Market Trends

For those of you interested in business and the stock market, David Callaway at Marketwatch.com has good news and bad news. Here's a synopsis:

Wednesday's 108-point run was the best day of the month for the Dow, and it's now up more than 3% for September, 11.6% for the year, and nearly 50% from its bear market closing low on March 9.

But just as stocks couldn't go straight down to zero this spring, a favorite prediction of the bears and the shorts at the time, they can't go straight back up either. We've no better chance of hitting Dow 14,000 again this year as we had of hitting Dow 3,500 in March, when the average got below 6,500.

Earnings aren't good, Washington is in typical gridlock on health care and financial regulation, banks continue to fail at an alarming rate and unemployment is approaching 10%. Yet some economic numbers do show that the worst of the recession is over, a theory which garnered a modicum of credibility this week when Federal Reserve chief Ben Bernanke said the recession has "likely" ended.

Still, it's hard to see this rally as anything other than a momentum bandwagon right now. Online brokerage trading volumes are surging at Charles Schwab Corp., E-Trade Financial, and TD Ameritrade Holding Corp. and small investors are jumping back into funds and especially exchange-traded funds.

At some point, a correction is inevitable. And arguably, it's OK to just ride this out until that day comes. Might be next week; might be next year. When it does come, though, it will come with a loud crack in equities, as all the positive momentum behind the market right now suddenly shifts to an embarrassing, emperor-without-clothes type of feeling, which will precede a rush to sell.

That ultimately will be healthier for the market than the current sprint to Dow 10,000, though it might not feel like it at the time. By the end of the year, I think we'll be higher than we are today, likely above 10,000. December in particular could be a strong scene-setter for a recovery run in 2010.

So what's the take home message? It appears to be that the road ahead for investors (and businessmen and women) is going to be bumpy, but that if you just ride it out you'll be fine. I'm not an economist but I have some doubts about this. It may be that over the relatively short term things will be fairly positive, but what happens when our huge deficits start building in a year or so, and we have to pay on the debt. The only way we'll be able to do that is to impose onerous taxes on businesses or print money which will generate inflation. Either course will kill the markets. It seems inevitable that one or both of those alternatives lies in the not so distant our future, so I wonder why Calloway thinks that 2010 will be a year of recovery.

Perhaps the only thing that's going to be recovered in 2010 is the good sense of the voters who will decide to cashier the people who got us into this mess.

RLC

Why The Arabs Languish

The folks at Strategy Page analyze Islamic terrorism and why Arab civilizations have stagnated while the rest of the world passes them by:

In many parts of the world, especially among young Moslem men, Islamic terrorism has become fashionable. It's a coping mechanism for failure. More than half a century after the Arab world once more became free (first from centuries of Turkish rule in 1918, then a few decades of European supervision), the truth has sunk in. While the rest of the world prospered during the last half century, the Arabs are still uneducated, unproductive, poor and ruled by tyrants and kings. What are young Moslems to make of this?

Blaming the Jews has accomplished nothing, except to provide more opportunities to fail. Supporting al Qaeda (with money and volunteers) produced the September 11, 2001 attacks. That had young men dancing in the streets all over the Arab world (much to the chagrin of their elders, and embarrassment of their governments). But the response has led to an even longer list of failures. Not only was al Qaeda, and similar organizations, revealed to be mindless murderers of innocent Moslems (in Iraq, Afghanistan, and several other Islamic nations), but these Holy Warriors proved embarrassingly incompetent when fighting the Crusaders from the West.

American troops suffered far fewer casualties in Iraq and Afghanistan (where the casualty rate was actually a third of what it was in Vietnam) than in earlier wars. While pro-terrorist web sites loved to feature videos of roadside bombs going off and American troops getting shot out, more embarrassing were U.S. videos of Islamic terrorists being caught in the act, and bombed or shot up. Worst of all were those videos, taken by American UAVs or helicopter gunships, that showed terrorists trying to plant roadside bombs, which then blew them up because of improper handling (or construction.)

One of the little discussed tragedies of Islamic terrorism is the fact that most of those it attracts are the least capable. Islamic terrorism is not only an act of extremism, but also of desperation of those who have few other prospects. It's an international organization because Islam, in general, has not been amenable to taking advantage of new technology and economic opportunity, except for cable TV and the Internet. That's why the Moslem world has lagged so far behind the rest of the world in the last century. Religious leaders are reluctant to discuss the possibility of Islam being part of the problem, although many educated Moslems are becoming more aggressive in seeking out cultural problems, and proposing solutions. Terrorism is not seen as a practical way out by most Moslems, but the threat of retribution by Islamic radicals makes it difficult for most Moslems to speak up.

It's hard to overstate the importance of the religious worldview of a people in shaping their culture. Everything they value, everything they accomplish, is a consequence of what they believe about God, man, life, and nature. A worldview, for example, that inculcates the idea that our minds are gifts from God that He wants us to use to unlock the secrets of His creation will have a completely different developmental history than cultures which believe that our minds should be used only to study theology. A worldview which sees nature as the creation of a rational, loving God who gives it as a gift for our safe-keeping will imbue the people who hold it with a completely different attitude toward scientific investigation than a worldview which teaches that technological progress is somehow outside the proper concern of the truly pious.

Even many thoughtful atheists recognize that the values we have always held dear in our democracy are derivatives of our Christian heritage and can not be sustained by any other worldview. Atheist philosopher J�rgen Habermas, for example, has observed that:

"Christianity, and nothing else, is the ultimate foundation of liberty, conscience, human rights, and democracy, the benchmarks of Western civilization. To this we have no other options. We continue to nourish ourselves from this source. Everything else is postmodern chatter."

Habermas is right, of course. The Enlightenment sought to ground the virtues of Western civilization in the exercise of human reason and wound up giving us the soul-crushing totalitarianisms of the 20th century. Modernity's rejection of God in general and Christianity in particular led to unprecedented horrors in China, Cambodia, Africa, Germany, the Soviet Union and elsewhere around the globe. One hundred million people were murdered in the name of reason, science, and state atheism. In the attempt to deify man the 20th century wound up dehumanizing him and grinding him into the earth everywhere but in those cultures which remained under the sway of a vibrant Christianity.

Jesus taught that truth makes us free. It will liberate us from superstition and the sort of assumptions that enchain men rather than free them. The problem with the Arab world is that they are in thrall to a worldview that locks its adherents in the chains of a mental dungeon rather than freeing them to fluorish.

RLC