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Wednesday Night #1326 – Postscript: the Laurel Comment
Written by Diana Thebaud Nicholson // August 1, 2007 // Economy, Geopolitics, Markets, Middle East & Arab World, Wednesday Nights // Comments Off on Wednesday Night #1326 – Postscript: the Laurel Comment
“…this is not the end. It is not even the beginning of the end. But it is perhaps the end of the beginning.” Winston Churchill
31 July 2007
A little over 7½ years ago (6½ if you count your millennia properly) the United States entered the 21st century as the most powerful nation on earth and arguably, the mightiest in history.
Around the world she had been admired by some, envied by many more and despised by only a minority, reflecting a condition of public opinion that had been growing positively, albeit with the exception of certain periods, since her revolution and birth.
There have, unquestionably, been times during which America’s incredible foreign polic blunders have brought both its international and domestic popularity poll numbers to numbing depths, yet it has been seen that its powers of recovery have been strong enough to overcome tragedies even as great as Vietnam. In fact the disdain once felt for America during the late sixties and early seventies had largely dissipated through the Reagan and Clinton years. America, in short, with the Cold War behind her and a budget surplus gilding her treasury was on a roll when Bill and Hillary turned the White House keys over to the Bushies.
Then there was 9/11 and America’s popularity in the world soared to new heights as sympathy, loathing and fear shook the emotions of even the most cynical of the civilized nations. Ah, the opportunity for a positive and united response to such treachery could have only found parallel with that exercised by the Allied powers in the 1940’s. Sadly it was not to be at this time and place in history as this potential watershed for progress was squandered by ideologues infatuated with power and robber barons hungry for oil. The Republican Party and its newly appointed administration sought not the friendship of allies or the advice of history; instead it began the hijacking of America in pursuit of goals that were not only dishonourable but incredibly misguided.
The unnecessary and debilitating war in Iraq may go down in history as the first symptom of America’s terminal disease. It may also be seen by future historians as the symbolic event that led to America’s hurried demise as the world’s greatest power contrasted to China’s accelerated rise. This will have not proven to be a good thing for our world because the promise that the United States and its Constitution held in both philosophical and practical terms may well be vanquished in future decades by nations which operate under far less democratic principles, where rule of law is subject to the rule of the state.
The irony inherent in this possible circumstance lies with the knowledge that it was a conservative/libertarian coalition that brought it upon us.
Bulls have called the recent market downdraft a healthy correction while bears have intoned the crash word and others meanwhile still have adopted the fence sitters motto…let’s wait and see.
The difficulty in writing a “market current” letter to be read on any but the day one parses it, is a conundrum solved only by those who believe in the theory that “I’m in it for the long term” which may be either a catchall phrase or an investment philosophy. For those of us however who struggle with the ups and downs of extreme market volatility bear with me while I present the other side.
In last month’s column I wrote that “a 5% upside move in markets won’t change your life but a 20% downside move might.” Well since that time the former has largely been achieved while the latter (at this writing) is still pending. Caution is not a particularly strong word unless it is applied to a flashing yellow light on the cusp of turning red. This bull market is now past 5 years of age and unless “things are different this time” the economic and credit cycles are in the process of forcing a set of old realities on this new realm of circumstance.
Protect is a stronger word and it implies a move to money market funds in whole or in part of your portfolios. Stronger still for the brave among you is the phrase “creative action”. This would involve familiarizing yourself with the methods of money making in down markets, the most simple of which we have already mentioned, the second involves the purchase of short or ultra short Exchange Traded Funds. As an example; for those of you who do not wish to sell your bank shares, now or ever, for whatever tax or personal reasons try the following HFD on the TSX. This is Horizon’s short on the TSX financial index, a wonderful hedge considering the age-old market adage that financials lead markets up or down. You may also wish to engage the HGU which is a long on gold ETF.
The Bush team of Gates and Rice have been travelling the Middle East lately handing out defense packages to those it presently deems to be friends.
This current program of arming majority Sunni nations is reminiscent of the 1980’s policy that funded the Iran-Iraq war. There is little beneath the Machiavellian surface of these machinations as they portray a possible exit strategy from Iraq and a balancing of the Iran threat.
This is such a screwed up policy that the grasping of straws in the wind is now finding purchase in neocon circles.
And while on the subject of irony, George W Bush bears no similarity to the old lion who roared our opening quote during the worst days of WWII, despite what he may believe.