heightened awareness of consequences that arise from permitting the 'sanctuary' in Pakistan for basically the world's worst people.
In recent days and weeks we mentioned Pakistan again, because of the harboring of al Qaeda and Taliban, and what it could mean. If Islamabad thinks they're somehow safer by looking the other way; I think not. On top of it we have threats of Hamastan, which used to be known as Gaza, which must not be known as that for long; but may be easier to tackle (of course that doesn't mean easy) than Hizballah was in Lebanon last year as Israel learned the hard way. Gaza can be surrounded, and isn't bordering with Iran's clients in Syria. And Israel is the only totally cohesive nation in the region.
New members are encouraged to review our text commentary in the archives below, for the previous few days, to scan our assessment of Iran, Iraq; Turkey, Lebanon and other hotspots as well as potential strange liaisons as well as incredible forward risks.
Speaking of media; we were honored to have 'speculated' a week or more ago, that a most logical competitor bidding for Dow Jones / Wall Street Journal, would be none other than General Electric, for all the reasons we outlined. It is firming considerably.
Investing . . . returns to optimism; for the long-term, barring awful exogenous times that are a risk. For today's teens, and college grads emerging this Summer into their first careers, these promise to be interesting times. By the time they commence buys for retirement, their average entires may start to look pretty good. Better than today.
Bits & Bytes . . . provide investors ideas in a few stocks, often special-situations, but also covers an assortment of technology issues (needed for assessment of general factors in tech overall, or as compelling developments call for) that are key movers in the NDX, SOX or S&P, plus ideas ingerletter.com thinks might merit further reflection.
Rarely we will comment about stocks in text. Typically remarks are via audio-video.
Last night's stock remarks are reiterated in case you missed them; partially as relate to the Apple iPhone and AT&T's plans, as we postulate them. We won't comment at this point as to whether the suppliers of 'cheap' computers worldwide are clueless or not with respect to the positive and negative implications of 'empowering' the youth of the world, or at least making them aware. It's more intrusive (reserved for members).
To last night's discussion: (Apple, AT&T, Level 3, PURE Bioscience, Intel and Motorola noted)
Bottom-line: envision this as the first truly-portable multifunction device, combining a camera (albeit without flash, a mistake), iPod (albeit with limited storage initially), and a the Internet (yes, that makes it a mini-computer); plus (oh yes) a cell iPhone. At this point we don't even know if it has compatible voice-command and phonebook upload capabilities (through its 'Bluetooth 2.0', which it has); though it must or becomes very much a deal-killer for the majority of folks who insist on using such features as they're driving/commuting, and preferably as displayed on their nav-screens (if available on a vehicle), with respect to phonebook/address book scrolling capabilities. We hear from the rumor-mill (reserved).
Of course much of that's for 'future' versions; but the phonebook link aspect must be on first iterations, or there's a problem. If it is, sales may not only affect cellular competitors (raise the price and minimize the subsidies cellular carriers for years have offered), which everyone realizes; but also diminish need for many business or casual-user consumers to carry laptops. We see the key (other than a 'bluetooth' link) being 'sideline' or the embrace of downloading from a PC, not over-air; for many prosumers going to be adequate, along with quick-checks of stocks or email via the device. That's where an insufficient focus on internet ability, and how it might cannibalize (this part we'll reserve for ingerletter.com).
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Members please note: we have no association with any publicly traded firm (never have had; never will), other than as shareholders, while trading from time to time as deemed necessary for personal reasons; especially once initial targets are reached. We may be right or wrong on a stock, but are not financial PR or IR; have never, and will never be compensated by a company or their representatives, directly or indirectly, for stock coverage. Our opinions may be valid or invalid, but reflect our own view.
Comments are interpretative speculative postulations provided 'as is with all faults' and all risks with no assurance about future performance of anything (markets or stocks) in any way whatsoever. Personal necessity, irrespective of opinions, may require buys or sells deemed necessary, without prior notice.
In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including organized terrorist forces in various countries. A world addressing terror threats continues, as domestic issues absorb us less as we focus on the Middle East crisis and World War III avoidance. (In this case World War III or IV if you count the Cold War as III, could be Islamic terrorist interference targeting 'global village' communications or necessity supply-chains.)
Though few generally concurred for three years, our consistent view has been slow but persistent American growth isn't negative, allowing the protracted gradual growth without ancillary significantly high interest rate pressures. There's no truly-restrictive monetary policy; nor is there likely to be one, irrespective of oil-induced inflationary pressures. This is a continuing saga. Often we get a speculative phase later in a bull market, but increasingly towards the end of an overall rising phase. In our view, there has not been that degree of speculation, but that is a potential feature developing let us suggest somewhere in the years ahead, maybe later (reserved), barring disaster.
McClellan Oscillator finds NYSE 'Mac' shuffling with intervening bull-bear fights that more recently are at +24 for the NYSE and +17 on NASDAQ. If LBO's (the leveraged buyouts) begin to implode.. well (we'll reserve reiterating our view on this). We'll keep an eye out as shifting Volatility evolves. Suspect volatility to transition (reserved).
Issues continue including oil, terror; China, Pakistan (possibly the key to survival for a number of aspects of the 'war on Terror'); certainly all the Middle East, Korea, and economics. As assessed for a couple weeks, watch the Dollar and Oil in all of this.
We are a resilient people and resilient market; that's why it hasn't fallen totally apart, yet. However it's increasingly borderline; though we did think rallies as we moved into Triple Witching. Thereafter some fluctuations with risks likely to increasingly grow. If we get a decent intraweek rally (even to new highs) it's fragility may become evident I suspect when Oil prices resume forecast recent firming that's essentially (as noted).
Enjoy the evening,
Gene
Gene Inger,
Publisher
~Gene Inger’s Daily Briefing™ (The Inger Letter daily analysis on www.ingerletter.com)
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