French Terror Spawns Theories on Markets, Humanity: Opening Line

Talk about a buying opportunity. Nothing like a terrorist attack to put a spring in your step.

Sorry, a little harsh.

There was some bewilderment around here yesterday about the reaction in stock markets to the slaughter of 12 people at or around the Paris offices of Charlie Hebdo, the satirical magazine that has been perhaps the bravest at standing up to the menacing threats of Islamic terrorists. There were some explanations, too.

Lu Wang, Joseph Ciolli and the markets team produced a chart for us showing the response in the MSCI All-Country World Index to major terrorist events in the past. We’ll start with the big one, Sept. 11, 2001: down 2.63 percent. Granted, that’s an outlier. Bombings in Madrid; London; Islamabad, Pakistan; and at the Boston Marathon all produced declines in the index. It even dropped Oct. 22, 2014, when a gunman shot up Parliament Hill in Ottawa.

Yesterday? A gain of 0.47 percent. Heck, the S&P 500 jumped 1.16 percent. The killings weren’t mentioned at all in the Bloomberg global markets wrap.

Giri Cherukuri, head trader and portfolio manager at Oakbrook Investments, suggested we’re becoming inured. “The market is seeing it more as a mass shooting that unfortunately we’ve had lots of over the years throughout the world, and has become numb to this type of thing,” he told Wang and Ciolli. “People are just focusing on these other events right now: lower oil, the good U.S. economy and buying on the dip.”

Other events? At the market’s close yesterday, the two most-read stories on the Bloomberg terminal, covering the attacks, dwarfed the readership of the rest.

Still, we wondered, what if this had happened at, say, the offices of the New Yorker? Right. Is this not cause for concern?

“We don’t apparently know exactly who did this, but there’s certainly a risk from radical Islam,” Cliff Kupchan, chairman of the Eurasia Group, told Bloomberg Surveillance. Islamic State “is frustrated in its area. It’s going to be turning toward Europe; that could well happen.”

It gets worse.

“Any incident like the one in Paris will only be fuel to the fire,” Joerg Forbrig, the senior program director at the German Marshall Fund of the U.S., told Patrick Donahue from Berlin for a story headlined ‘Paris Killings Seen Fueling Europe’s Anti-Islam Movements.’ “It will be welcomed as a ‘told-you-so’ episode by radical movements saying Islam is a threat to our countries.”

And worse.

“The leader of the anti-Islam Freedom Party in the Netherlands, Geert Wilders, took aim at the Dutch and European political establishments and Dutch Prime Minister Mark Rutte. ‘When will Rutte and other western government leaders finally get the message: it’s war,’” Donahue quoted Wilders as saying.

But then it gets better, and we start to understand. Maybe.

We tracked down Nicholas Dungan in London last night. He’s a senior fellow at the Atlantic Council in Washington, specializing in France; senior adviser at the Institut de Relations Internationales et Strategiques; on the faculty at France’s uber-prestigious Sciences Po university; and a former investment banker with Merrill Lynch and Societe Generale, among other bright spots in his bio.

“Stock markets reflect the future value of the production of the economy,” he said. “Yes, they reflect fear and greed, but the idea that this attack is somehow connected to a larger threat to the West, that it is somehow imminent that it is going to have an effect on business or finance, would be far-fetched, and in that sense it makes sense that the markets haven’t reacted.


‘‘Even though this attack occurred, the one thing everybody knows about France is that its security is fantastic and water-tight,’’ Dungan, 63, said. ‘‘The fact that these guys got through to what was actually probably a pretty soft target is absolutely no indication, I don’t think, of any sort of larger vulnerability.’’


‘‘The French have a very, very strong family feeling. Even though they will fight with each other, as families do, and dispute things and argue with each other [personal note: true], I think, in a bizarre sense, this incident has made it less probable that these people will be able to fuel anti-Islamic extremism, such as from the National Front, because the dignity and sympathy and humanism of the reaction of the French, who have gone out in the streets,’’ he said.

‘‘You have the French gathering in Union Square in New York. What they do is they go out into the public square to manifest their emotions and their solidarity,’’ Dungan said. ‘‘I think the fact that their reactions have been so dignified is in itself both a tribute to the victims and also tends to separate this incident from any sort of larger menace.’’


Initial jobless claims at 8:30 a.m. EST, Bloomberg’s consumer comfort index at 9:45 a.m., and the Fed’s consumer credit measure at 3 p.m. are today’s main U.S. economic indicators.

U.S. earnings include Family Dollar, Constellation Brands and Apollo Education Group before the markets open, followed by Bed, Bath & Beyond after the bell.

The BOE is scheduled to announce its rate decision at noon London time, 7 a.m. EST. A short time ago, Germany said factory orders fell more than forecast in November, while euro-area economic confidence was unchanged in December.


