For weeks, the jabbering geniuses on Wall Street have been feverishly pitching the theory that war triggers stock-market rallies.

The tub thumping seems to be working marvelously.

Taxi drivers have been spreading the news.

Major newspapers have been running with it.

My barber told me he’s going to jump into the market with both feet once the bombs start falling on Baghdad and Saddam Hussein.

In fact, there are some charts that support this theory, but the money isn’t in the bank yet.

As I see it, the problem with the theory that the market will take off like a cruise missile once the U.S. attacks Iraq is that it’s too popular.

Historically, taxi drivers, scribes and barbers are three of the best indicators of the current state of the markets. Once a theory turns into a popularity contest, it’s time for a haircut. And, yes, even barbers get haircuts in bear markets.

Too many people are talking about the buy-on-bombs theory. Too many people are writing about it. Too many people are believing it.

More often than not, the consensus is dead wrong. The consensus tells the truth about as often as Saddam Hussein.

Market historians have been working feverishly to make the case that bombs can spark a powerful stock-market rally and boost the troubled U.S. economy, citing rallies that occurred during or after the First and Second World Wars, the Korean War, the Vietnam War and the Gulf War.

Many investors are already banking on a war rally, mesmerized by a useless, old blueprint – the allied defeat of Iraq in 1991 when the Dow Jones surged five per cent the day after the bombing started while gold and oil plunged.

Ken Tower, a former chief strategist of Charles Schwab who has studied stock-market reactions to war, offers a cautionary note about making dangerous assumptions.

“Wars are like snowflakes,” says Tower, “no two have the same shape.” (Curiously, Tower is also part of the crowd betting on a rally once the war starts).

I’m still waiting for some analyst to provide a scenario of how stocks might react if a war in Iraq becomes a dirty, drawn-out affair.

And, even if the best-case scenario unfolds in which there is a swift and decisive outcome, any rally could be cut short by other disconcerting factors.

Even if Saddam Hussein’s long shadow over the market vanishes, investors will still need to tip-toe through a minefield of wild cards.

There would still be a lot to hate about this market, with North Korea’s nuclear arsenal, terrorist threats, the skittishness of investors, lousy corporate earnings, the U.S. deficit and a shrinking U.S. dollar weighing on the market like a 400-pound Sumo wrestler.

Bottom line: It’s a sad, damn stock market.

* TRADING PLACES: Sprott Asset Management has landed Canada’s most revered gold guru, John Embry. Embry, architect of the Royal Precious Metals Fund that was up a whopping 153 per cent last year, has moved from the Royal Bank to become president of Sprott.

Embry has earned a reputation as one of the few straight shooters in the business and, being refreshingly outspoken about his bleak prospects for the stock market, seemed to be a poor fit as a spokesman for one of the big banks.

Sprott also boasts an enviable record with its Precious Metals Fund and provides its top picks to the Edge Pro’s 3 Stars feature.

* GOLD FEVER: Astute market players don’t fall in love with stocks, not even on Valentine’s Day.

Wait a minute! Here’s one of Wall Street’s most respected market watchers falling head-over-heels for gold.

Richard Russell, author of the Dow Theory Letters for 44 years, feverishly headlined his Valentine’s Day note, Russell Loves Gold.

And that was after gold bugs took a cold shower with the gold price plummeting almost $40, to the $350 US range per ounce, in a week.

“Subscribers who bought gold and gold shares for a quick profit should probably get out of their positions,” wrote Russell. “Reason: You’re in for the wrong reasons.

“The correct reason is that gold and gold shares provide a defence against the (U.S. Federal Reserve’s) policy of destroying the dollar. This entails holding gold items for years, perhaps even willing your gold coins to your children, your wife or your sweetheart.”

* SAGE WORDS: “The gold market was as jittery as a long-tailed cat in a room full of rocking chairs.”

– Eric Gebhard of the Gold and Silver Review.



HOT ALBERTA STOCK: Steeplejack Industrial Group
SID-TSX $1.29
Up 21 cents (+19.4%) on 76,000 shares (for week ending Feb. 14).
Even in a deep bear market, there’s one surefire way to give your stock a kickstart. Just show investors the dough and deliver knockout financials. That's exactly what Edmonton-based Steeplejack did, releasing quarterly results through Dec. 31 that showed net profit
skyrocketed to $895,000 or 12 cents per share compared to year-ago numbers of $67,000 and one cent per share. Steeplejack serves the industrial market by providing manpower, scaffolding and specialty equipment.



COLD ALBERTA STOCK: Destiny Resource Services
DSC-TSX 10 cents
Down 4.5 cents (-31%) on 180,600 shares (for week ending Feb. 14).
Aren’t stocks supposed to go up and down? For Destiny, it’s been all downhill, a 77-per-cent descent from its 52-week high to a low of 10 cents. The Calgary company’s revenue and earnings have also been in steep decline.