Larry Kudlow

No one seems to be connecting the dots, but I'm willing to bet that the capture of the top assistant to terrorist mastermind Abu Musab al Zarqawi was the trigger for Tuesday's best-in-the-new-year stock market rally.

 U.S. coalition forces announced that morning that mad car-bomber Abu Omar al-Kurdi has been in custody since Jan. 15. As usual, Washington Times reporter Rowan Scarborough filed the most illuminating account of the white-hot event. He cited a key Pentagon source, who extolled the many benefits of the terrorist capture. Wrote Scarborough: "(Al-Kurdi) knows names. He knows people. He knows contacts. He knows sources. It could be very damaging." A special-ops terrorist-hunter added that "These dirtbags ... when caught ... squeal like pigs and give up their 'brothers.'"

 Up goes the market.

 Sources say that al-Kurdi is the deadliest Iraqi terrorist yet to be captured. He has already admitted to 32 of the worst bombings, including the August 2003 attack on U.N. diplomat Sergio Vierra de Mello. The capture of thugs like al-Kurdi bring the United States and coalition forces that much closer to capturing Zarqawi, an ally of Osama bin Laden, and to confounding the desperate attempts of the terrorists to stop the Jan. 30 elections.

  Ever since late December, the step-up in pre-election Iraqi terrorism has disrupted the post-election stock market rally in the United States. Not coincidentally, a steep fall in oil prices was reversed on fears that terrorists would disrupt energy flows by bombing oil fields in Iraq, Kuwait and Saudi Arabia. As new gloom settled on trading markets, wild predictions of $70- or $80-per-barrel oil -- prices that would damage corporate profits, jobs and the economy -- became commonplace. Stocks headed south on the fear factor.

  This was quite a reversal. President Bush's re-election victory -- complete with a pro-growth platform of tax, Social Security and legal-abuse reforms -- caused the major equity indexes to roar ahead with double-digit gains. Highly growth-sensitive technology indexes advanced more than 20 percent. Expectations of new recruits for the investor-ownership class -- and a flood of newly incentivized saving and investment to fund capital formation, technology advances, productivity gains and job creation -- propelled the indexes higher and put yet another dagger in the Kerryite pessimists.


Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.
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