Fear and Loathing on Wall Street

U.S. industrial production grew at a higher than anticipated rate in February, while terrorism fears were the cited cause for today's sharp pullback in equities prices.

I don't buy it. I think that there are deeper issues at play here. This far into an economic expansion without meaningful jobs growth is as likely to be a driver as terrorism fears. The Spanish bombings were no doubt a catalyst of sorts, but Wall Street seems to adopting a 'show me' attitude towards further economic growth in the U.S.

Only with real gains in jobs growth and earning power will Wall Street likely make the next leg up in this rally. Terrorism in and of itself is not a real threat to global markets. It does bring a level of level of uncertainty to the markets, which is generally a negative sign.

Today's equities action was undermined by the terrorist actions in Spain. But there are much larger issues out there. A lot of money was taken out of the market today. This is the continuance of a trend that started towards the end of January.

2003 was a banner year for equities. Institutions are sitting on big gains. It doesn't require much of a catalyst for them to move to cash positions.

Longer term, we shall see. I think the real intermediate term threat to equities prices gas to be energy costs. This directly effects purchasing power. From you and me, to the biggest corporations. I'm going to play it safe right now, and stay as liquid as I am.

Too much risk to reward ratio for me to commit new money to the markets.

UPDATE: Bob over at Chum Bucket correctly adds that terrorism, which in Greenspan speak is 'increased geo-political risk' undermines investor confidence. That point is certainly worth adding. Thanks, Bob!