I am getting worried about the markets. The company fundamentals are fine but the things I see in the news are making my nose twitch.
Pat Buchanan and Barbara Boxer ganging up on free capital flows is an ominous sign. They are not the story. They are just astute politicians with a good nose for public emotions, leading the lynch mob from behind, as usual.
It is the fact that the people/voters are getting so frightened and are pressing for protectionism in all its forms that is the ominous sign for the market.
The Dubai ports issue has been the big story here, but there are similar things happening in France Spain, and Italy.
Smoot and Hawley did not create the Smoot-Hawley tariffs. They were merely surfing the wave of public sentiment at the time; exactly like Buchanan and Boxer.
Markets are information networks that use prices to transmit information. When they are open for business the economy and markets do fine. But kneejerk policies (capital controls, tariffs, currency bashing) can temporarily disrupt the information flows. That’s when information networks short-circuit and blackouts (recessions, credit crunches, trade wars, market downturns) can happen.
Check out the stock markets in the Gulf region; they are rolling over big time. Stay tuned.