By EconMatters [9]
[10]
The Latest Conflagration
The Middle East has flared up again and as usual the media hype machine goes into full court press hyping the news event in desperation to boost ratings and sell advertising space. This is a slow time relatively speaking in the world, and now that CNN has beaten the Missing Malaysia Airlines flight MH370 story into the ground, they need something to fill their vapid programming void.
The stock market and financial markets are pretty somnolent lately as well, most days in the financial news world are pretty slow, so they are also desperate to hype any possible news event way out of proportion to bolster sluggish ratings.
This latest event out of Iraq [11] is no different at this point, and chances are this latest Middle East flare up fails to go anywhere and live up to the hype in causing any major supply disruptions in Oil, a Geo-Political Shakeup [12] that changes the game in the Middle East, or has any meaningful impact for the developed world and financial markets long-term.
Middle East & Constant Churning of Chaos
Let us revisit history, remember the Arab Spring? The next question is which iteration of the Arab Spring [13] as there has been about three iterations in Egypt [14] alone all of which haven`t really changed anything, or amounted to anything other than power transferring from one powerful group that doesn`t exactly have its citizens` best interests at heart to another powerful group with the same modus operandi. The more things change in the Middle East the more they stay the same. It sounds like a nonsensical statement, but that is the Middle East constant chaos and change with little progress towards enlightened goals. These events in the end are ultimately power grabs, and while the developed world has elections; the Middle East has ‘revolutions’.
Read More >>> Arab Spring: Counting Costs and [Oil] Profits In MENA [13]
Media Attention Not Exactly Good For Small Insurgent Groups
Frankly I think 15 navy seals on the ground in Iraq with some strategically placed air strikes wipes the entire 2000 member ISIS militia off the face of the earth, and this problem becomes another short lived footnote for history books in the region. Use a little common sense folks, this isn`t a 9 Magnitude Earthquake hitting Los Angeles, this ISIS group wasn`t even on the radar a week ago, and with decisive military action their 15 minutes will last a month or less. This band of highly trained precision military killers is driving around in pickup trucks for goodness sake!
Actually, from their perspective the worst thing that could have happened to them was to get this kind of media attention because the Iraqi track team ran like a bunch of schoolgirls at a Justin Bieber concert. Now they have the world`s undivided attention, not such a good thing for such a relatively small organization that relies heavily on catching opponents off guard.
Sun Tzu's Art of War [15] applies here, if your enemy is stronger, the last thing one wants to do is get their attention and take you seriously as a potential threat until you are strong enough to fight and do serious damage in battle. This little insurgency group called the ISIS worst nightmare was having CNN cover their exploits, now we have large scale security meetings at the Whitehouse planning their demise – not exactly sneaking up on anybody from this point forward. This group needed to take Baghdad before they decided to celebrate and parade around, now they have the world`s undivided attention, and making any inroads towards the oil fields or Baghdad just became much more difficult by a factor of ten.
Read More >>> Crude Oil: Egypt Contagion and A Tale of Two Risk Premiums [14]
Market Implications & Taking Advantage of Media Hype in Both Directions for Oil Markets
This all has market implications and there has been a lot of money made by being patient waiting for the events to play out, and then coming in and shorting the Oil Markets the last five years. There are several dynamics in the Oil markets that make these plays especially enticing for trade setups. We aren`t going to do all the work for investors, put the time in and ask yourself what dynamics could EconMatters possibly be alluding to that makes Oil as a financial and consumer driven commodity different than say Equities, Gold, Silver or Bonds?
Some of the tools required for navigating these events are patience, level-headed critical thinking abilities to analyze real threats from paper threats, and the wisdom to use stops if by chance this Middle East event does take a dynamic twist, and let`s say the Saudi Kingdom is overthrown and the Oil fields are set on fire – now that`s a game changing event.
Read More >>> Oil's Middle East Fallacy [16]
However, if the Saudi Government is strictly overthrown and the Oil fields remain intact, while prices will spike a whole lot initially, that represents a market opportunity both on the way up, and the eventual inevitable collapse.
Oil is a commodity that has value on the World Stage, but the other truism is that even Insurgents need money to flourish! Another truism is that as Oil prices spike, economics dictates that demand drops to the degree and duration that prices remain elevated, i.e., there`s no cure for high prices, like high prices [17]! One gets paid in financial markets on getting the timing right, but in my experience 75% of investors cannot even get the analysis right in financial markets, and who can really blame them with the less than critical analysis that takes place in mainstream media.
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