Syria recalls Rumsfeld's law of 'unknown unknowns'
Unintended consequences are in part to blame for volatile markets. To paraphrase former Defense Secretary Donald Rumsfeld, it's not the known unknowns that worry traders, it's the unknown unknowns. Can the U.S. and its allies ever really extricate themselves from Syria with just a 48-hour air strike?
I understand there are no boots on the ground, but it still creates complications: with Hamas, Iran and even Russia. Then there are the 'known unknowns': the possible spillover into other countries like Jordan,Lebanon or Iraq; or terror cells being unleashed from Iran.
It's the unknown unknowns that are most worrisome...things we simply do not know. Namely, how likely it is Russia would actively support Iran striking out against its neighbors, primarily Israel. All of which could trigger a wider war.
There's a macroeconomic issue of course: If this Syrian action doesn't end after 48 hours, it could hamper global growth. It could even have an impact on the Fed's taper calculus.
Speaking of Iran: while U.S. action in Syria may be on hold for the moment, reports from a U.N. watchdog state that Iran has significantly expanded its uranium enrichment capacity at the Natanz plant -- and that has traders talking.
1) The free-fall of India's poor rupee continues: gold is up again today to a 3-1/2 month high on safe-haven buying, but as I noted yesterday some of this move in bullion is due to the free-fall of the Indian currency. Indians are the largest buyers of gold in the world: hence, the rupee is down another 3.6 percent to a record low 68 to the dollar.
A collapsing currency is not a trivial issue. We have tidal waves of money going in and out of these countries that are very disruptive. The more these countries have to focus on their weak currencies, money flows and their deficits, they less they can focus on restructuring and improving growth.
This creates an economic sinkhole: when a country like India has a trade deficit, or a collapsing currency, they need to divert money away from capital activity to fund the deficit. That is a drag on growth, which has the same effect on Indonesia, Thailand, the Philippines.
And of course, we can't have a country like China that is stabilizing and still growing, yet other weak countries around it. You don't want one country running on 8 cylinders while others run on two.
2) Once again, we get a mixed series of reports from retailers. Jeweler Zale reported a loss that was not as great as expected, and same-store sales were up 5.6 percent.
Express, which sells apparel and accessories, reported earnings in line with expectations and raised 2014 earnings guidance to $1.52-$1.60, up from $1.48-$1.58, while they confirmed 2014 same store sales of 1 to 5 percent. The disappointment was women's apparel retailer Chico's, which missed on top and bottom line, and had weak traffic.
—By CNBC's Bob Pisani