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Your Palantir or Crystal Ball: What if it actually happens?

edited February 2012 in Off-Topic
I'm becoming quite concerned as I see an ever-increasing drumbeat of war-talk escalation. Of course, none of us knows for sure if this talk is merely part of a well-orchestrated psychological war or the real thing. But given the volatility of the Mideast and the ancient fears and hatreds involved, the odds don't seem to favor a peaceful outlook.

The general consensus of this board regarding the stability of this market suggests that not only could the current gains be quickly lost, but significant losses could be inflicted in the event of virtually any major world-wide economic disturbance.

If Israel were to actually carry out it's threats, I would think that all bets would be off regarding the financial impacts worldwide. I know that some board members were quite prescient regarding the 2007/2008 financial fiasco, and took steps to preserve their investments prior to that crash. Are any of you looking into your crystal balls regarding the current possibilities, and if so, what are you seeing?

Comments

  • Hi OJ,

    Raise some cash. Not everything, not huge, but raise some cash. When the Israelis attack Iran this spring, the markets will tank. However, I am thinking it will be a surgical one time and short series of very targeted high tech strikes. Perhaps a 24 hour blitzkrieg type attack. When the world doesn't come to an end, the markets will all road back.

    The nut is to have some cash, so that IF they attack and IF the market tanks, you can buy some broad market index fund and wait. Most of your stuff that you don't need to be fungible, you leave alone to come out the other side. feh. I've read where we should have some of our emergency money in blue chip stocks (hopefully paying a dividend) that will survive a financial system collapse. The good ones will. Gov't bonds may be so much toilet paper.

    peace,

    rono

  • Thanks rono- had you and Catch in mind there with the prescience.
  • edited February 2012
    Hi OJ,

    Have to hit the pillow; but will place this link from several days ago. Action not necessarily related to any military actions; but of interest to the situation and area.

    http://www.businessweek.com/news/2012-01-24/china-hires-at-least-two-supertankers-for-iranian-oil-data-show.html

    Addendum: I will also tend to agree with rono. One may find U.S. Treasuries and dollar to move positive until the ramifications are determined. Energy and gold may move forward; but not necessarily their related equities. Global equities would also likely pull back for some time. Overall, I would suspect silent hand claps and smiles behind closed doors if Israel caused some changes with Iran's nuclear program; not unlike 1981 in Iraq.
    I don't know that military action by Israel would be the move. Surely their are those within Iran who want a big change and could find them assisting the Mossad or other interested parties with internal turmoil. The recent death of an Iranian scientist via a car bomb and reported damage to some of the nuclear centrifuges from a planted software bug are examples of other actions that would not and likely could not have a finger pointed at any one country. A mission accomplished without making many folks unhappy. Sidenote as to tech. warfare: Perhaps the recent story about Iran "capturing" a U.S. drone is that they were allowed to capture or a drone was placed into their airspace and forced to crash. A "Trojan Horse" gift from the U.S. Who knows what cute, little software cooties may hide within the programs that the Iranians will or have attempted to download and play with.
    However, recent history points that Israel doesn't hesitate to take swift actions when their citizens are involved......Munich, 1972 and Entebbe, Uganda are two examples.
    I'm sure plans are upon table tops in many countries for the "what if" scenarios.

    Overall, a short lived event that may alter some market movements in a short term aspect (3 months). I don't suspect that oil would be affected long term, as Iran needs the money. The exception may be a long term boycott by others to purchase crude, UNTIL Iran behaves itself.

    Side note: Of interest, regarding older history and the shaping of the middle east by the colonial powers; attempt to find via your library system..........
    "Riley, Ace of Spies". A most interesting story about a real person and the many little items and persons who shape and change future events.
    http://en.wikipedia.org/wiki/Reilly,_Ace_of_Spies

    Take care,
    Catch
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  • edited February 2012
    (disregard- moved)
  • edited February 2012
    Jeeze, Maurice, Iran/Israel is bad enough- that one really bothers me, but I'm thinking that rono has the right outlook on that. But for sure, if Israel goes after Iran, it's just a matter of time before we pay the price to some terrorist nutcake too, whether we have anything to do with it or not.
  • edited February 2012
    I think a good deal of it will be carried out by other, non-traditional means, such as our actions that are believed to have caused sudden hyperinflation in Iran the other week. Destabilize the country from within (apparently right before elections), etc. There could certainly be consequences, unintended and otherwise, plus you also have China, India and Russia more than willing to deal with Iran (see catch's link above and the note below. How does this end well when you have a number of major countries still more than willing to line up and pay for oil in their own currencies or gold?

