Real Wealth #268 08/18/2010
The Big Wild Card That The Market Is Missing
There is an old line which states, "All politics are local." We believe in a modified version of this for the markets and it is, "All politics are the wild card." Big up or down days are often the result of political decisions out of Washington or overseas. Last night we read an article that blew us away and we are very surprised the talking heads are not mentioning this risk.
The Jersusalem Post notes that Israel has DAYS to strike an Iranian nuclear reactor before the Russians deliver fuel to the the reactor which is named Bushehr. The window will disappear once the fuel is loaded into the reactor the Israelis will not be able to strike at the reactor because the radiation fallout would be too great.
So Israel has a tough decision to make. Risk their future as a nuclear reactor in Iran would be a serious threat to Israel or take out the reactor like they did in 1981 in Iraq and 2007 in Syria. The problem with a nuclear reactor in Iran is that the excess or spent fuel from the reactor could be used to build a nuclear weapon.
It is hard to believe that Russia is moving ahead with the fuel supply given the current backdrop but it is a very good way to challenge the authority of the United States and its influence on Israel. Israel has a mind of it own and President Obama has strained his relationship with Prime Minister Netanyahu with several snubs and Netanyahu is one who likes to flex his muscle as he was a former military leader.
Former U.S. Ambassador to the United Nations John Bolton has noted this is a wild card and that the strike will have to occur before Saturday which is the day the Russians will load the fuel into the reactor.
The result of a strike that is not anticipated by the market would be a hit to equity markets around the world, a rise in the dollar as well as spike in the price of oil and gold. You have been warned of a potential outlier event that would spook the markets.
Please see risk disclosure link below.
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