How Might Terrorism Affect The Stock Market?
by James Dines, editor
The Dines Letter
How horrible, fantastic, incredible it is that we should be digging trenches and trying on gas masks here because of a quarrel in a faraway country between people of whom we know nothing! Neville Chamberlain, Prime Minister of England, Sept. 27, 1938 (just before World War II)
King Dionysius was the fourth-century BC tyrant of Syracuse, the richest city in Sicily. Swathed in luxuries, in a spectacular palace, with rich clothing and jewelry, rare perfumes and spices and the best foods, he was nonetheless so insecure that he surrounded himself with court flatterers (adsentatores) to buoy his ego. Damocles was the court sycophant, constantly praising King Dionysius, and declaring how lucky and blessed he was. Once, the king offered to trade places with Damocles for a day, readily accepted by Damocles, who suddenly had all the riches and luxuries money could buy at the time. But Damocles inadvertently lifted his eyes toward the ceiling and saw a razor-sharp sword whose point almost touched his head and he stiffened, ashen faced, with trembling hands. Upon realizing that it was hanging by a single horsehair, pointed right between his eyes, he froze in place for fear that any sudden move could kill him. After Dionysius inquired why he had lost his appetite, Damocles asked if Dionysius saw the sword. Dionysius replied that of course he saw it, and that it was always hanging over his own head those who wish to be a leader must be willing to accept risks. Damocles, realizing that he had been mistaken, rejected riches and fame, and was glad to go back to his own humble home.
Asked what the most important factor was in future stock market action, one television respondent last week concluded that it was "future earnings." Well, fair enough, isn't that always the most important factor?
No. Amateurs know the rules, but seasoned professionals know the exceptions. Whatever earnings are to be, a terrorist Sword of Damocles hangs over every investor, whereby a single unanticipated terrorist event might take the bottom out of the stock market.
How many of you noticed that American negotiators didn't ask whether or not North Korea had a nuclear program? The press reported that, "We presented the evidence and they admitted it." In other words, Bush had known, as a fact, for some time, that North Korea had been playing with nukes. This set us back reflecting on Bush's "Axis of Evil" speech recently, fingering Iran, Iraq and North Korea. It seems fair to assume that Bush has hard evidence on all three, does it not? Then we thought back to 9/ 11, when the Taliban vociferously denied involvement while Bush spoke right past them, preparing for an invasion of Afghanistan, not arguing, not negotiating that is Bush's style. Accordingly, we cannot resist inferring that he has something really big on Saddam, providing sufficient cause for an invasion, but he is too much the tight-lipped Texas sheriff of the Jimmy Stewart school to be interested in offering lengthy proof, so we can only guess what it might be. or order online at www.dinesletter.com.
Considering the very urgency to attack Iraq, we suspect that Bush has gotten wind of Saddam slipping a weapon of mass destruction to terrorists to be used on us. Not merely ordinary explosives, obtainable locally, but probably a nuclear device, or a bacteriological weapon that would make an area uninhabitable for many, many years.
To be used where? Considering the recent explosions in Bali's idyllic Kuta Beach, and Moscow's theater, we cannot believe anywhere would be spared. Projecting this line of thinking further, what type of terrorism? Having plotted for over a year, chances are it would be spectacular, whatever it is to be: simultaneous explosions of numerous bridges and tunnels with vehicular bombs, a group of snipers spread out nationally, or a suitcase nuke. Where? In the U.S., New York and Washington DC must be high on their priority list, but the FBI has recently captured al-Qaeda photographs of American railroads. Not everybody has yet fully grasped that we are in a world war, 21st century style, the early stages of it.
In our last The Dines Letter (TDL 18 Oct. 02) we wrote "Avoid crowds, especially after nightfall," and only five days later a Moscow theater was invaded by Chechens, part of an 8-year old struggle with Russia, and suddenly the lives of over eight-hundred innocents were under mortal threat. After the death of at least 119 hostages, the Russian military bombed Chechnya in revenge, but it resulted in a military helicopter getting shot down, killing nine soldiers (a half-dozen aircraft have been shot down by Chechen rockets in the last three months). As with Israel, we believe that neither side can win by force, yet President Putin is undoubtedly tempted to employ the bush doctrine of "pre- emptive strike" into Russia's Georgia, as India might likewise attack Pakistan over Kashmir. This is a dangerous time, involving fundamental geopolitical changes in the world order, and Russia should at least be grateful that the Chechen target was not a nuclear reactor. So don't for a minute think targets are limited to faraway places. Where next in America?
