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Seeking Alpha

Wednesday, December 27, 2006

Wake Up Call - Dec 27

Good Morning. This is your wake up call for Wednesday December 27, 2006.

* President Gerald R. Ford, our 38th president, passed away at 6:45 PM Tuesday evening.

* Overseas, avian influenza is raising concern in Egypt, where the family of a lethally infected individual has taken ill.

* Iraq's former dictator Saddam Hussein will be put to death in a matter of days, with debate currently focused on whether to televise the hanging or not.

Well, I guess that's the bad news, depending on how you view capital punishment! The good news is that U.S. equity futures are sharply higher across the board this morning. Traders in Asia and Europe returned from holiday in a good mood it seems, as the dollar weakened against the yen and the euro on speculation the slowing American economy might lead to a Federal Reserve rate cut sooner rather than later. Asian and European markets are broadly higher Wednesday as a result.

Yesterday's fall in the price of oil is likely helping the drive as well. However, we anticipate that despite weather patterns that are favorable for oil conservation, the Iranian conflict is only just beginning. The long-term event timing may be tricky to pinpoint, but its clear there will be a near-term acceleration of activity as Iran responds to sanctions. We anticipate Iran could ask IAEA inspectors to leave the nation as a first response. In the event of any minor intervention of ships or cargo headed for Iranian ports or major assault on Iran's nuclear facility, we anticipate Iran will withdraw from the NPT and urge its agents overseas to begin gorilla warfare activities at minimum. We shudder to think of where the high end of the disruptive range reaches, but it could include invasion of Iraq, where Iranian troops might be welcomed as liberators; invasion of Kuwait, which would put a lot of oil into the wrong hands; and attacks upon Saudi oil refineries and facilities, which could spike the price to $150+. Yes, we believe the current drop in oil is a short-term event. We will cover our geopolitical expectations and concerns in the first issue of The Geopolitical Factor, to be published soon. Stay tuned for "Today's Morning Coffee" to be released later this morning. (disclosure)

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