Perhaps today’s biggest question is whether or not Iran is a rational actor.  To date the regime’s actions do not match their words.  While I will not opine about the killing of Soleimani, the rhetoric from some in the US as well as in Iran is intense.

Some are ardently writing last week’s events are equivalent to the 1914 assassination of Arch Duke Ferdinand.  I believe Iran will continue the proverbial proxy war with perhaps threatening oil shipments in the narrow straight between Saudi Arabia and Yemen.  Iranian proxies hold the islands in this straight thus limiting any response time.  Accordingly US warships generally avoid this area.

Perhaps the only certainty to write is if there is a demonstrated attempt to curtail shipping in this vital but less talked about area, the US will respond accordingly.

Changing topics, was Soleimani’s killing really a warning to North Korea’s Kim?  I find it interesting Kim’s rhetoric has all but disappeared.

Foreign policy is fascinating, where true motives are often disguised.  The two truest axioms of foreign policy are to support the least bad actor and the use of brinkmanship.  Brinkmanship is all art and no science for at some juncture actions do have to support words other than it loses its effectiveness.

As all know, the cornerstone of American foreign policy is never to avow first use of nuclear weapons, a cornerstone that Candidate Trump violated during the second 2016 presidential debate, the first candidate in history to do so.  Contrary to popular opinion it was this threat as to why the Cuban missile and the Berlin blockade ended in the manner that they did.

While I am not suggesting a nuclear conflagration is remotely at hand, I am only writing that at some juncture words have to become reality to ensure the future effectiveness of words.

Commenting about yesterday’s market action, led by the mega size technologies, equities ended about 0.30% higher after opening about 1% lower.

Last night the foreign markets were up.  London was up 0.17%, Paris up 0.39% and Frankfurt up 0.91% .  China was up 0.69%, Japan up 1.60% and Hang Sang up 0.34%.

The Dow should open nervously flat under the possible guise that Iran is all bluster.  The 10-year is up 4/32 to yield 1.80%.


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.