Our gaze turns toward Alaska, which supplies 17% of America's domestically produced oil. The 800-mile Trans-Alaska Pipeline was recently shut down for two days after a drunk fired one bullet into it; it is indefensible, especially in remote areas. The Alaska Coast Guard has only 2,000 people guarding around half of America's entire coastline area, and our TDLrs in that state are advised to remain realistically alert.
Coming attacks will be "unbelievable." The World Trade Center, as with the purportedly "unsinkable" Titanic before it sank, was specifically built to withstand a crash by the largest airplane of its time a 707 but even then the fuel load was not considered in the original design. Terrorists might rent apartments in high-rise buildings, bringing in explosives. Cargo on passenger planes is virtually unchecked, although the nitwits in charge are still confiscating nail clippers from passengers. Big-rig trucks handling explosive fuel or toxic chemicals are ideal terrorist weapons. We have all just observed how one rifle and two sociopaths paralyzed the capital of the world's superpower what asymmetrical leverage! The one certainty we have is that the Taliban was watching the huge economic and terror impact of the two snipers, a point we made in one of the Interim Warning Bulletins we sent since our last TDL. And on 6 Nov 02, Hong Kong police arrested four al-Qaeda men seeking to trade 600 kgs of heroin and five tonnes of hashish for Stinger anti-aircraft missiles from undercover U.S. FBI agents, that could be fired at commercial aircraft from a building near any airport in the world.
Stirrings of trouble are everywhere. In August, six in a "sleeper cell" were arrested in Seattle, Washington, and it was discovered that they had been surveilling Disneyland, the MGM Grand hotel in Las Vegas, and plotting to detonate a dirty nuclear device in the U.S. Four men this August were busted near Dearborn, Michigan, another sleeper cell. There are almost daily reports of arrests of phony asylum-seekers, especially into Germany, and we would not be surprised to see American airplane pilots packing heat soon America banned pilots from carrying guns in July 2001, amazing timing. But as airplanes as targets become "hardened," terrorists will simply hit elsewhere in a world that we have often described as a "terrorist's candy store." The U.S. State Department has identified at least 70,000 suspected terrorists in the world, many repeatedly having tried to enter the U.S. to form sleeper cells for attacks someday, and undoubtedly some have already slipped in.
For example, al-Qaeda is definitely on the attack in Afghanistan. In July an assassin killed an Afghan vice-president in Kabul, and almost killed Karzai himself which would have been a devastating blow in the war against terrorism on the same day that a car bomb in Kabul killed 30 people and wounded nearly 170. Recently, a booby-trapped fuel truck loaded with explosives headed for the Bagram Air Base north of Kabul, whose vital function is to support ground troops hunting for al-Qaeda, but was intercepted by police. The assassination of an American diplomat in Jordan at the end of October shows that international borders mean little in this new war, and it is definitely not over yet. An Afghan army is being trained by American, French and British soldiers, but it will not be fielded until June 2004.
The explosion in Bali amongst light-hearted, innocent, unsuspecting youngsters was a warning that al-Qaeda seeks economic warfare. Granted, there was a religious component in that Bali is a Hindu enclave in a Muslim country, but all Asian tourism will crash, and it was almost as efficacious a weapon as a nuke. Tourists might begin avoiding all Muslim countries, fulfilling what must be a master plan to destabilize them cheaply. The Bali explosion will also damage investment flows for hundreds of millions of people, and terrorists' strategic master plan is still to unify Indonesia, Malaysia, Singapore and the southern Philippines into one huge Islamic caliphate under a type of 14th- century rule. Singapore is especially vulnerable to a deep recession. We have not seen Bangladesh mentioned anywhere in the press, but now we are first to predict that it will be an important source of terrorism also. All TDLrs are advised to avoid travel in Southeast Asian, especially Phuket in Thailand. For years we have been warning about "The Coming End of The Age of Travel"; like it or not, international travel is ending and will be as kaput as it was during World War II.
