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Stock market may not rally on war | |||
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By DAVID MOON, Moon Capital Management Last week, I made fun of CNBC's Times Square studio, noting that it is not nearly as significant as it appears on television. This week, however, I want to congratulate CNBC for one of the most insightful phrases I have seen or heard from a financial journalist in a long time. Tuesday afternoon, after a topsy-turvy day in which the stock market vacillated back and forth between positive and negative territory, a CNBC announcer made a passing reference to 'the most anticipated stock rally of all time.' Drawing on Sadaam Hussein's 1990 comment, he might have called it the 'mother of all anticipated stock market rallies.' Many investors are convinced military action in Iraq will spark a stock price recovery. I am afraid a watched pot never boils. The stock market is not like a gas grill, easily turned on and off. Every day I hear comments from people waiting for someone to ignite the stock market, based on the outcome of actions in Iraq. Some investors seem to favor military action in Iraq as the cure for some sort of financial, economic or investment ills. 'Let's kick some butt so we can get back to making some money!' But war is not some male bastion where Neanderthals walk around eating turkey legs the size of dinosaur bones. Nor is it a game where success is measured by the number of conference titles or consecutive defeats over an adversary. Regardless of the presence or absence of a direct connection between Iraq and Al-Queda, the terrorists who attacked our country on September 11 made a grave mistake. It was a mistake for which many of their comrades have already paid with their lives and liberty. They struck at the king and didn't kill him. (I can already anticipate the 'arrogant American' letters and emails.) In 1991, we made a similar mistake by leaving in power a ruthless killer who later congratulated the September 11 highjackers, calling them heroes and saints in the eyes of God. This is the same killer who, when offended by someone's actions, stuffs 'guilty' men into giant commercial plastic shredders. The fortunate victims are fed head-first and die instantly. Others scream in pain as first their feet and legs, then the remainder of their torso is shredded. Two weeks ago, I stood on a New York sidewalk, next to the Trinity Church graveyard, looking into what was the World Trade Center. I can only describe the site as a giant, complex hole. A hole where once stood two 110-story buildings and several smaller ones. I looked around and the largest building in the vicinity appeared no taller than 30 or 40 stories. I tried to imagine where the tops of the towers once peaked. Then I imagined a clear September morning with people jumping from that height. When those people finally hit the ground ' perhaps on the sidewalk where I was standing ' they were traveling up to 250 feet per second ' or somewhere between 125 and 150 miles per hour. To my left was a homemade memorial constructed from two beams recovered from the wreckage, welded into the western symbol of sacrifice ' a cross. Below the cross was a giant hand painted banner. Was the red ink on the sign intentionally the color of blood, or was that a coincidence? The banner read 'Never Forget.' I wonder how different this site would look if those planes contained a nuclear device. Whether you support our actions in Iraq or are disgusted by them, they have nothing to do with the stock market or the economy. Using historical data, one can support almost any conclusion about the correlation between stock prices and war. Trying (or hoping) to profit from it is, at best, a 50/50 gamble. We will never know the total financial impact of the current geopolitical environment. And while we can measure the direct financial costs of our military actions, we can never know the unknown costs of what we might not do. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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