Zeev...
The war will almost certainly start very soon but as the hour approaches, the reality of a lot of uncertainties argues strongly against an immediate rally. Just to list a few:
a) a preemptive strike by Saddam against our troops, especially if chemical/biological weapons are used.
b) a strike by Saddam against Israel, possibly with chemical/biological weapons.
c) will Saddam's Russian made anti GPS jammers really work and impair some of our "smart" weapons capability?
d) will Saddam be able to destroy his oilfields and to what extent will the damage be?
e) will he be able to damage the oil fields of Kuwait?? Saudi Arabia??
f) Saddam just explicitly promised to wage war on the US through terrorism - can he do it?
g) will other world terrorist groups take the war as a signal to greatly increase their efforts against us?
h) is Saddam able to get his military to wage a protracted and bloody urban warfare.
i) will North Korea or China (or others) take advantage of this opportunity to do mischief while we are occupied elsewhere.
k) what will be the reaction of the arab and muslim world to the war??
While it is hopeful that all of these questions will answered in our favor, the negative implications of one or more of them erupting in fact could be enormous and have a very serious negative impact on the markets. For that reason alone, the risk/reward equation for the markets over the next few days should take the markets down and I doubt any strong rally will develop until most of those questions are answered - and there is always the chance that we have already seen the "war rally".
The primary arguments against a significant selloff here would be first, a hope that everything will go well, and second (probably more important) Greenspan's recent promise that he would do every possible to prevent the markets from being hurt by the war. To date, he has been very effective at defending the markets but I still think that if selling volume were to pick up, even the PPT would be hard pressed to prevent a selloff.
We shall see what happens tomorrow.
mlsoft
AI
