Time to Reckon

As New York City heroically digs out from under the rubble and businesses plot their return to normalcy, the feeling mounts that America has been greatly strengthened and unified by the appalling events of the past week. Not since World War II have we brought such determination and solidarity to the notion of defeating an enemy who would seek, in the name of god, to destroy our way of life, our institutions and our humanity. On Friday, in solemn celebration of this cause and of the many lives that were lost, homes, schools and offices unfurled Old Glory and we dressed in patriotic bunting. President Bush visited The Battery to rally rescue workers toiling under rainy skies, and at dusk, millions took to the streets with candles, mourning those who perished in last Tuesday's fiery rain of destruction. Throughout the day, we tuned intermittently to the news, eager for that piece of evidence that will link the hijackers conclusively to a place on the map -- to an enemy camp or terrorist staging ground that we can bomb into dust.

The enemy whom we seek is one that Israel knows all too well: ruthless, zealous and implacable, terrifying in his chilling disregard for life. It is an enemy capable of unspeakable acts that lie almost beyond the imagination of the civilized world. An enemy who, even as we roll up our sleeves to clean the debris from lower Manhattan, could be readying a biochemical second-strike that would kill not mere thousands, but hundreds of thousands or even millions of innocent people. Can we deal with a threat of this magnitude? It is hardly reassuring to contrast our reaction so far with the way in which the Israelis would respond to such a devastating attack. Indeed, if America's week-long spectacle of candlelight vigils and fist-shaking are not supplanted very soon by stunningly tough action, our known enemies are liable to suspect it's all no more than the usual, ineffectual brand of American hubris. Americans cheered the rescue workers' "raising of the flag at Iwo Jima" the other day in the Battery, but it is already time to move beyond the photo-op displays of patriotism and brace for the worst.

Patriots, Beware

With respect to the financial markets, I fear that any "patriots" who try to rally the market are going to be devastated, and quickly. They're evidently out there, as evidenced by the following e-mail message, (which circulated to a large list of Wharton School grads): "Ten minutes ago on Bill O'Reilly's show a female guest said that, on Monday morning, Americans should empty their wallets and buy as many shares as possible. The woman was one of the two female radio talk show hosts that aired at the same time on Bill's show. "We'll show them terrorists, we'll buy more shares - all that we can!"

If you'd rather not join the Light Brigade, there are a few no-brainers for those who would attempt to align their investment portfolios with the blood-dimmed tide: oil and defense stocks, gold and strategic metals. You could also try to short the airlines, although there will not likely be enough upticks in their shares in the coming months to accommodate foreseeable demand. As far as the specific recommendations made in the last issue of Black Box Forecasts, there is just one obvious change: hold onto the December gold call without selling another lower-strike call against it.