Friday, July 06, 2007

The New Normal

Here's another indicator explaining why terrorism isn't being beaten by governments and armies alone but by billions of people adjusting their attitudes -- their attitudes to Islamism too, unfortunately -- and taking the offensive in myriad, swarming ways.

The Economist says that markets have learned how to incorporate the risk of terrorism into its traded values. "Each successive terrorist attack cause smaller and smaller shockwaves in the markets. The September 11th outrage in America had a huge effect; stockmarkets had to close. But share prices eventually recovered, with the help of effective central-bank action. Subsequent attacks, such as the bombings in Madrid, Bali and London, have been one-day market events."

Events in Iraq are no longer seen as a market-moving factor. Perhaps military action outside the Middle East, involving the two Koreas, India and Pakistan or even China and Taiwan, would be the kind of real shock that would turn investors into nervous ninnies overnight.

Nothing follows.


Blogger Whiskey said...

Or how about the Taliban and AQ overthrowing Pakistan's government, and controlling Pakistan's nukes.

Maybe even using them.

On the US?

Lose a few US cities and see how quickly markets crash. Harder, further, and longer than 1929.

7/06/2007 11:24:00 PM  
Blogger ADE said...

Single Malt,

If the Taliban and AQ overthrow Pakistan's gov, sell all your shares in glass stocks.

Apparently oversupply is not good for prices.


7/07/2007 05:59:00 AM  
Blogger What is "Occupation" said...

This comment has been removed by the author.

7/07/2007 07:07:00 AM  
Blogger 3Case said...


I do not see what is "unfortunate" about "...adjusting their attitudes -- their attitudes to Islamism too....". The effect which you lament is the product of the billions of people observing the absence of response from a "mainstream" Islam to counter the genocidal impulses of it's purported radical fringe elements.

In fact, not quite 6 years after 9/11, "mainstream" Islam has yet to identify itself in the public arena and has done NOTHING to control and/or marginalize their genocidal spiritual kin. This failure causes the rational billions to wonder and, rightly, to adjust their attitudes.

7/07/2007 08:48:00 AM  
Blogger Chris said...

Here's my take on the market reaction. The US stock market has been on an uninterrupted upward trajectory since (literally)the day we went into Iraq. The DJ average was around 8,000 in March of 2003 and is now near 14,000. That's better than 80% over 4-plus years. For all the handwringing about Iraq, the markets have voted approval.

It's interesting that the Economist didn't mention (at least in the excerpt) what effect a nuclear Iran might have on the markets. You could argue that it's factored in, but I doubt it.
What might surprise would be a positive reaction to confrontation there. Look at the Iraq reaction. It seems that the only thing guaranteed to cause a negative market reaction would be retreat from the GWOT. I'm not advocating taking on Iran, or anyone else, for the sake of the markets. But if it's the right thing to do, so be it.

Markets are the collective wisdom of millions displayed in real-time. And the verdict wrt Iraq seems clear. Not saying that the war is the sole reason for positive returns; tax cuts and sound economic policy also play a large role. But it seems undeniable that military response, rather than law enforcement only, has been a net plus for markets. Just my 2 cents.

7/07/2007 10:10:00 AM  
Blogger Whiskey said...

Let's look at a nuclear Iran and a Taliban-AQ controlled Pakistan:

1. We will see several US cities destroyed, by "untraceable" or deniable proxy cut-outs.
2. We will have no for a while no consensus on military action, until degenerate elites are overthrown by a Jacksonian revolt.
3. We will have a pretty indiscriminate, "Trail of Tears Part 22" response to the above events ...

But what then? When the shouting and dying is over?

Global trade IMHO will likely curtail drastically. Since the shipping container could have instead of cheap Chinese goods a nuke for your port. You can't check them all, so you will have to forgo the trade. Isolationism and protectionism and local-sourced goods AND services will be the rule.

