Happy New Years! 2015 began with a surge in volatility. Leaving the S&P 500 trend line looking like the EKG of a critical care patient. Yet, the year is young. Let's not get distracted.
The whiplash was the result of an array of issues bedeviling investors. The collapse of energy prices. Ghosts of the Fed's first rate hike. Looming Q4 earnings. European political and economic trauma. And an election in Greece (yawn).
From the January 2 through Tuesday, the S&P 500 declined 3.75 percent. Followed by two excellent days. Then a Friday from hell.
Much of the wreckage came from collective selling by fund managers exiting that which worked last year. Utilities. Consumer discretionary. And turning their attention to those asset classes that could spark as the economy continues heating up. Home builders. Real estate. Semiconductors. Tech equipment and biotech.

Jihad Watch
Tragedy, and the perspective that comes with it, befell Paris last Wednesday. Two brothers, both Muslim radicals, attacked the offices of a French satirical magazine. What followed was France's worst terrorist attack in 50 years. 12 were killed, many more were injured. The ensuing days saw another five killed as another terrorist killed five more out of solidarity.
Critics have stated that the magazine's controversial material was bound to offend the wrong group. Yet, that misses the point. As crude and offensive as the "satirical" material may (or may not) have been, such is the rubric of a free society. It would be unjust for a free world to permit such barbarism in the land of Lafayette, de Tocqueville and Montesquieu.
This last month has seen a dictator in North Korea prevent the release of a satirical American film. Has seen fundamentalists kill 17 innocents in an attack against a French media outlet. Leaving the west, and its Middle Eastern allies, at a crossroads. Can such acts be permitted without a perception of acceptance? An unspoken lack of resolve?
Counter intuitively, I've heard no better a sentiment than that expressed by Bill Maher. Necessarily traveling beyond the frontiers of political correctness to criticize Islam itself. In the name of liberalism no less. During an interview on ABC's Jimmy Kimmel Live on the day of the attack, Maher explained, "I'm a proud liberal ... It's not my fault that the part of the world that is most against liberal principles is the Muslim part of the world ... We have to stop saying, 'Well, we should not insult a great religion' ... we should insult them."
Two days later on his HBO show Real Time, he was even more castigating of Islam: "When there's this many bad apples, there's something wrong with the orchard."
The next few weeks will speak volumes. Either the west and its Middle Eastern allies draw a line in sand, or they permit these acts of savagery to stand. And yet, even after I write as much, I cannot help but wonder if we're vilifying the wrong facet of society. Perhaps we need remember that the enemy is not the Middle East, nor Judaism, nor Hinduism nor Christianity. The enemy is the idea that an entire facet of society can be evil. The enemy is denigrating such groups into submission.
Did the Australians get it right? After having been recently attacked, they embraced their Muslim community. Created an "I'll Ride with You" campaign (here) to show their unity with the majority of everyday Muslims who disdain the violence perpetrated by the fundamentalists. Just as we do.
If human beings become reactionary, cowering in fear and lashing out in hate, we all lose. If governments use tragedies to degrade civil liberties, we all lose. If society uses such tragedies to permit bigotry and hatred, we all lose. If we leverage such travesties as spring boards for war, we all lose. And the attackers, representing all forms of fundamentalist hatred, win.
That said, this is hardly the time for the U.S. government to loosen its defensive posture. At a time when Islamic radicals appear to be dialing up their aggression overseas. And are certainly eyeing high profile American targets. Unfortunately, the current administration appears to be doing exactly that.
White House officials won't blame recent attacks on Muslim radicals. Preferring to simply call them radicals. Score another for political correctness. Yet, counter-terrorism and security consultant Patrick Poole wrote a disturbing report that reveals the administration's purge of U.S. counter-terrorism training. As if it was no longer required. Perhaps the administration's strategy is to ignore the problem until it goes away? Blinding our domestic security forces at a time when Muslim radicals appear to be playing the short and the long game alludes to a dangerous lack of vision.
Check out this article on Poole's findings.
These are weighty issues. Not to be resolved quickly. Yet, one cannot but hope that there is visionary western leadership, somewhere, with the strategic wherewithal and resolve to craft and conduct an effective, forward looking strategy. Perhaps a tact we've not considered. Otherwise, I fear last week's tragedy represents a beginning, as opposed to an end.
O-H-I-O
In October, a green freshman quarterback found the game too big for him as Virginia Tech clobbered The Ohio State Buckeyes in The Horseshoe. College football fans denigrated Ohio State. And the Big 10. Yet, three months later, as improbable as it may be, the Big 10 capped off a successful bowl season by having one of its own crowned champion in the inaugural CFB Championship. And how about the route taken to get there? Right through the heart of the SEC.