    "The new US sanctions against Iran's central bank was part of the NDAA bill that Obama signed into law on New Year's Eve and are no doubt seeking to isolate Iran for their anti-dollar behavior. To garner support for the new sanctions US Treasury Secretary Timothy Geithner traveled to China to attempt to persuade the Chinese government to take part in the sanctions on Iran's banking system.

    In response to US pressure to reduce or eliminate Iranian oil imports, China's deputy foreign minister has said he does not believe the issues of Iran's nuclear program and China's economic ties to Iran are connected. And therefore China will not stop or even reduce the oil they import from Iran."

    http://milwaukeestory.com/index.php/2012/01/10/us-sanctions-seek-to-target-irans-anti-dollar-policy-350/

    Also:
    http://articles.businessinsider.com/2012-01-02/markets/30580643_1_import-iranian-oil-nuclear-enrichment-program-mehr-news

    Petrodollar pumping US policy on Iran, backfire looms‎
    http://rt.com/news/iran-attack-us-allegations-243/

    "There are rumors that India, which imports 12% of their oil from Iran, has agreed to purchase oil for gold. Energy trade with China, importing 15% of its oil and natural gas from Iran may be settled in gold, yuan, and rial. South Korea plans to buy 10% of their oil from Iran in 2012, and unless Seoul sides with American and European sanctions, it is likely to use gold or their sovereign currency to pay for it. Also, Iran is already dumping the dollar in its trade with Russia in favor of rials and rubles."

    http://www.usnews.com/opinion/blogs/economic-intelligence/2012/01/30/the-financial-war-against-iran

    As for investing, if the situation really escalates, I agree with Rono's take. I continue to own Glencore, the world's largest commodity trader (which is now merging with Xstrata if that's approved), as well as commodity funds and other hard asset plays.

    Otherwise, I continue to believe being very globally diversified is of primary importance.
  • I tend to agree with rono. First Eagle Overseas management always has some cash set aside. And when the earthquake/tsunami hit on a Friday (I think) last year, they had the weekend to look at the numbers and the companies in Japan. When the markets opened on the next Monday, they were big buyers. That is not unlike what rono suggested above.

    My crystal ball has been in the shop for repairs probably for 5-6 years now. There are so many what-ifs that I could worry myself to death if I spent time on all of them. I've been through enough national and world economic and political crises that it's hard to imagine an Israeli strike to neutralize Iran's nuclear weapons plans would be much more than, as rono says, a short-term event. Things could always get out of control, on this issue or any other. The world has always been a dangerous place, but if we prepare for every what-if as if each one could be the end of the world, we'd put all of our money (which would probably be worthless) in a can in a hole in the backyard.

    Anyone remember Y2K? My company spent thousands of dollars and hundreds of hours preparing for this non event because of federally-mandated requirements for what was supposed to be an end-of-world happening. Remember Ed Yardini, who still is treated like a know-all swami, who predicted a disaster at midnight 12/31/99? The news media tend to forget all the terrible calls the experts make.