- Obama travels to Phoenix to propose cuts in FHA mortgage-insurance premiums at about 12:30 p.m. EST. - The Consumer Electronics Show continues in Las Vegas. - Finalists for the NFL’s Hall of Fame Class of 2015 are announced. - The Brookings Institution releases its poll on U.S. attitudes toward Islamic State at 2 p.m. EST. Seriously? - Merkel hosts Ukrainian Prime Minister Arseniy Yatsenyuk for talks in advance of a potential meeting between herself, Putin, Hollande and Ukrainian President Petro Poroshenko. - Meanwhile, Merkel’s website has been hacked, along with others in the government. - Sri Lankans vote for president. - Keystone XL pipeline legislation will be the subject of a vote at the U.S. Senate Energy Committee meeting at 10 a.m. EST. - China to enforce expatriate taxation. - Blessed are the incontinent. - In other shooting news... - In other Paris shooting news… - Palestinians to join International Criminal Court in April. - Dog abandoned at Scottish railway station has his choice of new homes. - A tad harsh, maybe? - And in other shooting news... - Shooting news. - This year’s flu season already makes Ebola outbreak look like lightning strikes. - Back to bombing for a moment. - More shooting news. - Back to bombing. - Bombing. - Shooting. - Future shooting. Or bombing. - Bombing and shooting. - Bombing. - Shooting. - Cold enough for ya? - Shooting. - Shooting. - Shooting. - Shooting. - Shooting. - Shooting. - Shooting. - Lovejoy.


It dawned on us after a moment of levity with Ken Fireman, managing editor for economic and government news in the Americas, just what a heady job it must be to set monetary policy for the U.S. Federal Reserve and how easy it could be to get it wrong.

We were talking over the FOMC minutes. Our question was whether the Fed was painting itself into a corner with what appears to be an unwavering trajectory toward what appears likely to be a second-quarter rate increase, even if all its ducks weren’t in a row yet.

We pointed out this passage from the minutes: ‘‘It was noted that the committee might begin normalization at a time when core inflation was near current levels, although in that circumstance participants WOULD WANT TO BE reasonably confident that inflation will move back toward 2 percent over time.” (Emphasis ours.)

Isn’t that risking spending money that’s not in your pocket yet?, we asked Fireman. A lot of stuff could still go south between now and then. He reminded us of the moving-target nature of the decision.

“What I think most economists would say is that what the Fed has to do is to really thread a needle here, timing the rate increase at a point where inflation is beginning to come up, but not so late that it’s already running and has built up a lot of momentum,” Fireman said. “Because once that momentum has built up, it’s very hard to stop it.”

Fireman’s a football fan, it appears.

“It’s like leading the receiver before he’s made his break,” he said before adding, “That’s what they get paid the big bucks for -- trying to figure that out.”

No pressure or anything.


We’re all sufficiently impressed by the self-driving cars, clothes that monitor our body temperature and smart homes that can be managed by remote, including playing with our cats via Wi-Fi. But where’s that life-changing item taking its early bows at this week’s Consumer Electronics Show in Las Vegas?

We found it: the Nature Bound bug vacuum, by Thin Air Brands, which “lets children capture critters without having to grab them,” according to this roundup of oddball products by Ian King, Danielle Burger, Keith Naughton and Lucas Shaw.

“The pint-sized vacuum is equipped with a magnifying glass kids can use to inspect the creatures, and ventilation to ensure their survival,” they write. “After inspection, kids can either release the bugs to the wild or store them in another Nature Bound product, the critter barn.”

How thrilling: All the visual wonder of exploring the great outdoors with none of the dirt or daring associated with picking something up with your fingers.

The idea, it turns out, isn’t really that new. The National Geographic Wild Anteater Bug Vac, sold by World Market for $19.99, does much the same thing. Hammacher Schlemmer also sells a bug vacuum ($29.95), though insect disposal, rather than study, seems to be its intended use.

The best we can say about this bug-sucking trend is that kids at least have to go outside to use the devices. At least until there’s an app for that.


Dear Opening Line:

Is there really such thing as a Santa Claus rally? I counted on it this time around and now my 401(k) is down.

Signed, Vexed in Virginia.

~ ~ ~ ~ ~ ~

Dear Virginia,

Yes, there is a Santa Claus rally. It exists as certainly as over-exuberance and herd instinct exist, and you know that they give to the markets its worst excesses and misery. Alas! how dreary would be the trading floor if there were no Santa Claus rally.

Now Virginia, please be aware that we speak not as a fiduciary, and past performance is not necessarily indicative of future results.

That being said, we can’t blame you for feeling let down by Santa Claus this year. The S&P 500 lost 2.9 percent on the last five trading days of 2014 and the first two of 2015, versus an average gain of 1.5 percent in previous years. There’s lots of blame being assessed, most of it focused on plunging oil prices, but we think that misses the point.

Virginia, as long as you continue to believe in the Santa Claus rally, then the Santa Claus rally most surely exists. Follow your heart next year and wonderful things will happen.

But diversify, just in case.


Opening Line advice bureau


It’s a small world, after all.

At least nine people were diagnosed with the measles after visiting California’s Disneyland or an adjoining Disney park last month, Crayton Harrison reports.

“While the measles is relatively rare in the U.S. because a vaccine is available,” he writes, “it persists in other countries, making international tourist destinations like Disneyland vulnerable.”

But Americans are hardly just innocent victims here.

According to Harrison’s story, of the seven confirmed measles patients who are California residents, two were too young to get the measles vaccine. Of the remaining five, only one “had received the recommended two doses of the vaccine, which are more than 99 percent effective in preventing the measles.”

Think about that: In this admittedly tiny sampling of Californians old enough to be vaccinated, four out of five weren’t. Have we let down our guard? Or, worse, is the anti-vaccination scare campaign really making inroads?

“The U.S. Centers for Disease Control and Prevention reported 20 measles outbreaks through November of last year, leading to 610 cases -- a record since the disease was temporarily eliminated in 2000,” according to Harrison.

“Temporarily eliminated diseases” is one oxymoron we could do without.