Trying to account for two days of hard selling in U.S. markets since Friday, I’ve focused mainly on the trivial: the Fed’s increasingly embarrassing failure to manage our expectations, the dismal trend in U.S. corporate earnings, the election campaign from hell and sundry other factors that have arguably had little impact on the bull market. But if the bull is in its death throes and complacency is about to give birth to panic, there might be another reason for it: an outbreak of geopolitical mayhem that has been threatening to inundate the world for so long that investors long ago ceased losing sleep over it.
An Epic Realignment Looms
One potential catalyst, drastically underplayed by the mainstream media so far, is the growing likelihood that the U.S. is about to get kicked out of the Philippines. If President Duterte, the guy who recently called Obama ‘the son of a whore’, is about to re-align his country with Russian and China as seems likely, this will have dire implications for U.S. allies in the region, particularly Japan, South Korea and Australia. It would be such a blow to what remains of U.S. prestige and international influence under Obama that it could conceivably embolden Iran to try something dangerously provocative in the Persian Gulf. In a blink, oil would be on its way to $100, the world would inch closer to war, and the Dow Industrials would start to look incredibly stupid hovering near 18000. If all of this makes you feel like loading up on cheap put spreads just in case, there is little time to waste. We can share ideas in the Rick’s Picks chat room Wednesday, so be sure to drop by if you’re looking to strategize.