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I Think the World is Evolving into a State of Anarchy.

I think the world is evolving into a state of anarchy, the direct result of the Administration abandoning the 70 year unspoken role of global policemen for political expediency.

Some might comment this is a sensationalist remark but this view is also shared by many in the foreign affairs community including Secretary of States from both parties, retired military leaders and several of President Obama’s past foreign policy advisors.

Against this backdrop, I ask is the four day 17.5% advance in oil the result of the Middle East is about to become unglued?  Again referencing the periodical Foreign Affairs, the Middle East is on the verge of the greatest anarchy since the dissolution of the Ottoman Empire a 100 years ago which created today’s map of the Middle East.

The Energy Information Agency writes 56% of all oil imports or about 25% of the US daily oil needs is from OPEC.  What happens to oil prices if there is a supply disruption?

As widely noted yesterday’s strong advance in oil and the easing of Greek tensions is a major reason why equities were strong.

Is there any correlation between the gains in oil (and equities) and the news of the ISIS incineration of the captured Jordanian pilot, an act that I think all believe is extremely barbaric and heinous?  The advance in crude (and equities) accelerated following this morbid headline.

I must write about 30-45 minutes following the Jordanian news, OPEC’s General Secretary reiterated last week’s comments that he thinks oil prices have bottomed and should soon rise, suggesting the possibility of $200 oil if investment in infrastructure does not occur.

Today the ISM non-manufacturing index and private sector ADP employment report is released.  Will the data have any impact or will the markets consolidate leading into Friday’s unemployment data?

Last night the foreign markets were mixed.  London was down 0.57%, Paris down 0.16% and Frankfurt down 0.29%.  Japan was up 1.98% and Hang Sang up 0.51%.

The Dow should open nominally lower on profit taking and some second tier profit disappointments.  Moreover Greece is on the forefront as is oil.  China joined the growing list of countries of increasing liquidity.  The PBOC cut the amount of cash lenders must set aside as reserves to boost liquidity and attempt to re stimulate its economy.  The 10-year is up 3/32 to yield 1.78%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.