I am blown away by the power of the Internet. I do not believe I ever quite understood it until this weekend. I have been
“True, This! —glued to Google’s real-time twitter and news feeds of events unfolding on the ground in Libya. There are no reporters, not a single news station has been able to deliver reliable information. The Internet is not just a funnel to the world’s database, but it the driving force behind the next evolution of mankind. It is a weapon, one that we have never seen wielded with such precision as we have these past few weeks. “The pen is mightier than the sword” is a metonymic adage coined by English author Edward Bulwer-Lytton in 1839 for his play Richelieu; Or the Conspiracy.
Beneath the rule of men entirely great,
The pen is mightier than the sword. Behold
The arch-enchanters wand! — Itself a nothing! —
But-taking sorcery from the master-hand
To paralyze the Cæsars, and to strike
The loud earth breathless! — Take away the sword
— States can be saved without it!
But it is the Internet that has fulfilled this prophecy. The pen has become a metaphor for the power of communication.
The sword empowered one man over another. The pen empowered single men over the masses. The Internet has empowered us all. No voice unheard. This is evolution. Blood is being spilled this weekend in the name of evolution as much as revolution. Revolution will bring temporary change. New leaders will come and go. But the idea of change, the method by which change occurs has now evolved forever. The sword has proven worthless as dictatorships fall despite there overwhelming military power. They cannot turn to their generals who look to their own children’s eyes and wonder about the future. They turn off the one last hope of their people, the Internet. But to the people, the Internet is no longer a privilege. It is a human right. I breathe, I eat, I twitter. Knowledge is synonymous with Google. To socialize is to Face book, and to communicate is to email. Our language is evolving, our very nature has changed forever. CNBC with a lack of real coverage in Libya has started reporting on tweets. I just heard them post their viewers on a tweet asking about Apache helicopters circling protestors.
Short term, I believe the stock market will retrace some of its aggressive gains of the last month. Perhaps the S&P will even retest the 1300 level to determine the commitment of the buyers in the most recent Bull Run as the world has so rapidly changed around them, without even the slightest of pullbacks. Oil, as I predicted just keeps going higher, and why not? The Middle East is in turmoil. There is a very real probability that it spreads to Saudi Arabia. The effects of regime change in other oil producing Arab countries, on all commodity prices let alone oil, would be unprecedented. Gold would sky rocket, as the possibility that political revolt could spread to Latin America or even china, would rattle world currency markets. The Bull who plays down these possibilities argues that these other countries have the wealth to control the political challenges. They can pay for peace. Mubarak alone had 70 billion tucked away. Imagine what the rest of his regime has hidden throughout the complex web of interconnected global banks. Could he have paid for peace too? The Bull Run, for the S&P that began in Jan of 09 is over for now. It will take real clarity and an understanding of the future impact on countries yet affected, before the market can resume its unfettered run. Global corporations can no longer asses the value of the deals they cut with dictators, tyrants and princes. Eventually the Libyan crisis will end. Many will die. Questions of how a new Libya and Egypt fit into the geopolitical landscape will pail by comparison to the debates over the future of Iran and China. Worse will be the affect on the world political scene, of the M.A.S.S., the minimising of America’s Superpower Status. The silence from the U.S. administration can no longer be tolerated. Israel stands more alone today in the Middle East, than perhaps at any other time in its history. If the West does not take an active role in the geopolitical changes, there is a chance that all the gains we have made in the war on terror could be lost.So what does this mean for the financial markets? Clearly in the long run, this evolutionary period will be remembered as one of the most important periods of the century. In the same way the decades after World War 2 reshaped the human condition. But we are in a vacuum of information. The Internet is the Nuclear weapon of our generation. We do not truly know how it will affect the world in the short term. What impact the rapid change will bring. I do not mean to compare the two on an actionable level. Clearly a nuclear blast is not the same thing as an Internet blast. But rather let us analyse it from an existential standpoint. The mere existence of the nuclear bomb, though never used, has altered the powers structure of the world. Harry Truman said, “The atom bomb was no “great decision.” It was merely another powerful weapon in the arsenal of righteousness. The Internet’s power, as a catalyst for change has barely been discovered. Obama may owe his presidential seat to the force of the Internet. The Egyptians owe their freedom to it. When the Israelites escaped the tyranny of the pharaoh in Egypt they required a miracle from G-d. Then again, no one has ever been able to tell me exactly who created the Internet. It turned out not to be Al Gore. Though he probably wouldn’t mind the comparison. Perhaps the mere existence of a phenomenon that can topple governments in weeks is a miracle. Perhaps it is more powerful than a nuclear bomb. And perhaps it will take a long time to digest what impact this newfound power will have on the world, let alone the financial markets.
While we have just finished corporate earrings’ season and economic numbers while not powerful indicators have shown
a steady recovery. It is the kind of recovery that can be thrown rapidly off course by sky rocketing oil prices. I have been raising a red flag on inflation for some time. The event overseas will accelerate this process. We stand on the verge of government shutdowns and municipality insolvencies. Pouring more leveraged money into this market is foolhardy. There is only one logical trade for Tuesday. Take risk off the table, and short the market if you have free hands. I am reasonably short. While I am looking for a pull back, I will use any bounce in the market as an opportunity to further short the market. I believe we are at a significantly overbought level, ignorant of the realities that have been swirling around us