    Bottom line...invest only what your sleep factor, time horizon, and cash flow requirements necessitate. If you do invest, and if you panic every time you turn on the news, keep some cash aside. But the truth is that most of the folks who do keep cash aside for opportunities, rarely have the guts to invest it when that time comes. It's just human nature.
  • edited February 2012
    Tell it like it is BobC - "a classic" & we thank you.
  • Thanks very much to all who have taken the time to reply. I much appreciate your input and insight. Will go with rono's suggestion and in the tax sheltered accounts take most of the recent profits to cash, and wait for redeployment opportunity.
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  • edited February 2012
    Reply to @Maurice: Tend to agree with you Maurice. John Templeton once said that a market rarely falls more than 50% - so such drops represent buying opportunity. However, in this bizzaro world today, I doubt Sir John would repeat that advice. When gold can run down from $850 to $250, and than than climb back up over $1750 - all in our investment lifetimes - Katie bar the gate! Similarly, Japan (who many thought we should emulate back in the 80s) has seen their stock index fall from over 30,000 to what? 6,000 - 7,000? - and remain there for 25 years. Anybody buying near the bottom would have had a long wait by now. And heaven forbid they dollar cost averaged in all the way down! So, while I tend to agree and can think of instances where I was rewarded for buying into a depressed market, there are some brutal exceptions. Going to BobC's point - if I read him right - it's very hard to move in and out of equities based on one's geopolitical read because the world is usually in some type of upheaval. FWIW
  • edited February 2012
    Well, we'll just have to wait and see. Took ~50k YTD gain to cash. Like Scott, not at all convinced about this market at this point, so the bomb-banging in the mideast kind of was the tipping point. Lord knows (or maybe even He's scratching his head) where the Greek tragedy/fiasco will end up.

    (I can never see the word "fiasco" without flashing back on a priceless Sid Caesar/Imogene Coca TV skit. Remember how they used to introduce the new car models each year? The huge new car slowly rotating on a large turntable with a glamorous woman lying on the hood. Picture the "Revolutionary New 1959 Fiasco"! Yes, with Imogene lying on the hood. And Sid grandly opening the car door to show off all of the wonderfulness. And the door falling off the hinges... and definitely downhill from there. Still makes me laugh 50 years later... those vaudeville vets were really good.)

    Anyway- now at 40% cash / 38% Bond / 23% Equity

    Hey, that's more than 100%! Either a rounding error or I did better than I thought!
  • edited February 2012
    Reply to @Old_Joe:

    Here's my thoughts:

    1. If you have a long time horizon for an investment or investments, like I do now with a number of individual holdings, then it doesn't matter and I'm - personally - tired of timing and predicting, at least in large scale. Smaller scale? Fine. As I've said before, I think there are things that are longer-term stories and I do not want to time them. I can normal weight/overweight them and shift back and forth, but not doing any more whole movements in and out of various sectors/etc.

    2. If you have profits on holdings with a shorter-term time frame or are in retirement age and are looking to reduce risk ,then consider taking some off the table. Whether or not there's armageddon tomorrow, I think it's hard to argue that, at least for today, the market is/was overbought.

    3. I don't agree with Buffett about everything, but I do agree that you have to be in stocks to some degree, and that inflation is going to be an issue to contend with. I mean, I just went grocery shopping and in the last month or so I've started to notice again changes in packaging and/or price increases, some that are starting to get ridiculous.

    4. I do not think that anyone should be 100% in anything, whether it be stocks, gold, farmland, commodities, bonds, etc. This continues to be a time period that is very uncertain and while I *personally* have limited exposure to fixed income, I would not suggest someone twice my age to take the same investment positioning that I do/am. I continue to recommend a portfolio both diversified in terms of assets and in terms of the globe, with an eye towards inflation.

    5. I'm not as certain as to the outcome of the situation in the Middle East, but I think that A:) trying to somehow time the situation in relation to investing is completely futile, certainly (those near/in retirement may want to reduce risk, and that's fine, but I could see a situation where the market keeps working higher in the meantime while some people timing a possible event watching from the sidelines waiting for an event that never happens), and B:) I think there are layers beyond the core situation, especially the fact that China seems completely focused on dealing with Iran and has no interest in our view (same India/Russia).

    + Yield is going to continue to be of importance, but a lot of these names (stocks), funds or bonds, etc became overbought when everyone started running for yield. Now that things that were left behind last year are taking off this year, it may be worthwhile to look at some of the more boring names again that may have lagged. I continue to like MLPs and infrastructure, but there are some more blue-chippy names that have lagged, and some Euro-heavy international dividend funds have lagged.

    Investing advice bonus:

    "BERNANKE: HOUSING MAY NO LONGER BE VIEWED AS SECURE INVESTMENT"

    http://www.zerohedge.com/news/ben-bernanke-ftmfw-quote-day
  • Reply to @scott: "BERNANKE: HOUSING MAY NO LONGER BE VIEWED AS SECURE INVESTMENT"

    Wow! Who would've guessed that?

