Fighting For Their Life

The war news is coming in fast and furious.

Let me first begin by noting that a month into the hostilities which started in Gaza, and a couple weeks after the outbreak of the Hezbollah war, the S&P 500 is actually about unchanged with a nice little multi-day move right in here, based on good profits, a solid economic outlook, and growing expectations that the Fed’s restraint cycle is nearing an end.

My spiritual pal, Mayer Rothschild, is right: “Buy on the cannons, sell on the trumpets.”

Another spiritual friend of mine, Joseph Schumpeter, is also right: low tax rates, strong profits, and plenty of bank credit for business entrepreneurs is a great combination for economic growth. Mike Darda calls this “the wellspring of entrepreneurial capitalism, innovation and wealth creation in the dynamic capitalist system.”

Relative to record earnings, and moderate, normal interest rates, U.S. stocks are significantly undervalued according to gurus like Art Laffer and Elaine Garzarelli. I totally agree.

Barring a $100 oil price, from some sort of bizarre Iranian action—which can never be ruled out—stocks and the economy will outperform the usual chorus of pessimism. It’s still the greatest story never told.

But, I digress from the war. Here are a couple points that stand out for me from all the news reports:

First, is a wonderful headline from the AP: “Hezbollah Says Israeli Response a Surprise.”

Oh really? Tch-tch. It’s called fighting for your life. It’s called fighting for freedom and democracy. It’s called fighting against a bunch of terrorist thugs who want to wipe you off the face of the earth. It’s called fighting to enforce U.N. resolutions which Israel observed. It’s called searching for peace, but then fighting for your life when your enemy refuses to engage in any civilized peacekeeping.

The second point is, “There can no longer be a Hezbollah,” according to Israeli Foreign Minister Tzipi Livni, in a Der Spiegel interview published today. She goes on to say, “[T]here is a very significant difference between us and our enemies: We are defending ourselves against anyone who attacks us and use every means possible to prevent hitting civilians…the problem is that the Hezbollah hides some of its weapons in apartment houses.”

Even the UN agrees. Jan Egeland, a U.N. humanitarian official, charged that Hezbollah is fighting like cowards and causing hundreds of deaths of women and children in Lebanon.

So, while the usual leftist chorus of Western opinion makers agrees with Hezbollah over Israel’s response to the kidnappings and bombings from Hezbollah, the reality is, Israel is doing what it needs to do to protect their freedom in the face of evil.

Fortunately, President Bush has remained steadfast in his support for Israel’s effort to preserve their homeland security. And Secretary of State Condi Rice continues the mantra that their can be no cease-fire without a broader deal that cracks down on Hezbollah terrorist bases in southern Lebanon used to attack Israel. In Rome, Secretary Rice also said the situation cannot return to what it was before July 12th.

Rice and Israel would accept an international force along the border to stop Hezbollah from using it as a military staging area. Israel’s government has indicated that it would prefer and accept a NATO force. Anything would be better than the phony U.N. force that has been camped in south Lebanon for decades (where U.N. and Hezbollah flags fly side by side).

Perhaps, other Arab states like Egypt and Jordan can exert some pressure on Syria to stop arming and backing Hezbollah, but I wouldn’t bet the ranch on that. (Three dittos on Iran on the same subject. No, make that a hundred dittos.)

White House Press Secretary Tony Snow has said repeatedly that there must not be a Hezbollah victory by leaving them in place. Hezbollah, not Israel is the aggressor. That is the wrong that must be righted.

But the fact remains that it’s a tough fight for the IDF.

Israel is moving slowly on the ground to capture Hezbollah run villages, but it’s a very tough slog. Analysts like retired Col. Ralph Peters believe Israeli intelligence badly underestimated the huge volume of Hezbollah missiles supplied and funded by Iran and transported mainly through Syria.

So far, the war has not gone as well for Israel as both they and their friends (including me) had hoped. Hopefully in the next week or two, Israel can grind down the Hezbollah enemy. And, hopefully President Bush will continue to buy Israel the necessary time to complete this vitally important mission. I suspect he will.

The free world knows full well just how high the stakes are in this war. The more punishment Israel inflicts on the nefarious and cowardly Hezbollah, the more Syria and Iran will have their Axis of Evil ears pinned back.

The Arab Street in the Middle East (including the governments of Egypt, Jordan Saudi Arabia Kuwait Bahrain the UAE and so forth) loves a winner and hates a loser. Israeli strength and success will translate into another big step forward for freedom and liberalization in the Middle East.

It is precisely this political and economic freedom, so highly valued by Joseph Schumpeter for the creation of wealth and social progress, which is at stake right now in the Middle East.

Individual liberty is the cornerstone of the great and successful “City on the Hill” experiment in the United States. And while Israel may be a relatively small hill in global terms, the battle they are currently waging for their own freedom is incalculably large on the new millennium world stage.

That is exactly why we should be thankful for their courageous efforts for continued self determination and independence.