Middle East

There are many different kinds of revolution; some more effective than others. Telling the difference between a successful revolution and a failed revolution can be tricky. Often, on the surface, they look exactly the same. The secret is to set aside what we would “like” to see, and be brutally honest about what was actually accomplished in the course of the dissenting action. Has power been fully rescinded by the offending government or regime to the people, or, to yet another corrupt bureaucracy with a slightly different face? Have the puppet strings of corporate globalists been severed from your country, or do they remain strong as ever? Has ANY corrupt official actually been punished for the crimes that led to the insurgency in the first place, or, did they fly off scot-free to their million dollar villas in Ecuador, drinking mojitos in wicker recliners and watching the disaster they created unfold on CNN? Who ultimately benefited from the event?

The Numbers Behind the Middle Eastern and North African Revolts

It's only a start ... but the Egyptians have done orders of magnitude more in a couple weeks than the U.S. military has been able to do in 9 years.

The two oil shocks of the 1970s saw gold prices rise by more than 24 fold (2,300%) in just 9 years - from $35/oz to $850/oz see chart above). To put that in perspective, today gold's rise has been far more gradual and it has risen some 5 fold (430%) in 11 years - from $250/oz to $1,330/oz. In this regard it resembles gold’s rise from $35/oz in 1971 to nearly $200/oz in late 1974 – a six fold increase. Given the significant macroeconomic, systemic, monetary and geopolitical risks of today gold is likely to perform again as it did in the 1970s. A 20 fold increase from trough in 1999 to peak sometime in the coming years would see gold rising to over $5000/oz. This may seem outlandish to those unaware of gold's fundamentals but the very small supply of gold internationally, increasing demand (particularly from investors and central banks), the sovereign debt crisis in the EU (soon to spread to the U.S.) and the debasement of the dollar, the euro and other currencies internationally makes this increasingly possible.

And no … allowing democracy in the Middle East will not increase terrorism.

From Foreign Policy Magazine, August 2009: "Lost in this Egyptian Kremlinology is the fact that neither Gamal Mubarak nor Omar Suleiman presents a clear departure from the present state of affairs. Neither offers the new social contract that so many of Egypt's 80 million citizens are demanding in strikes and protests. The prevalence of the Gamal vs. Omar debate, more than anything, highlights the low expectations ordinary Egyptians have for a democratic succession to Hosni Mubarak's 28-year reign. Those low expectations come with their own quiet tyranny, too."

As the conventional and cheap oil and gas start to dry up in the Middle East… a bigger, even better opportunity seeks to replace it.
For many who aren’t familiar with the region, the Middle East comes across as an updated version of Lawrence’s Arabia, only with lots of oil. But this mosaic of cultures isn’t made up of only Arabs or Muslims, and most Middle East countries are neither awash with heavily armed, rather excitable citizenry… nor with black gold, which is what we’re interested in. Twenty-three countries comprise the Arab League, but only Saudi Arabia, Iraq, Kuwait, the United Arab Emirates (UAE), and Iran are major oil producers.

China is decades ahead of the global curve when it comes to understanding the strategic importance of rare earths. But with demand set to double to 225,000 tons by 2015, not accounting for the burgeoning green energy industry, nobody's immune to the coming supply shortfall, including China.

The lingering impact of August 3, 2010, clash on the Israeli-Lebanese border lies in the greater context of, and wider strategic dynamics in, the Middle East. These aspects were highlighted by HizbAllah Secretary-General Hassan Nasrallah in his speech later that day.
Overall, the issue dominating the overall situation in the Middle East is the reaction by the local powers to the emerging new grand strategic reality: namely, the demise of the United States as the dominant regional power. This is a dramatic reversal of a concentrated US policy of more than half a century.

Middle East oil countries should increase production of heavy oil as oil prices remain higher and improved technology makes it easier, those attending an industry conference in Bahrain were told. Bahrain’s oil minister, Abdulhussain Mirza, told the Heavy Oil World MENA conference that heavy oil reserves in the region were estimated at 1 trillion barrels, or 28% of total world reserves, but historically accounted for little more than 10% of production. “The vast reserve demonstrates the importance of heavy oil as a future energy source, one that cannot be overlooked and, therefore, companies that position themselves early in the heavy oil business are likely to win the game,” Mirza said, according to local news reports.

The lock-step inverse relationship between the dollar and the stock market appeared to take the day off Monday. Pre-opening, the dollar had backed off slightly in the face of new rumors of a Greek rescue package. Stock futures and oil firmed in reaction. Gold refused to get out of bed. As U.S. markets opened, the dollar began to firm on the lack of any details of the rumored package. The dollar rally failed to even dent the rally in stocks and crude. Around noon, the dollar (DXY) rally topped out and the greenback began to weaken. Stocks and crude did not appear to even notice. - Art Cashin

Some traders claimed that other assets did not react to the dollar rally because of its relative level. The DXY rally failed to reach the levels it hit in the hours after the Discount Rate hike. It was a nice theory but failed to explain the afternoon selloff in crude that accompanied further weakness in the dollar.

The Middle East peace talks are at a deadlock. Negotiations between Israel and the Palestinians to move ahead with the plan established by the so-called Quartet – the US., U.N., EU and Russia -- have faltered and come to a complete standstill. Continuing with this inertia will have a long-term negative effect on the future of the region both from a political point of view as well as from a business perspective. With the exception of a few risk-takers, what company or business executive would be willing to invest in the Middle East once the region plunges onto the abyss amid renewed violence?

And whenever trouble brews in the Middle East it tends to spill over into other parts of the world. The risk that Mideast violence could spread to nearby Europe might have been one of the reasons that pushed Italian Prime Minister Silvio Berlusconi to say that Israel should be admitted into the European Union earlier this week. Berlusconi made the statement during an official state visit to Israel. Berlusconi, of course, is one of Israel’s strongest supporters.