Bears in America, Tunnel Rats in Gaza and the speaker that wasn't.

Hi, Peter Navarro here with this week's Economy and Market Rap

for the week ending October 2023.

Recall that after a bullish reversal two weeks ago of the S&P 500, I warned

off any short sale warriors and indicated instead that a cash position earning 5% in short-term instruments may well be the optimal position.

Recall further that Hamas stuck a thousand missiles in that infant bull and now the risk is clearly

once again to the bearish downside in US markets.

The S&P 500 indeed had a bad week this week. One obvious bearish force is the rise in oil

prices which top 90 dollars at the end of this week. That's a clear stag

inflationary supply side shock to the US and global economy. Why stag

inflationary? Oil price shocks not only spike inflation, they slow economic growth, the stag part of the

equation, and they do so by effectively taxing consumers who then spend less and reduce aggregate demand.

Such shocks also tax businesses with higher costs leading to reduced output, reducing aggregate supply.

The bad news here is that we may well see much higher oil prices

if the war escalates more broadly across the region. And there is a very high

likelihood of such a possibility. Here, Israel is literally between an Arab hatred rock and global negative opinion if it does what many of its hardliners believe must be done.

Rid the Gaza the Gaza strip of the Hamas militants that regularly

engage in terrorist activities against Israel. Importantly, this would require what Israel has begun to do.

Send a massive ground troop contingent into Gaza to destroy Hamas's extensive tunnel system

and hunt down the perpetrators

and literally fight gun and missile fire with fire.

As a side note here, one of the big reasons the US lost the Vietnam War was the extensive

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