chainik...
Timing the market in an Iraq war is going to be very tough and probably best played by ear. I wish I had the whole article to put the excerpt in perspective, but I very much agree with his final statement:
"Of course, I may have to change my mind more than once, as events unfold."
It is almost impossible now to have much of a game plan because the event is so big and the possible outcomes are too very diverse. He may capitulate and go into exile just as things are beginning, he may become the victim of a coup at any time before or during hostilities, or he may fight it out using urban warfare and chemical/biological weapons. Saddam is crazy enough that he may destroy his oil fields and try to do the same to those of Saudi Arabia, Kuwait, and others, and he very well may launch a strike against Israel, in which case anything could happen. It's all a huge unknown.
I would start by noting that the bear market has little to do with Iraq - had Saddam died or been replaced years ago, we would be in the same bear market right now. The market is going down because of a steadily weakening economy coupled with extremely high valuations as we try to adjust to the bursting of the bubble. Even after the Iraqi problem is all over, we still are in the same economic conditions, and still have terrorism, the middle east, and North Korea to deal with, just to name a few problems facing us. Iraq is just a small additive to make things worse, but indeed Saddam has the potential to make things very much worse before he is eliminated.
The most expected scenario is that any war will be quick and painless - a virtually bloodless "computer game" that makes for pleasant viewing of the evening news for a few weeks at most and then is gone. I have my doubts about that scenario, but if it does unfold, I would expect a pretty good rally (three days to three weeks?) as the good news comes in, but which would then be followed by a return to the bear. That is also pretty much what I would expect should Saddam be eliminated or takes exile before hostilities begin. Should the war not go well, especially if it gets really ugly, the market would probably need a strong dose of PPT to keep from falling completely out of bed and crashing.
Because my main goal is capital preservation in order to be able to take advantage of eventual "lifetime" type bargains at the end of the bear, as any invasion gets underway I will probably go largely to cash and play only day by day until I have a better idea of how it will go. The market is not the place to be a hero, at least not for me.
All my own opinions, though, and subject to change as Fleck so well noted.
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