A 'Wake' for Globalism?

'The future of the world is at stake' . . . are not words of hyperbole from a network known for sensationalism, or an effort to elicit more anxiety from American citizens. In fact they were the words of the President of the United States, at Travis AFB today, a stop on his road to Shanghai, where he will join Secretary of State Powell already at the ASEC conference. That China granted permission for U.S. fighter jets to escort Air Force Oneover Chinese airspace during the flight, in fact emphasizes the extent to which security is a concern and how countries (China is one normally sensitive to overflights or approaches, as we all so vividly recall with the P3 incident) normally not particularly supportive, are this time. After all, the concept of government is one of the targeted victims of these barbarians…that's all government; free or not. Theocracies are just that; administration by decree, with no tolerance for dissent or life's decisions (thus forms of administration) in which hopes for ever returning to citizen participation or the most basic individual plans for life, are nearly impossible. No overstatements.

We have been quite serious about this matter ourselves, while calling for the past few weeks of rallying from the selling climax panic of September, as the market reopened following the attack on America. We talked then aboutrecovery from the December S&P 940's, to about where we got this week, before a secondary decline in earnest, about the time so many analysts (often panicked in September) became complacent, or even bullish, in recent days. Our argument was that Dow Industrials had rallied back about as far as they could on a rebound; that a swing-rule might press the highs once more (it did); and then we'd unravel somewhat as has now commenced on cue.

While explaining this a couple weeks ago, and appreciative of the very overwhelming understanding by most readers who also understood the pressures involved directly (our computer tech cannot yet move back into his office near the WTC disaster site, which combined with the efforts to assess all this, didn't reduce daily responsibilities, though our California main office has continued functioning normally throughout this), there were one or two protests emails, to what they saw as merely patriotism (nothing wrong with patriotism, even on the left coast, for a note of humor). We suggest elitist comments, especially from web site visitors who didn't read actual pattern forecasts, well not only ill-informed, borderline supporting anarchy or worse, but basically those were thoughts of people either in denial, believing market analysis could be based on some arcane system or the like, or failing to interrelate geopolitics with market work.

In essence, they didn't get it. The Nation and the world, are challenged, as we never have been in modern times. That the UN itself, that's the often-vacillating UN, not the US, just today identified Iraq as the country likely possessing equipment to make the type of aerosolized Anthrax that was analyzed at Senator Daschle's office, injects the 3rd party problem recognition, might just serve as a wake-up call even to cynics, or to any of us, who would rather not be dealing with this. Probably some see it arrogantly as an 'inconvenience', rather than grasp what's truly at stake, for all civilized peoples.

As a matter of fact, the continued stability of the U.S. Dollar affirms this concern, as it -rather than Gold or something that would benefit more in an inflation than deflation- has continued to retain or attract funds, even given the strains on this strong Nation. (It had a decent prior move, and will have others; but not here; not particularly now.) And our views were indirectly buttressed by Chairman Greenspan's comment today about: 'the cost of doing business in a more uncertain world'. Essentially these remarks endorsed Federalism in ways previously unheard of (from him); indirectly he skirted the subject of globalism, thus some risks we have been pointing out all along.

And as we noted the other night, the so-called 'silent majorities' in many countries of questionable leaning (generally in the Gulf region or Western Pacific) have actually contributed to what we project will be a cooling of globalism for years to come, since they didn't take sufficient early efforts domestically to shunt the extremists into quite the outcasts they deserved to be. When American and European companies show a reluctance to invest or spend (much less travel) there in years to come, and jobs are a scarce commodity even though the industrialized world will have recovered, lots of protests about political incorrectness or repetitions of other post-war behaviors will be heard; but because of the nature and civilian character of the assaults, that won't be a big factor for a long time. Government will say otherwise; we think this is realistic. In the time after WWI, the lack of international help fostered a Germanic depression that contributed to Hitler's rise; though some politicians opposed that. In the years after a hard-fought WWII, politicians were able to marshal the monies to start the UN and an essential Marshall Plan to stimulate recovery in Europe; but even then (despite calls by politicians) most corporate boards resisted heavy new investment for many years.

