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Morning Commentary

Whiplash
By Charles Payne, CEO & Principal Analyst
4/7/2017 8:48 AM

Question of the Week

Should President Trump be lured into military confrontation with Syria and North Korea?

Post your answer below.

Whip Lash

  1. The flexible part of a whip or something resembling it.
  2. Injury caused by a severe jerk to the head, typically in a motor-vehicle accident.
  3. Sudden jolt to monster rallies from exogenous news like a wayward Fed statement or the drumbeats of potential US military engagement.

For the second session in a row, robust stock market rallies stumbled into the close.  Today, it was comments from President Trump and members of his administration on Syria.

"I think what Assad did is terrible. I think what happened in Syria is one of the truly egregious crimes. It shouldn't have happened. It shouldn't be allowed to happen. I think what happened in Syria is a disgrace to humanity. He's there, and I guess he's running things, so something should happen."

President Donald Trump (aboard Air Force One)

When asked whether the United States will help with current international efforts to remove Assad, Secretary of States Rex Tillerson replied: “Those steps are underway.”

The drumbeats of war would be a major distraction, although ultimately, it shouldn’t alter market fundamentals.  Of course, the Middle East has been a humanitarian, economic and political quagmire for two American Presidents, so any addition actions shouldn’t be written off out of hand. 

Bombs Away

"Circumstances rule men and not men circumstances" -Herodotus

Most military experts believe there were five options that could be used singularly or in coordination. 

  • No-Fly Zones
  • Strategic Airstrikes
  • Cruise Missile Strikes
  • Safe Zones
  • Ground Forces

As it turns out, President Trump decided on tactic. Tomahawk launching 59 missiles, aimed at the base from which the chemical attack originated , and focused on warplanes, storage facilities and hangers.

The administration is saying its official policy on Syria hasn’t changed, but a message had to be sent and not only to Assad.  Syria isn’t going away as an issue for the west, so while safe zones could be part of a longer term answer, near term challenges my require America to look the other way as long as the carnage is with conventional weapons.

This measured response wouldn’t hurt the market and in fact is a sign of strength.

That being said, many are worried about the so-called neocons wielding too much influence and pushing the envelope or cheering for it to be pushed wide open by the current administration.  Let’s not forget this administration has already promised action against North Korea with or without the United Nations or China.

Market Resolve

Wednesday major indices avoided closing in the red as late buyers emerged.  But there is no doubt the old bull is facing new hurdles, including geopolitical, that could increase volatility.  

On that note, while major equity indices eked out positive gains, crude oil was up more than 1% and seems to be on one of those unstoppable rallies.  There could be a geopolitical support point in place for a while, too.  (Remember when geopolitical risk put up to $20.00 in the price of crude?)

https://s.tradingview.com/x/qEUDCSsZ/

Of course, there would have been anxiety no matter the domestic or foreign policy news with the big jobs report out this morning. This report has to be a blockbuster for a number of reasons.

  • Wall Street needs the fuel
  • Main Street needs the hope
  • Administration needs the win to push agenda

First, I think the number will be north of 250,000 in part because of ADP 263,000 and also the ISM manufacturing employment component, which surged 4.7% in March.

On wages, I look again at anecdotal trends like the JOLTS report with 5.6 million job opening and higher quits and initial jobless claims yesterday morning -25,000 pushing the overall number to 1970s levels (when the population was significantly smaller).

http://markets.money.cnn.com/cgi-bin/upload.dll/file.png?z6c8f7c0az93a62e1be09f4382a88c3e65be98a8e5

Today’s Session

Stocks are lower after the jobs report came in significantly below consensus, and a million miles below my own modelling. 

Stocks are off the worst levels of the pre-opening session, and I’m sure most professional investors will consider this a one-off or a wake-up call to Congress, which will be off (recess) for 24 of the next 32 weekdays, to get back to work and accomplish something.

I have misgiving with the accuracy of this number, and not in a conspiracy way, just simply, it doesn’t jibe with all the other sources of data from the government, industry and business world.   For instance, construction jobs were significantly lower for the BLS report than ADP, but belies housing starts data as well.

  • Construction +5,000
  • Mining +11,000
  • Manufacturing +10,000

I don’t want to react hastily on the jobs report.  

United States Non Farm Payrolls


Comments
There are OTHER options as well, such as many different electronic warfare tactics. In addition, during one of our Iraq campaigns, we "dropped" shredded carbon fibre onto their electrical grid which messed up their electrical transformers.

Their SCADA system is super vulnerable.


Their communications system is super vulnerable.


We could perform damage such that it would cost the Russians a LOT of money to fix and/or replace.

LOTS of similar options.

Al M. on 4/7/2017 10:09:17 AM
Lured is not the correct definition, more like what is really necessary, and yes, I agree with Trump missile attacks.

Karin on 4/7/2017 10:39:16 AM
He is smarter than that, Charles.

William Brown on 4/7/2017 11:48:10 AM
trumps presidency is a game of chess, and my money is on him as the grand master. as a recent ex-new yorker, 'the donald' was always bigger than life and didn't come by his successes accidentally. under all that hair is a great mind, and a deep thinker who truly 'understands' and 'sees' things, unlike the dumbocrats who are now the obstructionists. i'm disappointed in rand paul's comments after the syria bombing, and shocked at schumer and pelosi's comments but most grateful for them. our president doesn't do anything without great forethought and i'm sure he has the outcome(s) under full control. he's savvy enough to know what he doesn't know and to surround himself with experienced great minds and i especially love that he's not afraid to say 'you're fired' when necessary. we are in for a wonderful 8 years. may god bless our president and all of us.

marlene bertman on 4/7/2017 2:10:19 PM
When calls go out to let slip the dogs of war, some send jackals. It's clear the torture and murder of babies doesn't equate to one strategic hit to a military target. The civilized world is obligated to do more than make sure their collars and cuffs are pressed for meetings when atrocities within our ability to stop occur.

Patricia Flynn on 4/7/2017 5:27:30 PM
Trump "lured" into military action.
Action both financial and if needed kinetic are needed if necessary.


Bert Pulitzer on 4/19/2017 10:47:55 AM
War with Korea would be horrible. We have 33000 troops in South Korea in harms way.

JOhn Brody on 4/20/2017 1:40:37 PM
 

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