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As I sat down to write the backgrounder for this holiday-shortened week's Saturday Spotlight, reports of an air-to-air missile fired from a Turkish F-16 downing a Russian Su-24 flooded my newsfeeds. U.S. equities were in the red early in Tuesday's trading sessions, with transports (and airlines, hurt by the U.S. State Department issuing a global alert for Americans planning to travel abroad) leading to the downside. Crude oil was up on the perception of increasing tension in the Middle East and beyond. "Safe havens" such as the Japanese yen and U.S. Treasuries were higher. Russian President Vladimir Putin, expressing his outrage, described the incident as a "stab in the back" perpetrated by "accomplices of terrorists." Turkish military officials said its F-16s engaged the Su-24s after warning the Russian jet that it was violating Turkey's airspace. This is yet another factor exacerbating uncertainty and threatening the "currency peace" Wall Street Daily Global Markets Analyst Martin Hutchinson describes in today's Saturday Spotlight. |
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Why So Tense Following so closely the November 13 and November 20 attacks in Paris and Mali, this shoot-down will only muddy an already fraught debate about how best to deal with the Islamic State of Iraq and the Levant (ISIL) and other international terrorist organizations. Many observers have compared this devolving Turkey-Russia dispute to the spark that ignited World War I, the assassination of Archduke Franz Ferdinand by Gavrilo Princip. And it's thought to be the first time a NATO country has shot down a Russian plane since the 1960s, evoking Cold War memories. Iraq, Syria, and the Levant are a mess right now. Identifying allies and enemies is far from simple. Indeed, Cold War logic led us to support all sorts of really bad people. It put us in the truly awful position of choosing to support popular uprisings in long-oppressed countries such as Libya, Egypt, and Syria or to possibly unleash, a la Iraq, chaotic internal forces that would inevitably gravitate to radical leaders. To wit, Syrian President Bashar al-Assad has been propped up by the Russians. The U.S. initially sought Assad's ouster in the early days of the Syrian Civil War. Now, clearly, ISIL is the greater threat to regional stability. Coincidentally, "Islamic Jihad" is no longer (if it ever was) a monolith. ISIL and al Qaeda are at cross purposes, and there are multiple organizations operating in the Middle East and North Africa with their own, localized objects of terror. The overriding fear is that unintended consequences of engagement in the Syrian Civil War set the stage for World War III, pitting the U.S. against Russia. Turkey is a NATO ally, after all, meaning that the U.S. and most of Europe would theoretically be bound to come to its defense should Russia respond with force to the downing of its Su-24. And thus a regional conflict escalates into another struggle between Great Powers. At the same time, it's a low-volume week. And before this latest flashpoint in an increasingly complex geopolitical crisis, markets were enjoying a run of strength. In fact, by Wednesday morning U.S. equity index futures were pointing to a solid open to the final trading session before Thanksgiving. Russian Foreign Minister Sergei Lavrov, though he described the attack as a "planned provocation," said that Russia did not "plan to go to war with Turkey," adding "our attitude toward the Turkish people has not changed." So we've certainly witnessed some short-term gyrations that roiled global markets. The Turkey-Russia incident triggered a "flight to safety" that buoyed the Japanese yen and the Swiss franc, though the U.S. dollar dipped as crude oil surged. We're not equipped to solve issues of global war and peace. Our aims are much more humble. For instance, we can offer a solution that can help you position your portfolio to benefit from medium- and long-term shifts in relative fortunes among the nations of the world. We call it Currency & Capital. A GeoMacro Moment The U.S. Commerce Department reported last month that the economy grew by 1.5% in real terms during the third quarter. On Tuesday, the government revised its report, bumping third-quarter gross domestic product (GDP) growth to 2.1%. The change was largely due to a sharp upward revision for private inventories, which still weighed on GDP growth but not nearly as much as initially estimated. This is good news in the short term. But what does it mean for the fourth quarter? Rising stockpiles help boost GDP, but they could be a potential drag in the fourth quarter, when those inventories are drawn down. And how will the market react if and/or when the U.S. Federal Reserve finally raises its benchmark fed funds rate off the "zero bound"? The thing to watch will be the Federal Open Market Committee's language accompanying this hypothetical rate hike. Our monetary policymakers are likely to be dovish around the move. Will Russia ratchet down its rhetoric, refocus on the common threat, and join its former adversary NATO to eliminate ISIL? It's certainly possible to trade these types of uncertainties. Indeed, large institutions, armed with detailed knowledge of flows and with huge amounts of capital, do so basically in real time. Rather than a "Currency War," what Martin Hutchinson sees right now is a "Currency Cold War." It's a critical distinction wherein lies the difference between losing and making money. In Currency & Capital - the latest addition to Wall Street Daily's lineup of premium research services - Martin will research and analyze the impact of geopolitical events and macroeconomic developments on global currencies. He'll provide recommendations for individual investors based on this research and analysis - actionable conclusions based on longer-term currency movements. David Dittman |
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Not only did he provide the intellectual, military, and moral leadership that preserved the Union. President Abraham Lincoln also helped turn Thanksgiving into a national holiday. On October 3, 1863, President Lincoln issued an official declaration of Thanksgiving to be observed on the last Thursday of every November: I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. We at Wall Street Daily extend our hope that yours was a wonderful Thanksgiving, full of family and friends. Chief Technology Analyst Louis Basenese strikes at the hyperbole so common when it comes to initial public offerings and cuts to the main issue surrounding the market debut of Square Inc. (SQ): Putting a value on a company of any age or size is difficult. With regard to "tech unicorns," Lou, ever the realist, notes that an "IPO is a check-and-balance in the system. It's merely a pricing mechanism that provides an opportunity to hit the ‘reset' button on a company and its valuation, if necessary." Chief Income Analyst Alan Gula revisits a crucial moment in Wall Street history to provide some context for his look at credit rating agencies (CRAs) such as Standard & Poor's and how they perceive your holdings. The fact that Lehman Brothers had an "A" rating right before it imploded in September 2008 is widely cited to impugn the accuracy of S&P, Moody's Investors Services, and Fitch Ratings. The fact remains that the CRAs do provide useful information. And you should be aware of what they're saying about the companies you own. Curious about how hedge fund wonderboys allocate their capital? Securities and Exchange Commission Form 13F is your Rosetta Stone. Senior Analyst Jonathan Rodriguez highlights a reporting season that can be every bit as important as earnings for agile investors. Finally, China has long dominated discussion of Asia and its emerging markets. Meanwhile, Prime Minister Narendra Modi is spearheading economic reforms that could make India an attractive destination for capital. Senior Correspondent Shelley Goldberg has an informative tour of the subcontinent. And thank you for spending part of your weekend with Wall Street Daily. Why Square's IPO Flop Is Good for Investors The IPO flop for digital payment firm Square has some tech analysts predicting doom for future tech IPOs. But here's why it's actually good news for tech investors. |
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