Global equities stumbled like drunken sailors last week. The worst five-day decline since August. The culprits? Chinese economic weakness. And the prospective December conclusion to the Fed's ZIRP policy.
Yet, finance and economics took a back seat as of Friday afternoon. When events in Paris reminded a global audience of life's delicacy.
Parisians had started their weekends. Large crowds lined the city's major thoroughfares. Packing restaurants. Cafes. And fans filled the Stade de France. Where their team was playing world champion Germany.
Amid these weekend-night activities in the City of Lights, Islamic fundamentalists conducted coordinated terror attacks resulting in 129 deaths and the injury of well over 300. Seven of the eight terrorists were killed. One remains on the lamb.
ISIS immediately took credit for the barbarity. After which French President Francois Holland declared the terrorist attacks "an act of war." By Sunday, French fighter jets were bombing operational targets in the defacto ISIS capital of Raqqa, Syria. As President Holland vowed to change the French constitution to permit his nation to better defend itself, and bring the war to ISIS.
Later, coalition jets attacked tanker trucks storing oil from Iraq's fields. Attempting to cut off the terror group's major source of funding.
The world mourns for those killed and injured in Friday's horrific events. And the western world was reminded that dedicated fanatics can, on occasion, inflict massive destruction on unsuspecting targets the world over. As will continue to be the case until dedicated Western and Middle Eastern leadership confront and defeat Islamic extremism wherever it exists. Till then, it will continue to represent a scourge to all developed societies.
Continuously, western leaders -- channeling Neville Chamberlain -- continue to downplay the threat of Islamic extremism. Only to have real-world events reveal their lack of prescience, time and again.
On September 6, 2012, President Obama boasted at the Democratic National Convention that "al-Qaeda is on the path to defeat." Five days following, on the anniversary of 9/11, al-Qaeda-linked terrorists attacked two U.S. diplomatic compounds in Benghazi, Libya. Killing the U.S. ambassador and three other Americans.
On January 7, 2014, President Obama dismissed ISIS as the "JV" team in an interview with the New Yorker. Adding that the rise of the Islamic State was not "a direct threat to us or something that we have to wade into." Later that month, ISIS began its march on Iraq. Declared its caliphate. Began burning people alive. And beheading Americans.
And last Thursday, President Obama told George Stephanopoulos of ABC News, "I don't think [the Islamic State is] gaining strength" and vowing that "we have contained them." The next day, Islamic State launched the worst attack on Paris since World War II. Killing at least 129 people. Wounding more than 350.
Meanwhile, the U.S. continues to wage the most tepid military campaign in its history. One in which 75 percent of the air sorties drop no bombs. This, while ISIS has grown into the most powerful terrorist network in history. Controlling territory the size of the United Kingdom. And raking in $1.2 billion in 2014 from taxation, extortion and money stolen from Iraqi banks and oil fields.
Repeatedly, Islamic State's leader, Abu Bakr al-Baghdadi has warned that ISIS is coming after the U.S. Having declared in an audio address last year, "Our last message is to the Americans: Soon we will be in direct confrontation, and the sons of Islam have prepared for such a day. So watch, for we are with you, watching."
And following the Paris attacks, ISIS released a new video in which it warned, "By God, as we struck France in the center of its abode in Paris, then we swear that we will strike America at its center in Washington."
Worst of all, it's not as if these fanatics had been quiet until last week. In fact, 2015 has featured one extremist atrocity after another. All perpetrated by Islamic fanatics.
2,000 Nigerians were brutally murdered over a couple days in January.
91 Cameroonians were killed in a single day in February.
137 Yemenis were killed in a single day in March.
147 Kenyan students were brutally murdered in a single day in April.
146 Syrians were murdered in a single day in June.
162 Iraqis were killed in a single day in July.
126 Iraqis were murdered over a three day span in August.
145 Nigerians were killed in a single day in September.
219 Russians and 102 Turkish were murdered in October.
43 Beirutians were killed only one day prior to the attacks in Paris.
And, of course, 132 Parisians were ruthlessly murdered last Friday.
How much more conviction need these fanatics exhibit? How much clearer need they be? How many lives must we mourn? How far must these extremists go before American leadership takes them seriously. The answer to those pleas continues to be resoundingly absent.
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Macroeconomically, concerns have grown following a slowdown in U.S. port traffic. The Wall Street Journal reported that, for the first time in a decade, imports fell in September and October at each of the three busiest U.S. ports. Worse, the slowdown has occurred during peak shipping season.
Disagreement exists among economists over the cause and implications of the shipping slowdown. Could be the result of the large inventory buildup earlier this year. Could be increasing concerns over weakening consumer demand. We believe it's both.
Despite rising employment, wage improvements and lower gas prices, American consumers are defying historical trends by spending less, saving more, and paying down debt. When they do spend, a higher percentage is being allocated to restaurants, bars and travel. As opposed to buying "stuff."
Retail earnings bear this out. As Walmart, Nordstrom, JC Penney and Macy's have reported weak earnings. Moreover, an underlying trend may be at hand.
Much of the recent consumer spending has occurred online. A realm in which the traditional brick-and-mortar retailers continue to play catch-up. With total U.S. e-commerce sales outpacing those at retail locations, having grown 14.1 percent versus 3.7 percent last quarter. Worse, Q2 non-Amazon e-commerce sales grew only 4.5 percent. Even as traditional retailers have spent more capital in attempts to innovate online offerings.
Earnings and share performance underscore the dynamic. With Amazon shares up 45 percent since mid-May while Macy's have sunk by an equal amount. Such trends could be temporary. Though we doubt it. So we'll be closely monitoring this story moving forward.
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The race for the White House continues. Democrats held their second debate Saturday night. When most Americans are out with friends and family. Those at home are more likely watching movies or college football. Not a political debate. The DNC has buried the debates. Holding them when most Americans will not tune in. In fact, the next one takes place on the Saturday before Christmas. So get your shopping done early. Lest you not be able to watch the Democratic debate immediately before Christmas.
Ya think that Debbie Wasserman Schultz, head of the Democratic National Committee, ever really intended for the American electorate to gain proper perspective on any candidate beyond Hillary? Sure doesn't appear so. Which only underscores the thesis that this nation does not benefit by its current political duopoly. Run by the two largest publicly-funded corporations in the world: the DNC and the GOP.
That said, Bernie Sanders landed an endorsement from the American Postal Workers Union. Based upon his record as "a true champion" for workers. Of course, the U.S. Postal Service lost $6 billion in 2014, while hemorrhaging capital for 24 of the previous 26 quarters. Making the decision to support a socialist akin to a child's desire to visit the candy store.
Major markets finished down last week. The DJIA lost 3.71%, the S&P 500 fell 3.63%, and the Nasdaq lost 4.26%. Small cap stocks dropped 4.43%. And the 10-year Treasury bond yield fell 5 basis points to 2.28%. Gold lost $7.49 per ounce, or -0.69%.