Truly a lesson in teamwork. Persistence. And the power of believing in yourself. Urban Meyer delivered a maestro's performance. And the Buckeyes bring back an abundance of young talent. Who will start at QB next year? TJ Barrett? Cardale Jones? Braxton Miller? Just the conundrum a coach hopes for.
Still, less than 12 hours after the Buckeye victory, football pundits were urging Cardale Jones to declare for the NFL draft. Really? Back off, slick. Let the kid marinate in the moment. He won a championship. Was embraced by Lebron. Don't force him to look beyond the moment. Let him stew in nirvana!
Occasionally, a nation need be reminded that there's more to Ohio than picking presidents and dispensing sage financial advice. Thanks for the memories. And Go Bucks.
 Swiss Logic
Cato Institute's Dan Mitchell recently wrote a report entitled "Landslide Vote Against Single-Payer Healthcare Confirms That Switzerland is an Outpost of Rationality in a Statist Continent." Mitchell explains why he is pro-Switzerland. And the news that voters approved a spending cap that should serve as a model for all fiscally prudent nations. Which does not include the U.S.
An American Sports Icon
On a more gentile topic, the NFL playoffs continued this weekend. More poignantly, this weekend represented the 46th anniversary of Joe Namath's unexpected triumph in Super Bowl III. That groundbreaking event heralded a new day for professional athletes, gave a boost to New York, and created an iconic American sports legend.
The Good
Auto sales remained strong at a 16.8 million annual rate... Consumer confidence via the Conference Board hit a new high... Dividends rose 10% in Q4. Initial jobless claims held below 300k, and employment net gains beat expectations...
The Bad
ISM non-manufacturing missed expectations with a reading of 56.2... Factory orders declined by 0.7%, a bit more than expected... Consumer companies lowered earnings guidance despite lower oil prices... Surveys show that the government remains the largest concern among Americans... Hourly earnings accrued the biggest decline in eight years... Labor force participation declined (again) to 62.7 percent, the lowest level in decades...
The Ugly
Extremist terrorism. Again. While the market's reaction seemed muted, the world's reaction has not been.
How OPEC Weaponized the Price of Oil
OPEC's four Middle Eastern member nations are deliberately pushing down the global price of oil in order to cut U.S. shale production. Much to the detriment of their present-day revenues, as they stand to lose $257B this year. But, will the strategy work? Story here.
BRICs Could Be Cut to ICs if They Don't Shape up
Russia and Brazil have seen their economies tumble badly. Should they not get their acts together soon, the consequences could be dynamic and long term. Article.
Hedge Funds' Annus Horribilis
2014 was the worst year for hedge funds. Low volatility and index-tracking equities blocked most funds from providing any real value. More here.
The Biggest Problem in America? Its Government
The Gallup polling organization regularly takes the pulse of the American public. A recent survey shows a surprising shift in perceptions. Americans no longer perceive their biggest problem stemming from the economy, terrorism or healthcare. We worry most about our ineffective government. Story.
Morgan Stanley Breach: Advisor Downloaded Client Data from Across the Country
One hires an advisor to assist in achieving one's financial objectives. Not to compromise them. This is especially scary since one rogue advisor threatened all of the mega-firms' clientele... Article here.
Why Washington and Wall Street are Better off Living Apart
Check out this video featuring a talk by Forbes' John Tamny at the Future of Freedom Foundation. Very compelling... here.
China's Financial System in Jeopardy as Deflation Deepens
China's faces mounting risk of a financial crisis as growth sputters and deflation mounts. Potentially triggering a wave a defaults. Caveat Emptor. Article here.
Harvard's Hypocrites and the Insanity of Statism
"Do as I say, not as I do." This, the seeming mantra of Harvard professors who supported the new health care laws but now lament and rail against having to pay more for their health care. What, everyone knew that HC costs would rise except Harvard's professors? Story.
Invested in Oil? Pain Now, but Profits Will Come
Be greedy when others are fearful. Fearful when others are greedy. That's an aphorism, Jeb. One worth following. And nowhere might this be more truthful than in the energy sector, which will make a lot of money for those with the stones to invest before the turnaround. Hungry for more wisdom? Read this.
Weekly Results
Major markets finished lower last week. The DJIA fell 0.54%, the S&P 500 dropped 0.65%, and the Nasdaq declined 0.48%.  Small cap stocks fell 1.10%.  And the 10-year Treasury bond yield lost 1 basis points to 1.96%. Gold gained $35.40 per ounce, or 2.96%.