Now, just when we think the market is getting jittery about terrorism fears again ahead of the Olympics and the Republican convention, we find a more convincing bottom (albeit lower than July's). So NOW, we have been in rally mode for a whole two weeks BEFORE the Republican convention. Granted that the major indices have only clawed there way back to levels last seen during the "Demo rally," but I find the difference in pre-convention behavior more than just curious, interesting, or striking. I will go so far as to say that the market has placed its vote of confidence in the Repubs. At the very least, the market seems to believe that the Repub's credentials and "expertise" in fighting terrorism is more reassuring than that of the Demos. The more cynical (twisted, take your pick of adjectives) might instead suggest that the market cares MORE about the potential of terrorism during the Demo's convention, but you sure would not get ME saying something like that. Regardless, we should take a pause and note that last week as a story in Russia unfolded that two jetliners were downed by Chechen bombs, the U.S. market hardly blinked. The market reacted negatively (albeit briefly) to the Madrid bombing, but not this one? What does that say? Certainly, Americans are not fearing retribution from Chechen rebels, but if the Russians cannot protect their own jetliners does that say anything about our own safety? I sure hope not. We also were confronted with a potential reconnaissance mission in Maryland by an alleged Hamas member. He and his family were caught filming a bridge under suspicious circumstances. The story is still unfolding, but yet again the market hardly blinked. Yet, did not the market get wobbly after Ridge and company hiked up the alert levels again after discovering that several financial institutions had been cased by al-Qaida several years ago?!? Perhaps the market cares more about its own than a lonely bridge "way out" in Maryland. However any of this turns out, I find the market's blasé attitude last week about it all more evidence that the market only cares about these myriad terrorism threats when it feels like caring. They are easy excuses for explaining away market sell-offs, but by themselves will rarely be enough to explain much (recall that the market was tanking fast BEFORE 9/11 and just a few short weeks after it, the market soared quick, fast, and in a hurry).

All in all, I think our worries and concerns about terrorism are much too short-sighted. While we are worrying about the color of the week or month for the terror alert, some of these terrorists are counting grudges all the way back to the Crusades of the early centuries of the second millennium! We have nuclear weapons slowly but surely spreading their way across the globe. It seems to me our "threat matrix" needs to extend out ten, twenty, even 100 years.

Ó DrDuru, 2004