By: Kent Engelke | Capitol Securities

The hype going into Comey’s testimony was incredible, thus suggesting a high bar for any type of shocking revelations. There were no bombshell revelations, albeit there is a ton of fodder for endless Internet and cable TV bloviating. I believe the markets interpreted Comey’s testimony as a nonevent for the simplistic reason a constitutional crisis is horrific for the economy and society. As inferred, the markets were generally unfazed by his remarks.

What I thought was of great significance was the House vote repealing the more onerous parts of Dodd Frank. I will argue Dodd Frank is a major reason why economic growth has been anemic as it stifles capital formation. Capital is the lifeblood of capitalism. As noted many times, monetary velocity or the turnover of money is at the lowest level since 1959.

Dodd Frank was fully implemented in September 2014 and the growth rate has since plummeted.

However, I believe the Animal Spirits have been uncaged because of potential regulatory repeal. This uncaging is a major reason why the Atlanta Fed increased its estimate of second quarter growth to 4.0%, the greatest growth since 3Q14.

What happens to growth assumptions if Dodd Frank is repealed in the Senate and monetary velocity accelerates? A dated Chicago Fed report stated if monetary velocity returns to 50% of its norm, the economy would expand around 6% with a 9% inflation rate.

Wow! A 6% growth rate would be equivalent to a bombshell revelation.

Speaking of potential bombshells, the Middle East is on the verge of total chaos. Qatar and Saudi Arabia square off in perhaps the greatest diplomatic feud in at least a generation. Suicide bombers strike at the heart of the Iranian Capital. Kurdistan moves toward independence and war rages in Syria and Yemen. Al Jazeera or the Islamic media outlet headquartered in Qatar reported that its entire news systems, websites and social media platform were hacked.

Was Saudi Arabia the attacker? Last month Saudi Arabia unexpectedly ended many of its austerity programs, partially the result of the “revolution” occurring in social media, with a direct reference to Al Jazeera.

Historically, any Middle East violence would cause oil prices to surge. For the last 15 months, prices have remained range bound between $45 and $55 barrel with crude today trading near the lower end of the range.

Commenting on yesterday’s market activity, the averages were nominally lower but the financials advanced, perhaps the result of the House repeal of Dodd Frank.

What will happen today?

Last night the foreign markets were up. London was up 0.59%, Paris was up 0.33% and Frankfurt was up 0.39%. China was up 0.23%, Japan was up 0.52% and Hang Sang was down 0.13%.

The Dow should open quietly higher. The 10-year is off 5/32 to yield 2.21%.