Wednesday, July 09, 2008

International tensions impacting market?

Today's afternoon market wipe-out had to be more than just finding out that Fannie and Freddie had to pay more to raise money and an economic forecaster suggesting that tech stalwarts Intel and Cisco would by negatively impacted by the slowing economy. What's earthshaking there after already going through the wringer the last few weeks. Could it be that scary stuff in the Middle East is being taken seriously by market players. International tensions could be the auto-immune disease of the market, you can't pin it down but it's messing things up.

How could the market not react to what's happening now, and the timing of the afternoon swoon coincided with details of Iran's missile tests. Iran is making a public display of testing new missiles that can reach Israel, Turkey and other vital interests of the West. Iran, at the same time, ran drills at the Strait of Hormuz, that little channel that as much as 40% of the world's oil must pass through. Last month Israel made a public display of 100 jets on test runs apparently meant to show their range and capability should an attack on Iran be decided upon. More noticeable to some, at that time Israel also practiced helicopter missions of 900 miles suggesting to knowledgeable observers the preparation for pilot rescue missions or the delivery of special forces. The U.S. fleet is, by the way, in the midst of exercises focused on the Strait of Hormuz. But there's more going on...

Pakistan's government appears to be unhinged and parts of the country and elements of the army are to some extent operating independently. The bombing of India's embassy in Kabul is being linked to Pakistani intelligence forces, as was the attempted assassination of Karzai in April. With India and Pakistan being drawn into this regional tension we are now talking about two fully armed nuclear powers, not just a clandestine one(Israel) or a hypothetical one(Iran).

This is all unsettling and at some point must catch traders' attention. Who would want to be overly long on the day that something meaningful happens in that part of the world, and if it's imminent who would want to be out there today. Of course this area of the world is always in some degree of turmoil and most observers accept this news and put it in a broader, more contemplative perspective. That said, our last century was filled with obvious political tensions, military preparations, and aggressive actions being put "into perspective" until they no longer could be, with the recognition of real danger just an insight in hindsight. The global financial markets are not immune to all of this and whether it had an impact today or not, this tension could be one more strain on confidence within the market system.

Just an aside---naive as I am, these rising tensions in the Middle East seemed like big news to me with a number of angles worth examining. NBC news led with the story, covered several other unrelated new items and seven minutes into the broadcast the "hard" news was over and the Jon Benet Ramsey DNA news took center stage. I checked. CBS got to Jon Benet in 10 minutes and it took ABC a full 15 minutes to get to the story but they spent the longest amount of time on it once they got there. As the traditional news networks edge toward irrelevance, they are pandering their way to a faster decline and completely alienating what was once their core audience.


Anonymous Anonymous said...

At this point the "international tensions" awareness of the market is all about money, as in oil prices. Don't give the traders too much credit.

12:03 PM  

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