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Israel Advances, Stock Markets Rally?
The real world, real money votes of the global investor class should be noted and digested.
August 1, 2006 (Larry Kudlow - National Review)
The U.S. stock market and world equity bourses are important measures of fear, hope, security, and the health of the world’s economy. And while you might not know it from today’s magnified headlines about war, terrorism, higher oil prices, and rising interest rates, the stock market message is one of reasonable hope, confidence, and optimism about the state of the world.
Could it also be that world stock markets are rallying as Israel and its freedom agenda advances toward a Hezbollah-free Lebanese border, highlighting a significant defeat not only of the thuggish and cowardly Hezbollah murderers, but their totalitarian backers in Syria and Iran?
For a long two weeks Israel and Hezbollah have been going at it hard, and world stock markets have chosen to climb. The backward-looking media pessimists won’t see this, but the real world, real money votes of the global investor class should be noted and digested by all the rest of us. Indeed, I believe world investors are thankful for Israel’s courageous efforts in the cause of freedom, independence, security, and hope for the future.
Of course, the stakes are very high in this game. But that is exactly why global investors are cheering Israel’s advance.
AntiSpin: Looks like Larry has been guzzling the kool-aid. There is no meaningful way to correlate the action in global stock markets with the outbreak of open fighting between Israel and Hezbollah, never mind take it as a vote of global investor confidence in Israel's military campaign. Larry is making a classic error in logic by using timing to correlate events without providing evidence of causation. One can make an equally strong argument that the recent positive market action he refers to is a recovery from the drop in the world's stock markets that started in May this year, that the declines that started in May anticipated the current warfare and the prospect that it might result in a reduction in oil supplies and a further surge in already high oil prices with a resulting cut in economic growth and profits. As evidence, note that the stock markets of nations with the most oil price sensitive economies, such as India's, were hit hardest.
Continuing this argument, one could say global markets over-reacted then and are now pricing in a more realistic outcome now that the fighting is underway and the anticipated spike in oil prices has not occurred, at least not yet. A similar market pattern occurred during the Gulf Wars I and II. One can also make the case that global markets may not be paying much attention to the fighting at all and are instead focused on Iran and the potential impact of UN sanctions on Iran's willingness to continue to supply oil to the West. Today's gold and stock market action supports that theory.
Larry isn't telling us anything about how global stock market investors feel about Israel's military effort, and by making leaps in logic to tie positive short term market moves to the war Larry is really telling us he's pro-Israel, pro-US and anti-Iran. That's fine and his right, but to say that global markets are voting in agreement with this position is silly. Further, even the best prepared for and executed wars have a way of not going as planned, and this one is especially unpredictable since post-invasion planning for Iraq was clearly lacking, and evidence is legion that neither side has been able so far to accurately assess the strength of will, strategy and materiel of the other. As one senior officer famously said about Iraq back in March 2003, "Tell me how this ends."
Once the wars in the Middle East are over, we can count the money. Until then, we'll be betting that this war will be no better for the global economy than any other war has ever been.
The real world, real money votes of the global investor class should be noted and digested.
August 1, 2006 (Larry Kudlow - National Review)
The U.S. stock market and world equity bourses are important measures of fear, hope, security, and the health of the world’s economy. And while you might not know it from today’s magnified headlines about war, terrorism, higher oil prices, and rising interest rates, the stock market message is one of reasonable hope, confidence, and optimism about the state of the world.
Could it also be that world stock markets are rallying as Israel and its freedom agenda advances toward a Hezbollah-free Lebanese border, highlighting a significant defeat not only of the thuggish and cowardly Hezbollah murderers, but their totalitarian backers in Syria and Iran?
For a long two weeks Israel and Hezbollah have been going at it hard, and world stock markets have chosen to climb. The backward-looking media pessimists won’t see this, but the real world, real money votes of the global investor class should be noted and digested by all the rest of us. Indeed, I believe world investors are thankful for Israel’s courageous efforts in the cause of freedom, independence, security, and hope for the future.
Of course, the stakes are very high in this game. But that is exactly why global investors are cheering Israel’s advance.
AntiSpin: Looks like Larry has been guzzling the kool-aid. There is no meaningful way to correlate the action in global stock markets with the outbreak of open fighting between Israel and Hezbollah, never mind take it as a vote of global investor confidence in Israel's military campaign. Larry is making a classic error in logic by using timing to correlate events without providing evidence of causation. One can make an equally strong argument that the recent positive market action he refers to is a recovery from the drop in the world's stock markets that started in May this year, that the declines that started in May anticipated the current warfare and the prospect that it might result in a reduction in oil supplies and a further surge in already high oil prices with a resulting cut in economic growth and profits. As evidence, note that the stock markets of nations with the most oil price sensitive economies, such as India's, were hit hardest.
Continuing this argument, one could say global markets over-reacted then and are now pricing in a more realistic outcome now that the fighting is underway and the anticipated spike in oil prices has not occurred, at least not yet. A similar market pattern occurred during the Gulf Wars I and II. One can also make the case that global markets may not be paying much attention to the fighting at all and are instead focused on Iran and the potential impact of UN sanctions on Iran's willingness to continue to supply oil to the West. Today's gold and stock market action supports that theory.
Larry isn't telling us anything about how global stock market investors feel about Israel's military effort, and by making leaps in logic to tie positive short term market moves to the war Larry is really telling us he's pro-Israel, pro-US and anti-Iran. That's fine and his right, but to say that global markets are voting in agreement with this position is silly. Further, even the best prepared for and executed wars have a way of not going as planned, and this one is especially unpredictable since post-invasion planning for Iraq was clearly lacking, and evidence is legion that neither side has been able so far to accurately assess the strength of will, strategy and materiel of the other. As one senior officer famously said about Iraq back in March 2003, "Tell me how this ends."
Once the wars in the Middle East are over, we can count the money. Until then, we'll be betting that this war will be no better for the global economy than any other war has ever been.
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