Did Iran back down?  Did brinkmanship win again?  Only history will answer this question.

Perhaps the only certainty to write is the media/blogosphere is filled with official sounding but completely unsubstantiated reports.  This is dangerous for no one knows the true reality.

It is often written those who control the media can greatly influence and perhaps control opinions and society.  It is largely agreed the Third Reich’s Josef Goebbels was the greatest master ever of propaganda. 

I will argue the massive proliferation of the blogosphere is the greatest global destabilizer.  There is no attribution to any comments and the ability to validate one’s opinions has never been easier.  As stated, the issue at hand is truth could be largely lacking.

What does the above have to do with the markets?  Everything.  An early Wednesday morning Bloomberg headline read “Algos Seized on Iran Headlines Focusing on Two Words…Attack and Iran.”  The volatility was intense, markets are now back to pre-Iranian crisis levels of a week ago and I will now write the rising complacency is as intense as Tuesday night’s and the preceding week’s volatility.

It is generally accepted indexing is dominating market performance.  Most other strategies have failed including the very popular “qaunt strategies” that take advantage of pricing discrepancies between asset classes aiming to spread risk equally across all asset spectrums.  Legendary investor Warren Buffet is also struggling, lagging the indices by over 66%.

Passive investing will also fail but the question is as to when.  Unfortunately the third law of physics also applies to the markets where for every action there is an opposite and equal and opposite reaction.

Commenting briefly on yesterday’s market action, equities advanced on Trump’s statements.  Treasuries ended significantly lower in price, the result of Trump’s statements and a “very ugly ten year bond auction” where demand was more than one standard deviation below the one year average according to Bloomberg.

What will happen today?

Last night the foreign markets were up.  London was up 0.52%, Paris up 0.35%, and Frankfurt up 1.21%.  China was up 0.91%,  Japan up 1.21% and Hang Sang up 1.68%.

The Dow should open nominally higher as it appeared all have taken a step back from a deeper military conflict in the Middle East. The 10-year is unchanged at 1.88%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.