You'll also see a move away from targets like cities, and cities like NYC, SF, and Chicago will be particularly hard hit. Financial markets will plummet since uncertainty in reaction to US cities being nuked is so high it's impossible to price anything. Besides, the trade that drives a lot of market activity will cease.

Loss of trade with the US and other nations, along with masses of young men, will provoke Chinese adventurism, and likely a series of Pacific wars including takeover of Taiwan, perhaps South Korea and/or Japan. Some outlet has to be found for all those young men or they will set about overthrowing the current regime and getting power for themselves. To find girlfriends/wives.

This will further roil markets, and likely remove China and/or Japan and much of Asia as a source for many manufactured goods. Perhaps a reprieve for Detroit along with protectionism.

One intriguing fact: Gold has been gaining across the board on all paper currencies. This suggests that fundamentally investors do not trust governments ability to not inflate their currency. And perhaps a broader loss of confidence in the ability to hedge against uncertainty. The bet there is for increased inflation in fairly large chunks (holding gold is expensive).

7/07/2007 01:36:00 PM  
Blogger Marcus Aurelius said...

The attacks carried out to date while perhaps market shocking to one extent or another I agree are now pretty much factored into the market.

However, when the attacks ratchet up in scale or in type (e.g. nuclear or radioactive device going off in a city) then market shock will occur.

Also, I am in agreement here that a nuclear armed Iran or Tali-Tubbie state. In case my attempt to anchor a link gets trimmed by Blogger see the Tali-Tubby at:

7/07/2007 01:57:00 PM  
Blogger Red Wolverine said...

There is a tremendous appetite for risk out there currently. Nevertheless, it has become apparent to me that democrats are more dangerous to work economic growth then terrorists are. We can fight the terrorists abroad. But can we fight the ene mies at home. Raising the cap gains tax would do more dmage to this country then anyting the terrorists could do.

Red Wolverine

7/07/2007 02:11:00 PM  
Blogger Chris said...

The scenario you sketch out is not that remote if a few (more) things go wrong. That's why I think the markets prefer pre-emption to reaction. Reacting to untraceable nuclear terrorism is not something any rational investor wants to contemplate.

I disagree with you a bit on gold. Think the increase in price there was driven mainly by oil. They have a historic correlation (going back to about 1973, I believe). There could be some fear factor as well. But gold is a common place for the kleptocrats in the ME to park some of their money. Oil goes to $80, they buy more gold--hence, gold goes up. That's extremely simplified but supportable.

7/07/2007 04:57:00 PM  
Blogger Cedarford said...

Of note is this is the 60th anniversary of the invention of the AK-47.,2933,288456,00.html

Along with the cell phone, and modern mdicine allowing exploding populations, perhaps the invention of the greatest impact in the 3rd World.

100 million AK-47s in service now, millions more produced every year. With their simplicity, low cost, and high firepower, they allow insugent groups a way to stand up to organized government militaries.

Mikael Kalashnikov changed the world. Now 86, he expects the weapon to be the dominant individual fighter weapon for another 20 years, and still in use (unfortunately, Kalashnikov said) for another 100 years.

In recent years, the US government has been one of his largest customers. In rebuilding the Afghan Army and Iraqi Army, those forces adamantly resisted M-16s being the firearm, insisting the US give them AK-47s.

The "New Normal" is, for now, islands of prosperity minimally affected by terrorism and the demographic pressures on global resources.

The future is one of growing chaos in unmanagable 3rd world megacities of 40-50 million and packed regions with badly degraded ecosystems with each person a potential lethal insurgent able to reach out and coordinate with other like-minded people instantaneously in a quest for more resources or power to "their tribe".

Survival of islands of prosperity may hinge on ending Liberal-Jewish-Euro "progressive law" to give a fighting chance and somehow end the threat of demographic takeover of those Islands by the hungrgy, ruthless barbarians outside the gates.

7/07/2007 08:00:00 PM  
Blogger Unknown said...

