A Walk Along the Third Rail

Religion and politics are two topics to steer clear of if you're hosting a social gathering (or a financial blog!). There are just some third-rail topics where, if you stake out any position, you're going to be open to potshots. It's why the immigration topic has proven so contentious, along with the reform of Social Security and health care. Of course, some people have figured out that you can get a lot of attention by walking along the third rail and staking out positions guaranteed to offend people. From Ann Coulter on the right to Michael Moore on the left, the third rail has become a way of life.

The majority of us are finding it increasingly difficult to steer clear of the third rails, given the commingling of religion and politics. On this 9/11 anniversary, Michael Moore pictures bin Laden and asks us to love enemies and forgive trespasses. The Obsession movie, on the other hand, anticipates calamities far worse than 9/11 if we do not take the Islamic enemy seriously. Do we begin the pull out of Iraq, or do we commit further resources toward the "War Against Terrorism"? Is there truly a "War Against Terrorism" out there, or is it a war against Western occupation?

Sometimes markets shed light on issues. Eddy Elfenbein of Crossing Wall Street notes the superior performance of defense stocks and asks if defense might be the NASDAQ of the decade. He notes that defense stocks sold off in advance of the end of the Vietnam War and ahead of the fall of the Berlin Wall, anticipating an end to hostilities. Today, the anticipation seems to be much different. Elfenbein suggests that this means that we might be in Iraq for a while.

Maybe. I suspect that a continuation of our presence in Iraq would be sufficient to keep defense stocks at lofty levels. I'm not sure it's enough to keep powering them higher. No, I think--and here's that third rail--that perhaps the markets are anticipating an escalation of hostilities.

Let's give the conservative leadership the benefit of the doubt for a minute and assume that they truly believe what they say. They believe that Islamic fundamentalism represents a potent threat to Western civilization. They believe that World War III has already begun--a war that is every bit as important to freedom as the previous world conflict.

What do you do if your watch is coming to an end and you deeply believe that the future is at stake if you do not act?

Father Thomas Berg recognizes the gravity of the issue and asks who we can trust for guidance. Perhaps our leadership asks the same questions.

And the markets reflect their answers.

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