I should really re-name the site ConsensusHour.com because that’s exactly what I managed to do with my post on Thursday morning after the terrorist attacks. It goes to show that markets discount information surprisingly quickly – all of my points were correct – for about an hour. Then the markets turned and never looked back. None of the traditional safe havens such as gold or treasury bonds had big rallies. And the swiftness of the equity advance was quite stunning. I will go back and review my assumptions for the markets this week.
In the meantime, from the strong reaction, here’s what I think the market’s have discounted, from indispensable George Friedman of Stratfor via Barron’s –
These days, crude, low-tech operations like the London bombings seem to be the only kind of operations al Qaeda is capable of mounting, says Friedman. The London attack involve none of the meticulous planning or sophistication of 9/11. "Al Qaeda is an organization that has lost its training camps and ability to easily communicate, transfer money and transport equipment, " Friedman says. "It’s hard to run an international terrorist organization when the leaders are bouncing from cave to cave."
Al Qaeda isn’t capable of mounting an attack involving weapons of mass destruction, Friedman says. Second, the organization would hit only cities that have symbolic power and resonate in the Islamic world, such as New York (financial power), Washington (government), Los Angles (unholy Hollywood) and maybe Dallas (Bush Country and the setting for the TV series Dallas, which is wildly popular in the Middle East)