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Dallas, TX
November 6, 2009, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Mexico: Is Vigilante Justice Coming?
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What's Hot Today: |
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U.S. stock index futures were flat on Friday morning.
Global markets were mixed overnight. Thursday's rally may be meaningless
if the employment report, released this morning, is interpreted negatively
by traders. However, if all of this week's employment related data is any
indication, the number should be fairly benign. We won't know, though,
until the actual number is released.
Today's Economic Calendar:
- Employment Situation 8:30 AM ET
- Wholesale Trade 10:00 AM ET
- Consumer Credit 3:00 PM ET
News For Thought
Cash flows into commodities are slowing. According to The Wall Street
Journal: "Investors plowed a record $50 billion into commodities this year, helping
drive prices for crude oil up 79% and gold 23%, but just $2.2 billion of new
money flowed into commodities in October." The Journal added the following: "Many
commodity investors missed out on the big gains because they invested in index
funds designed to track different commodities, and in many cases those funds
didn't do as promised. Other funds have had to stop taking new investments because
they became too big for their markets."
Cash on the sidelines is falling. One of the reasons for expert expectations
of higher stock prices, the so called huge amounts of sideline money is falling.
According to The Wall Street Journal: "Assets in money-market funds slid $31.26
billion in the latest week, adding to a recent trend of outflows, this time due
to moves out of institutional class funds, according to the Investment Company
Institute."
Pakistani army enters Taliban headquarters. According to Reuters: "Pakistani
soldiers entered the Taliban headquarters in South Waziristan on Friday, the
military said, as gunmen wounded an army brigadier and his driver in a drive-by
shooting in the capital. The army went on the offensive in South Waziristan,
a lawless ethnic Pashtun region on the Afghan border, on October 17, aiming to
root out Pakistani Taliban militants behind a wave of violence in urban areas."
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Mexico: Is Vigilante Justice Coming?
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A New And Dangerous Trend May Be Emerging In Mexico
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In Mexico, a new trend may be developing, as undercover
operatives may be hired to fight the war against drug cartels.
According to The Wall Street Journal: "Mexico's war on drugs took a grim twist
this week, as a prominent mayor (Mauricio Fernandez of San Pedro Garza Garcia)
said he had created an undercover group of operatives to "clean up" criminal
elements -- even if it had to act outside the law. Underscoring why the mayor
may have felt compelled to take such steps, the new police chief in a neighboring
town, a retired brigadier general, was shot and killed Wednesday, four days after
taking up his post."
The situation in Mexico is clearly not improving. Since 2006, there have been
14,000 lives lost in drug related violence. And nearly daily reports of new deaths
dot the news, especially in the violent areas near the U.S. border, such as Ciudad
Juarez, accross the Rio Grande from El Paso. According to the Journal: "Mayors
and state governors across the country say they feel powerless to control the
traffickers, who have corrupted local and state police to such a degree that
they are considered part of the problem, rather than part of the solution." And
the numbers continue to pile up. According to The Journal: "On Wednesday alone,
29 people died in killings in Mexico believed to be drug-related, including (a)
police chief."
There are other repercussions, aside from making tourism in Mexico dangerous,
as many American companies have factories in Mexico, including auto parts maker
Delphi and defense contractor and electronics manufacturer Honeywell. Both companies
have assembly plants in Juarez, where "have been more than 2,000 drug-related
killings in the city this year, making it the murder capital of the world, according
to Mexico City-based Citizen Center for Security, a local citizens' group."
The violence is now out in the open. Here's an example. According to The Journal: "in
the northern town of García, near the industrial hub of Monterrey in Nuevo León
state, the town's new police chief, retired Brig. Gen. Juan Arturo Esparza, was
gunned down in an attack by some 30 assailants believed to be working for a drug
cartel. Five of his bodyguards also died. Mr. Esparza was responding to a call
for help from García's mayor, who told the police chief that five vehicles with
heavily armed men had just sprayed his house with bullets. Mr. Esparza had just
taken over as police chief on Oct. 31. He is one of scores of military men taking
over policing duties across Mexico because of police corruption."
Even more daunting were items found at the crime scene, including signs of torture
and a note which said: "That's for being a kidnapper. Signed: The boss of bosses.
Job 38:15." As the Journal points out: 'The Bible passage from the Book of Job
reads "The wicked are denied their light, and their upraised arm is broken."'
Mr. Fernandez, has acknowledged that his group took part in the deaths of the
four men. According to The Journal, he took his oath of office on Saturday, and
during his post oath speech "he told a crowd of supporters that he had good news:
Mr. Saldaña and his accomplices, who had terrorized the town, were dead. The
crowd gave him a standing ovation, according to media reports."
According to The Journal: "Mexico City police discovered the bodies of the four
men several hours after the mayor said they were dead, and the men weren't identified
by police as the alleged kidnappers until two days later. Mr. Fernández was asked
how he knew about the deaths before the police. He answered that it was thanks
to his new group charged with cleaning up the municipality."
Conclusion
Mexico is becoming a nation where vigilante justice seems to be starting in response
to the ineffectiveness of the government to stop drug dealers and drug related
violence.
That means that the slippery slope has likely started, and that the acceleration
of some significant trends could accelerate.
As we noted here during our August trip to San Antonio, the number of Mexican
license plates, especially on luxury automobiles, was on the rise, as was the
number of tour buses from Mexico.
That means that a new, and likely legal migration of families from south of the
border, could accelerate.
For Americans that have businesses and travel to Mexico, the level of danger
in the country will likely escalate.
Know when to sell and how to make money when the market falls. Get a detailed
trading plan in your pocket. Read Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Mexico Fund (NYSE: MXF) and Ishares Mexico ETF (NYSE: EWW) Ignore Rising Drug Related Violence
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The news from Mexico is dramatic, but the Mexico Fund (NYSE: MXF)
and Ishares Mexico ETF (NYSE: EWW) are acting as if nothing
extraordinary is happening.
Chart Courtesy of StockCharts.com
There may be vigilante violence in Mexico, as the Wall Street
Journal reports, but Mexican stocks are following the general
trend of U.S. stocks.
Both MXF and EWW bottomed in March and have essentially doubled, having rolled
over recently along with U.S. stocks.
Yet, as with U.S. stocks, the Mexican ETFs seem to have found support, and will
likely respond in kind to Friday's employment report.
The questions for investors are straight forward. One is whether investing in
foreign countries is worth it, and the other is whether you believe the news
or look at charts.
The first answer is fairly clear. The risk in investing abroad may be worth it.
The S & P 500 is up 50% from its March bottom, and the two Mexico related
ETFs in this article have for the most part doubled. That's due to the dollar's
weakness and the fact that emerging markets are less deep than the U.S. market
so they tend to rise more during bull markets.
The second answer is fairly evident. While investors should be aware of the news,
from a money management standpoint, price action is the ultimate truth. That
means that you watch the news and you trade the chart. When the news starts to
impact the charts, you make decisions.
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