    Have a nice weekend, young man!
  • edited February 2012
    Reply to @Old_Joe: Thanks, you too.

    As for China and oil imports that I mentioned above:
    http://www.zerohedge.com/news/china-january-oil-imports-rise-record

    "At 23.4k metric tons of imports in January, China just imported the most crude in its history, despite the traditionally slow period around the Chinese new year. The trendline is unmissable - at this rate China will become the world's largest importer of Crude in a few short years, surpassing the US easily with its 28K metric tons of imports ..."
  • edited February 2012
    reserved:-)


  • edited February 2012
    Reply to @Old_Joe: Please don't misinterpret my remarks as "bullish on equities". I too have raised some cash (not as much as you) and expect some sort of pullback following the 15 - 20% run-up in our markets since July. Also, not to be overlooked - a doubling of major U.S. indexes in just three years. Nervous? Yes. Cautious at these levels? Yes. However, where I take exception is in (1) presuming you know what's going to happen over there, (2) presuming the eventuality you envision will be negative for stocks, (3) altering your long term investment plans based on those suppositions. Perhaps I misunderstand you, but that's what I'm getting from your input on this thread. I simply don't possess that same degree of certainty and so try not to be swayed by the conjecture.

    For the record, here's what I wrote January 26 in your thread "Extreme S&P 500 Momentum...":
    "No, don't accept those technicals if calling for prolonged bear. However, believe they're correct if lookin for brief pullback followed by resumption of upward trend. With indexes up near 15% past 6 months, we pulled bit off the table this week - hoping to put it to work @ lower prices next few months."

    http://www.mutualfundobserver.com/discuss/index.php?p=/discussion/comment/8154#Comment_8154

  • edited February 2012
    Hey there Hank- Not at all sanguine/convinced re what might happen in Mideast (or anywhere else, for that matter!). Certainly have no more insight or conviction than anybody else. Do think though that the odds at this point favor some sort of military intervention in Iran, and agree that the impact may in fact be relatively muted.

    By taking just the YTD "profits" off the table only made a 1% adjustment in the equity exposure, from 24% to 23%; cash from 37% to 38%; no change in bond fund allocations (still at 38%). No long-term changes...still pretty much a balanced/con-swervative setup.

    Mostly I just thought that right now looks kinda toppy. We'll see.

    Take care.
  • hi old joe
    talked w/ one my friend/cfa @ smith&barney [or morgan stanely]. He says he has some insider information that once EU situation passes it will be a massive rally. Don't know if this is true but I would bet my 2 cents [not my house] on his words.
    have a good night
  • Reply to @Anonymous: ummm.... any chance he could be a little more specific on exactly when he thinks that the EU situation will "pass"? Maybe nail it down to some month or even maybe some year?
  • Old-Joe, don't really know. It's all speculations. I think you have to account for PIIGS - heading toward organized default. US maybe there if we keep printing $$ and spending like crazy. then the whole world may belly up
  • Reply to @Old_Joe: Hell, I don't know. Just wish my brain was half as fast as my fingers on the key board sometimes. In truth, there's never a bad time to take some profits and sounds like you did just that, So good for you.

    Yep, that's a real powder keg.. You got that nailed right. And, yep, the odds favor some military action by Israel, U.S. or others. Lota rumors of this in the press. How markets react is tougher question. Maybe down at first, but than up if the action looks successful.

    I also think there's a small chance (maybe 20-25%) there could be a surprise agreement that would defuse things. Obama would sure like something like that leading up to the elections and it's hard to know what the fruitcake over there is really thinking. I only mention this because nobodys expecting it and could really stoke the markets were it to happen.

    Well, think I'll dismount this "high horse" now & thanks for posting such a "stimulating" thread. Take care OJ, hank
  • edited February 2012
    Hi johnN,
    "He says he has some insider information that once EU situation passes it will be a massive rally.
    Your friend should become very wealthy within the next 5 years.....if the timing is right.
  • Reply to @Anonymous: lol.
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