I believe it will best to be long Bonds, Gold, Oil and probably short USD. With all due respects, I really believe that a war against Iran is doomed to fail regardless of the miltary might of the US, the whole centre stage will collapse, and demonstrates a failure of reasoning ability. War with Iran will do to the US what the Suez Crisis did to England and France, it will put the US on to the sidelines. So, I believe foreign stocks will increase in value.
It will be the single best thing for the economy. Short term there will be panic selling, but once oil prices come down (the mullahs won't control prices anymore!) people will hop back on the bandwaggon and catapult the Dow to 20.000. I see oil prices back around $18 once Iran is taken out. After Iran, I hope we take out Gaddafi in Libya. Another old feud that needs to be resolved.
The effects on the market would surely depend on how any such war proceeded. Wars have the uncomfortable tendancy to not follow the script. Suppose for instance that a US aircraft carrier was sunk by Iranian anti-ship weapons. I have no idea of the proabablity of such an event, but it must be acknowledged to be possible. I would think that the US markets would not like this at all as it would be a significant blow to the ability of the US to project global power. There are any number of possible scenarios of such a war and some of them are very ugly.
Hmm, not that I don't admire your patriotism and glee in this matter but I don't follow the logic. I think in the short term a war would do the opposite. Oil prices would skyrocket as our military drew down the strategic oil reserve to fuel the military effort. Iran would of course mine the Straits of Hormuz and sink tankers in any way it could. Oil would temporarily become much more scarce and prices would shoot way up and probably be rationed. Frankly I support high oil prices and getting out of a dependent relationship with lunatic oil countries. It seems that oil creates mental diseases as most large oil producing countries seem to be lunatics and have madmen running them. But I digress. If oil is kept high in price OPEC is totally dis-empowered and alternatives ALL become cost competitive and 80% of the energy money stays here in the US and North American (Canadians) and helps western interests and creates large number of new jobs. Coal gasification, nuclear, natural gas etc. all become very very viable with oil at the $80 barrel mark. The problem in the past is that once the US tried to migrate away from oil OPEC would ramp up production to drive prices down so investors would pull out of the US change in energy in-dependency and stall the efforts. Now that OPEC can NOT keep up with production do to high demand they are completely dis-empowered and economically doomed to irrelevance. They don't have enough capacity to fund their own industrial revolutions and the US has succeeded in preventing them from ever economically surpassing our economic capacity. No other nation on the planet has as much cheap oil captured and invested in its infrastructure as the US does. Think if the millions of miles of interstates, buildings, and infrastructure at large that was built with cheap oil since WWII. No other country, not even China using lax environmental laws can approximate the low cost investment of cheap oil that the US has intrinsic to its economy. Our early investments in cheap oil will guarantee or long term economic stability over our competitors since the cost to get to our level of expansion is now too high. We just now need to transition off oil and fast. As for Libya - we should leave them alone as they are one of the HUGE success stories of west/Arab cooperation. After US government put a chunk of US steel in Gaddafi's butt decades ago to stop his terrorist campaign he finally learned his lesson and is now very moderate and reasonable with the US. He is not perfect mind you - but this is a changed man who is no longer hostile to the west and sees the advantages of being more moderate. The USA's only real core enemy anymore is N. Korea, Syria, Iran and Venezuela. To a lessor degree we need to watch China and Russia (Putin is sneaking around and up to no good in Europe and ex-Soviet states). Iran is winnable if we play moderate Arabs against them and we go in with a Balkanization strategy to carve up the place through a combination of economic pressure and military containment. Frankly, if it were my call I'd call Iran's bluff and destroy every oil well they own in 24 hours with cruise missiles to deny them an oil weapon at the very next time they sideways threatened anyone again (Europe, Israel or the US). We don't need to invade to take out the current lunatics running the place - just deny them oil revenues so they can't pay off the mullahs and the factions with oil money. The Revolutionary Guard would eventually turn against the gov with no salary/pay and then hopefully side with the students/intellectuals and people to form a more moderate gov. Frankly I am expecting somone internal to Iran to assassinate the nut-job Mahmoud Ahmadinejad and upper clerics Ali Khamenei to be eventually arrested like his predecessor and silenced. What few remain of the unexecuted intellectuals and students will eventually demand changes. It will all depend on how fanatical the Revolutionary Guard are and what general has the most sway. TS
uncertainty of any kind tends to 1. hurt stocks 2. help gold 3. help bonds. this kind of uncertainly would more than likely also 1. help oil (well in a bad way...help it go up)
Good post. Oil and Gold would most likely break new highs, however, I believe you over looked Israel in this potential conflict. I would not rule out a first strike by Israel that is probably welcomed by several key players. For the record, I do not support general wars, but not everything is perfect in life. Then again, I do not trade for the goal of a wealthy life style, either way, very good post TrendSailor.
I don't think war with Iran will be such a big deal. Unlike with Iraq, there is no need to invade the country. Just a series of bombing raids and missile strikes at their nuclear sites is enough. It could all be over in one night. Since everyone needs the oil, oil fields will not be bombed. And the Iranians will not shut them down either as they need the revenue. But is there enough reason even for a limited strike? Do Americans care enough if Iran builds the n-bomb?
Well one thing is for sure - it would result in a windfall for the real estate market and get it out of its doldrums as Europeans and wealthy moderate Arabs in the region fled to the US for safety. Hmm, maybe we should just give these nut cakes the bomb so the world can get use to the reality and the implications of them having it. Of course the backup would be to have a remotely trigger-able detonation circuit that the US could fire anytime we saw them renege on the licensing terms (cheap oil of course). TS
There is zero chance of the US bombing Iran. Thats why Ahmadinejad is running around acting like he can take on anyone. High oil prices bring out all the crazies
Well the only reason the US would care would be to keep a stable oil supply and keep all hell from breaking loose over there. Because as long as the current Iranian government is present, the minute intelligence in Israel finds out Iran can actually deliver a nuke, if the U.S. doesn't attack, whole parts of Iran are going to disappear in mushroom clouds created by the Israeli air force.