Iran Out; Jerusalem In

The Economy: Continued economic expansion is the order of the day with San Diego benefitting from Pentagon spending, tourism and hi-med tech. Defense/State Departments “Pivot to the Pacific” is in full swing with no slowdown in sight. Air, land, sea and sub-sea drones are expanding at an increasing pace with projections that pilots are the next dinosaurs to face extinction. The Trump administration’s goal of sharpening military readiness plays into this evolution. Trump continues to act on campaign promises and realign years of US policy: Paris climate accord gone. TPP gone. UN under review. Marginal allies re-evaluated. Iran nuke deal gone. Torpedoes be damned; business be damned. Yet, despite cries that armageddon is nigh, the economy continues to expand and stocks continue to hold fast. As we go to press, the major indices have turned positive for the year. … could change any time but the rally of the past week, led by oil, has been impressive. Year over year oil is up 50%. This time around oil is rallying on geopolitical instability and not demand. Think global, act local.

Food for Thought: Long time readers know that we’re not fans of the central banks. But to deny their impact is supreme idiocy. We look askance at market manipulations, chronic bailouts of TBTF banks, central bank crony capitalism and other signs that the Illuminati are hand in glove with the Giant Vampire Squid. However, don’t stand in the open and fruitlessly curse the weather. So we continue to warn that with the Fed on a tightening cycle, investors should have an exit strategy. Signs continue to accumulate that this is a late stage bull market in stocks. The inverse relationship in bond-land is a fact of life. Buy and hold has worked since 2009. We’re cockeyed optimists like only San Diegans can be. But nothing lasts forever.