Some of this is being discussed now; we've talked about this for about a month now, while calling for the (now-ended) rebound concurrently with a major shift in globalism. We need not reiterate the last two night's detailed discussion of this topic, but believe the additional impact remains one that will foster a focus on domestic-centricity stock holdings, as we have argued actually for several years; contribute to the strength by the T-Bond market (where economic prospects keep rates low for an indefinite time), and where the outlook, though guardedly negative very short-term, will eventually be a lot better potential for technology, versus big multinationals with all those overseas holdings, that have dominated their growth-in-growth (as we like to put it) for over two generations now. Let's use AMD as an example (not ours, and just as an example). Advanced Micro at this point makes most of its latest chips in Malaysia, not at home in California. Need we even contemplate who would want to build a new plant there anytime in the near future? If anything, management will be concerned about simply maximizing the existing one; as a comparatively weak government there does little about pressures on Americans (we're referring to Malaysia, not Berkley). These are precisely the kind of concerns that will tend to focus American corporate boards on a rejuvenation of domestic investment and operations, without the exposure of sending key personnel to politically questionable areas of the world.

Our approach suggests minimizing risks, not by broadly avoiding the idea of buying in extreme purges (but while doing just that, simply not chasing late-stage surges, such as forewarned in recent days); at the same time as one does focus that buying during duress on domestic stocks, that are not particularly vulnerable to disruptions of their international operations, even after short-term risks ameliorate in the future. Keep in mind that Afghanistan is not really the target; the extremists hijacked that country in a sort of 'default' manner, after they were booted-out of other mostly-Arab nations that they came from. Some of those countries harbor terrorist training bases under what is commonly the guise of 'schools', that make targeting those politically very difficult (as a few may actually be schools, so it's tough to differentiate), but we fully expect that many will be targeted as this war evolves. That's why the generals and admirals have been told to update their targeting plans for post-Taliban attacks, at the same time as they persevere in the current campaign. This is tough for sure, at the same time as it is somewhat similar (in design at least) to the island-hopping navy engagements of the Second World War, where forces would liberate or assault larger target islands or bases, then while the so-called mopping-up was going on, move preparations ahead for the next assault and/or invasion, in the process clearing the Pacific of occupiers.

In the current climate, besides the implications of this, which may weigh-upon older companies for some time to come, the movement to modernize the military and also public abilities to combat terrorism and detect the parthenogenesis of bacteriological warfare, we think technology will (after some consolidation) benefit the most from all of this. Thus the Nasdaq 100 (NDX) probably holds lots more potential gainers for the next two years than does the Dow, though some fairly domestic-centric issues are in that Average too. But some of the very chip stocks that are most suppressed at the moment, may be the very players in these forthcoming devices that detect mass-destruction weaponry hopefully in time to prevent the kind of panic increasingly seen.

Daily action . . . of course could not fathom how the announced closure of the House and Senate office buildings could possibly be offset by any common late Wednesday comebacks; so we assumed an expanded negative bias for the afternoon pattern call on the hotline, as far as Wednesday efforts were concerned. (Portion reserved.) And we were suspicious of a sort 'swing factor' topping this market anyway (it did do that, first making higher-highs before rolling over today). Basically, an absence of buyers simply lets the market fall virtually of its own weight. That was the afternoon forecast.

Hence the (900.933.GENE) hotline stayed short through the balance of the session; scoring several additional theoretical homeruns, as the ragtag vermin are clearly still out there; yet to be exterminated by domestic forces. In fact overall December S&P shots were partially choppy at midday, but very successful; so we'd be surprised if something between 3400 and 4100 ahead isn't unrealistic as theoretical tally for this, including shorts starting at1110 Wed. morning, interspersed with smaller moves, then capped with a terrific short-sale from 1091 down to 1077 or so later on. Surely we recognize these were our guidelines, and that individuals likely did more or less. These abridged comments also realize that we hope for 'normal' retracements out of all of this; hope for a favorable and ultimately bullish outcome from selling squalls in an interesting time; don't want to 'press' a bearish case, but must be terribly flexible.

Technically . . . this remains an extremely news-sensitive market, as you saw today. It's definitely one in which the old Roosevelt-era gem of 'having nothing to fear but fear itself', comes home to roost…as fear is what terrorizing counts on of course. But it's easier said then done as the so-called treatable bacteria attacks are barely able to be kept up with, and one has to ponder the 'unthinkable' of overwhelming assaults by a multitude of strange concoctions, that may dwarf the medical establishment's ability to readily cope. Let's hope not; but let's also try hard not to let fear get the best of us.