Many people here have listed ways to market would get affect by Iran getting nukes but there is a way to get around that. I think this article here indirectly addresses that. www.thomaspmbarnett.comweblog2007/07bushs_big_bang_strategy_contin.html

7/07/2007 08:25:00 PM  
Blogger Chris said...

Interesting piece from Barnett. Had to read it twice (like much of what he, and Wretchard, writes) to grasp the entirety. While the scenario he lays out (actually, it's Kass' scenario which he's commenting on) seems improbable, it may be worth a try. Certainly a game of chess rather than checkers.

What Kass is essentially pinning her hopes on seems to be Abbas selling out Iran, just to get things started. Then the Saudis have to get on board, and finally, the French.

The fatal flaw in the scheme, if there is one, seems to be that we can bargain with Fatah/Abbas. That they'd renounce the call for the destruction of Israel seems a stretch but not entirely out of the realm. Worth a try but the chance of success? Who knows? 10%? 20? Lots of moving parts. And it would require tremendous diplomatic and intelligence capabilities by the US. Are these agencies up to the task? It would surely be interesting to watch.

7/07/2007 10:24:00 PM  
Blogger Whiskey said...

Chris -- good point on Gold. I had not thought of the traditional ME predilection for gold (understandable given their own currencies teach them paper money is worthless).

Sad to say though, the elites prefer no pre-emption since it would by definition give a place at the power/status table to the unwashed: the military and those who support it (logistically) and otherwise.

Cedarford -- I agree with everything but "progressive/jewish" ... Progressives hate Jews, hate Israel, and hate modernity, harkening back to some aristo tree-hugging nightmare concoction of Deliverance meets the Red Guards. Go to Zombietime and see how the real "progressives" loathe every bit of Jewishness (with it's emphasis on secular and urban living) with all their Marxist aristo hearts.

Have you ever actually MET an Progressive? They hate Jews more than you do.

7/07/2007 10:29:00 PM  
Blogger Gary Rosen said...

Another turgid, incoherent bloviation from C-fudd so he can get in his little dingleberry of Jew-baiting.

Fudd, why don't you try to be a man for once in your life and admit you are pathologically obsessed with Jews? You'll never do it, though, you're a dishonest weasel and born loser.

whiskey - don't waste your time with Fudd. He's occasionally right, but remember the old saw "a broken clock is right twice a day". With Fudd it's more like twice a year.

7/07/2007 11:34:00 PM  
Blogger LarryD said...


I agree with everything but "progressive/jewish" ... Progressives hate Jews, hate Israel, and hate modernity, ...

Yeah, but. Despite that, a lot of Jews in the West are Progressives anyway. I think that's what Cedarford had in mind. Since there are also Jews who aren't Progressives, it isn't a useful designation.

I do wonder, though, what it takes psychologically to remain part of an ideology that hates for your race.

7/09/2007 12:53:00 PM  
Blogger Gary Rosen said...


That may be true, but that's not what C-fudd had in "mind"; actually he does not have a mind, only a festering boil of Jew-hatred.

Antisemitism isn't about Jews, it's about antisemites. They are embittered whiners and losers seething with jealousy and resentment against a small group of people who have managed to survive and even prosper for 4000 years despite having the most horrific evil arrayed against them bent on annihilation. Antisemites do not have the honesty or gumption to own up to their own shortcomings and failures, so they blame it all on the Joooos.

I do not believe that Jews are inherently "better" or "smarter"; it is a matter of culture - Jews value literacy, education and critical thinking. It is that "critical thinking" thing in particular that so befuddles the likes of C-fudd, who is a bundle of Pavlovian neuroses. My favorite C-fudd post was a response to an essay by Wretchard on the Barack Obama phenomenon - the fourth word in his (C's of course) post was "Jew"! I burst out laughing; his obsession was so palapable, so mindless, so uncontrollable.

7/10/2007 01:41:00 AM  

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