OOPS! Looks like we're both wrong. Reuters has announced that the Saddam news will cause the US and world markets to rally on. Darn. {g}
But seriously, see my "augienote" in bold, below.
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Stocks to Rally on Saddam's Capture
Sunday December 14, 1:14 pm ET
By Bill Rigby
NEW YORK (Reuters) - Stocks look ready to rally when the market opens on Monday after the capture of former Iraqi President Saddam Hussein.
In fact, analysts believe Saddam's capture will give a general boost to equities around the globe, as well as to the U.S. dollar and U.S. Treasuries.
"Initially, there's little doubt that it's a boost for the market," said Milton Ezrati, senior economic strategist at fund manager Lord Abbett & Co. "A major uncertainty has been removed, and it also gives hope that this situation, on a fundamental basis, will improve."
"In the end, the market is going to look at the financial situation, and that will depend on the United States' ability to transfer power and withdraw and relieve the financial strain of this whole exercise."
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augienote: the Saddam capture is wonderful news to anyone who cares enough about human rights to want a psychopathic slaughterer and torturer of children brought to justice. BUT, his capture will do very little, at least in the short to medium term, to increase "the United States' ability to transfer power and withdraw and relieve the financial strain of this whole exercise." We will be in Iraq for a long time, and it will cost a lot more money, and a lot more lives.
So, as far as removing medium to long-term uncertainty -- from a market perspective -- his capture does very little. But, just because it doesn't really remove much uncertainty does not mean that da boyz can't play it that way for a while, at least.
Thinking like a criminal...
If I were a specialist, MM, or even hedgies, I would be thinking to myself,
Hmmm... Self, how about we use the capture of Saddam as an excuse to play whack-a-mole for a while on the shorts, then load our own short positions, then announce that, gee, the capture of Saddam doesn't really mean that much to the market, because the US will still be in Iraq for a long time and it will still cost a lot more money and a lot more lives? Then we can take things down for a while, unload our shorts at a nice profit, then reload at wholesale to sell to the dummies, um ... er ... I mean "public" ... at retail.
end augienote
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John Davidson, president of PartnerRe Asset Management, believes Saddam's capture probably will give the blue-chip Dow Jones industrial average(^DJI - News) a reason to rally above last week's climb over the psychologically sensitive 10,000 mark.
But he questioned how long this lift may last.
"We might see a pop," Davidson told Reuters. "Stocks are pretty fully valued, so whether this results in a sustainable rally from here is in question.
"It might put a temporary pause on the rise of the euro," he said, noting that capture of the former Iraqi leader should lower the risk of attacks against the United States, which had been weighing heavily on the dollar.
"There is a risk premium in there for terrorism against the U.S. and this takes a little of that out," Davidson said.
Earlier, in London, Hilary Cook of Barclays Stockbrokers predicted Saddam's capture will help equities, especially in the U.S. and UK markets.
"It's broadly positive for equity markets," said Cook, director of investment strategy at Barclays Stockbrokers.
"U.S. and UK markets could have the most to gain because war is expensive," Cook said, referring to investor concerns that occupying American and British forces might get bogged down by a worsening security situation in Iraq after Saddam Hussein's regime was toppled this spring.
TEMPERING HOPE WITH CAUTION
Spirits also should be lifted by the Dow holding onto its five-figure finish at Friday's close and the prospect of closing out the market's first winning year since 1999.
But some may think it's time to sell as valuations peak.
"I would love to see some consolidation in the market," said Sandy Lincoln of Wayne Hummer Asset Management in Chicago, who manages about $1.2 billion of assets for wealthy individuals and institutions. "It's a perverse wish -- but some of these valuations, particularly on the tech side, seem hard to fathom."
Stocks like the world's biggest chip maker Intel Corp. (NasdaqNM:INTC - News) and Internet high-flyers Yahoo Inc. (NasdaqNM:YHOO - News) and eBay Inc. (NasdaqNM:EBAY - News) have led the market higher over the past nine months or so. But some investors worry that stock-price growth is getting ahead of profit growth, like in the ill-fated tech bubble of 2000.
This week could be the crunch time to decide whether to sell before the end of the tax year, or hang on in the hope of more gains.
"Valuing the market, based on historical reported earnings, makes it look very expensive," said Gordon Fowler, chief investment officer of Glenmede Trust Co. in his weekly outlook. "Valuing it, based on projected operating earnings, makes it look reasonably priced.
"The truth lies somewhere in between."
More huge gains may not follow like the first time the Dow broke 10,000. Back in late March 1999, when the Dow first held above 10,000, the index took barely two months to add another 1,000 points and top 11,000.
This time around, investors are a bit more cautious after weathering more than three years of a bear market.
Few seem to expect the Dow to run up to 11,000 again any time soon. But there's no sign investors are ready to bail out of stocks, either.
"There's a lot of momentum in this market," Lincoln said. "Clients have been wanting to get on this bandwagon, and really reluctant to get off it."
Last week, the Dow climbed above the 10,000 mark and the Standard & Poor's 500 hit an 18-month high, thanks to broadly good economic signs and the U.S. Federal Reserve commenting that inflation is not a problem, suggesting that it won't raise rates for some time to come.
For the week, the Dow Jones industrial average rose 1.82 percent to 10,042.16, its highest closing level since May 24, 2002. The broader Standard & Poor's 500 Index (CBOE:^SPX - News) gained 1.19 percent for the week, to 1,074.14, its highest close since May 28, 2002.
The technology-focused Nasdaq Composite Index (NasdaqSC:^IXIC - News) finished the week up 0.57 percent at 1,949, below the 2,000 level it broke through briefly the previous week.
For the year, the Dow is now up 20 percent, the S&P 500 is up 22 percent, and the Nasdaq is up 46 percent.
This week, investors will focus on Tuesday's Consumer Price Index, due at 8:30 a.m. (1330 GMT), for the latest read on inflation. Economists expect a very modest 0.1 percent rise for November, according to a Reuters poll.
Among earnings reports this week are tech bellwether Oracle Corp. (NasdaqNM:ORCL - News) on Monday and Wall Street heavyweights Goldman Sachs (NYSE:GS - News) and Morgan Stanley (NYSE:MWD - News) on Thursday.
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