In summary . . . considering the level of tension and domestic 'cocooning', markets aborted an Expiration-related rebound attempt, in the face of news, and we caught most of it (actually about all of it, if you consider the first break, rebound, and fade, on the 900.933.GENE hotline, and in harmony with a view in the DB of finalizing rallies).

Underdogs may stay in their kennels . . .for years to come, due to victimizing many people, if not directly, then by some of their siblings, with slightly perverted pedigrees, that have so horrendously offended civilized peoples. In fact that irony (that all those who would threaten Western Civilization) will be among the most significant victims, was the thrust of the Tuesday and Wednesday DB reports. This is not going to be something you hear from governments, as we noted yesterday (in many cases they will promise the opposite), but reflect the reality of insurance cost, the rates of foreign investments, and the perceived risks to personnel of many firms, as regards future investment ventures abroad. One would think American trade unions will be easier to negotiate with, should manufacturers want to eventually re-ramp domestic factories, in an effort to meet the eventual demand, and to put this Country fully back to work.

The point of course was how this changes the world; and the stock market focus for years to come; almost a polar distinction from the 'globalist' world we have known of. It is not just that the costs of doing business are unusually variable in uncertain times, but that there's likely a tendency for businesses to maximize what they already have abroad, with more than a reticence about expanding those commitments; incentives or not. After the First World War, there never really was a global re-expansion; there was a focus (rather glorious and thriving for some years) domestically and then came the Depression. After the Second World War, there was a short-term recession, great leadership which culminated in the United Nations and the Marshall Plan, and getting the majority of corporations to expand international capital expenditures abroad, still took years (in some cases decades) to get into a pattern of renewed confidence in so doing. Governments don't control 'boards of directors'; who will (and should) primarily act in the interest of the firms, shareholders, and with government policy secondary.

This is why ingerletter.com, since the tragic 9-11 'Attack on America' has dwelled on 'pulling the veil' off the hidden meanings of all this beyond the obvious, and where it's taking the future corporate commitments (or lack of them) for some years to come. In last night's DB, we remarked about which types of companies might conceivably see a benefit from this paradigm-shift, and which ones might not. The high uncertainty will very quickly impact demand for advanced communications, will assist productivity, as well as it may surprise some of the technology CEO's who look at overall surveys, as they ponder how their products could possibly be selling with brisk demand, while the surveys say it should be otherwise. We may know why; and discussed that last night.

We were impressed that Chairman Greenspan essentially validated our analysis of at last parts of this, with some of his remarks on Capitol Hill today, before much of it (the House Office Building in particular) was evacuated. The Chairman made one great point today: that there will be a big improvement in Productivity in the years ahead. He properly pointed-out that improvements in productivity do not automatically mean improvements in well-being (or standards of living); though there indirectly certainly is such a relationship. What I believe he meant was that even stimulating military and a necessary ramp-up of security preparation, will increase productivity for governments expenditures, which may not manifest itself in opulent lifestyles (I'm saying that, not him, but I think that's the implication), but which sets the stage for a better future.

Focusing on the stock market, this is an emphasis of the real world we live in, ever so tragically…and to which I add, no particular handouts to those who have so bitten, so hard, the very hand that to a great extent fed them. How this flushes out, will be how the market performs, and in that regard we remain extremely flexible shorter-term.

As for the McClellan Oscillators, the NYSE data is at +76 or so and NASDAQ now backing down, to near +40. The NY was getting especially increasingly overbought, as we have noted for days. This week's previous rebound was projected as just little more than a test of prior highs; with an increasing shot of doing a little more based on some short-covering spurts; then rolling-over. That's what occurred on both counts.

God bless Allied Forces in the various phases of operations ongoing, and as they're transitioning to 'targets of opportunity' or even land-combat phases with successes of air strikes to this point. S&P premium is a -109 discount to cash, with futures down oh about a point this evening, primarily a result of tensions, not mere earnings reports.

As for Thursday, it may trade down and then try to rebound in the morning, but as we noted today most Expiration activity is likely behind. All of this remains news sensitive of course, but ideas that the panic last month was at minimum a buying opportunity in a trading way, has been proven, and our expectation (no assurance) that subsequent declines were developing, have also been shown, with the best-case being that they will be pullbacks within a rising pattern, but increasingly subject to fear and news; not automatically one and the same, though it may seem so from time-to-time.