Dead Cat Bounce or sustained recovery?

I recently made a couple of posts dealing with the economic outlook and then the Dow goes from a low of 6469 to today's close at 7216. So the Dow jumps up about 747 points in a week or so. Is this the start of a sustained recovery or is it basically a temporary bounce? My feeling is that it is only a temporary bump up.



People obviously thought it was time to do some buying and this may continue for a bit, but there is really nothing going on in the U.S. or world economy to justify a sustained rally. The Chinese have been recently begging for assurances that we will not screw them over. Considering the actual value (or lack thereof) of the dollar, I'm surprised that we are not having to take a shoebox full of cash to the grocery store to buy a loaf of bread. The reason this is not happening is that, apparently, the rest of the world is worse off than we are and there needs to be at least one foundation currency. The fact that much of the TARP (Troubled Asset Relief Program) money has gone to European banks and other financial institutions is not sitting too well with me as it reminds me that about two thirds of our gold reserves went to rebuild Europe under the Marshall Plan. We are well past the time to keep bailing out ungrateful European countries.



Anyway, back on track. I still think we are going to see the Dow at 5000 or 4000 before we finally hit bottom. The big unknown is what will happen if we have another 9.11 or a conflict starts up somewhere. I feel there is a 99% probability Israel will attack Iran in the near future. Iran has about 6000 gas centrifuges in operation; this is not in dispute. (We had 20,000 gas centrifuges operating during the Manhattan Project, but 6000 is sufficient to produce enough enriched uranium to make a bomb.) Iran has produced enough enriched uranium to produce an atomic bomb....also remember Israel is a small nation and two or three nuke strikes would wipe it off the map. The Russians have completed the Bushehr reactor in Iran and it is undergoing testing. It can produce enriched uranium or plutonium, either of which can be used to make an atomic bomb.



The main issue for the Israelis at the moment, and the reason I think hostilities may be imminent, is that Russia is resuming sales of the S-300 ( NATO designation SA-10 Grumble) surface to air missile. Although the Russians have fielded a more advanced version known as the S-400 (NATO designation SA-21. The S-400 can engage spaceborne targets.), the S-300 is an extremely potent SAM. It can deploy within 5 minutes and can track 100 targets simultaneously and upgraded versions can engage up to 36 targets at the same time.



If you are an IDF General, you are acutely aware that you do not need to lose a bunch of multi-million dollar aircraft to a missile that cost a couple of hundred thousand dollars or less. Israel MUST strike Iran before these SAMs are deployed in significant numbers. All bets on the economy are off if that happens.



Another major terrorist attack could equally accelerate the death spiral of the economy. I hope I'm wrong, but facts are facts.




S-300 Launch

Update 03/22/2009: Looks like the Russians are holding off on the S-300's to Iran for a while. I still think we are going to see an Israeli attack on Iran soon since Obama's latest olive branch to Iran cannot be sitting too well with our Israeli friends. Israel is not going to allow Iran to ring its nuke facilities with S-300's and it is not going to give Iran time to develop an atom bomb or two either. Something has got to happen soon.