We have an American president who mispronounces nuclear as "nookyouler" and terrorists as "terrist," but he knows for sure he wants to take Saddam out. Bush invading Iraq would, our best guess, prompt Saddam to immediately hit Israel (with bombs, nukes, poison chemicals or biodisease) such that their inevitable retaliation would inflame much of the Arab world. Bush needs to settle the Mideast conflict as a key unblocking move, a point to which we will return.
This is a 21st-century war, brand new, with few borders, an example of which is the new escalation in Yemen. Instead of capturing and interrogating a suspect, there was a simple assassination by a CIA-run Predator drone aircraft, armed with Hellfire anti-tank missiles, vaporizing top al-Qaeda Abu Ali into an oily smudge in the Yemen desert revenge for the bombing of the USS Cole. America had criticized such "targeted killings" by Israel, so is this hypocrisy? If "the whole world is a battlefield," could our flying robots kill anyone, anywhere? And if we use robots why can't they be used against us? Will this inflame the "Arab street"? And what about the geopolitical rumblings in the entire Middle East because of a possible American attack on Iraq? We will cover geopolitics more in our upcoming Annual Forecast Issue, but Iran hates Iraq, having lost 20,000 troops to Saddam's chemical weapons, and its youth want a rapprochement with the U.S., in our opinion, believe it or not. We hereby predict that Iran will amaze the world by accepting a two-state solution to the Israel-Palestinian conflict, and maybe even curb its development of nuclear weapons. Iran's rapprochement might partially be prompted by fears of the thrust of U.S. power into Iraq right next door, plus they want to be in on a division of Iraqi spoils.
We are proud to have been apprising our TDLrs of "The Coming Terrorism" for over a decade, when we were alone and "looked wrong." We hope to continue to provide world-class analysis and informational coverage in the future. That also applies to the Middle East, where we remain strictly neutral and limit ourselves to trying to gauge the impact of events there on stock markets. Our two basic hypotheses there have long been that neither side could win by force, and that both the Israeli and Palestinian populations are deeply divided. We have often forecasted that the political division in Israel would tear apart Ariel Sharon's government, and the mitosis has just happened, with a new election scheduled for January. The secular Labor Party is willing to trade land for peace, while the religious Likud is not and the vote between so-called "doves and hawks" will determine whether or not more violence is coming the area, yet another factor we find ourselves including in our agonizing struggle to determine what 2003 might look like. The following condensed and carefully selected excerpts save our TDLrs valuable time.
In conclusion, trying to talk sense into some people would be like imprinting metal coins with "Get a Life!" on them, and burying them in the world's beaches!
Even before the bombing in Bali, Southeast Asia had already earned a reputation as a hotbed of terrorism. Over the past year, bombs have exploded at bus stations, street markets and church services in the Philippines, and across Indonesia on the islands of Java, Sulawesi and Ambon. The governments of Malaysia and Singapore claim to have uncovered terrorist cells planning big attacks. America considered Abu Sayyaf, an Islamic militant group in the southern Philippines, threatening enough to send troops to help fight it. Investigators discovered that senior al-Qaeda figures, not to mention some of the September 11th hijackers, had spent time in the region. Southeast Asian governments have been floundering in the face of these threats. Malaysia and Singapore keep arresting more suspected terrorists, an indication that their networks have spread more widely than the authorities at first imagined. Economist (England), 19 Oct 02
An unusually powerful electronic attack on Monday briefly crippled 9 of the 13 computer servers that manage global Internet traffic. The FBI and White House described the attack as the largest and most sophisticated assault on the servers in the history of the Internet. The origin of the attack was not known. Associated Press, 23 Oct 02
Editor's Note: James Dines, is editor of The Dines Letter, P.O. Box 22, Belvedere, CA 94920, 1 year, 17 issues, $195. Each issue of The Dines Letter is packed with Mr. Dines' crucial insights on what will happen with stocks, bonds and gold. Specific "Buy" and "Sell" signals and Mr. Dines' spectacularly accurate forecasting charts. Subscribe today and receive a FREE Report, 10 Gold Stocks That Could Make You Rich. This special report describes 10 gold and silver stock superstars, each handpicked by Mr. Dines who believes they could yield 10-fold profits in 12 months. Mr. Dines is also offering Bull & Bear readers a special 3-issue trial for $59. Call 1-800-845-8259 today.
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