June 15, 2014
Weekly Market Outlook
By Mish Schneider
Last Tuesday’s Wall St. Journal ran two “shocking” stories on the front page that surprised most readers in much the same way the upcoming market correction will take these same readers by surprise.
What correction? What two shocking stories?
First, the GOP’s No. 2 man, Eric Cantor, lost his bid for re-election to a college economics professor whose entire campaign budget amounted to less than what Mr. Cantor raised at “steak dinners” alone! Political experts scrambled to explain how such an upset could possibly occur, while at the same offering predictions of what other havoc it would cause in Washington.
This defeat was reported as a shocking defeat, but it should not have been a shock at all. Elections are not lost “on election day” any more than market declines are caused by one special day.
Ironically, the second “surprise” story on the front page that day has a similar message for investors. This news was headlined as “Islamist Drive Iraqis From Key City”. You didn’t have to read much to find that the “Key City” was Iraq’s second largest, Mosul!
If that doesn’t pique your interest yet… the truth is that this move by rebels resulted in control of more than just a city. The rebels now control the entire providence of Nineveh that includes the city of Mosul with a population of over 2 million.
In addition to the large population (much of which is now fleeing), the rebels managed to gain control of this key city even though it contained military installations where U.S. supplied fighter planes, helicopters and other heavy military weaponry are based!
And how did they do it?
According to news reports, it only required the advance of several hundred rebels to send the Iraqi fighters running for cover.
Witnesses said government soldiers simply dropped their weapons and ran for their lives at the sight of the rebels. This included knocking on civilian doors and begging for civilian clothes to improve their odds of surviving their retreat!
Clearly, the Iraqi military was about as strong as voter loyalty for Eric Cantor when it mattered most.
Let’s hope the same cannot be said for the complacent stock market should it be challenged in some way that will inevitably be described as a “surprise”.
This week’s Market Outlook explores just how prepared the market rally is for the next surprise.
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