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Bullish on War, Part II

by Michael Nystrom
February 23, 2007

Today's New York Times (Friday, Feb 23 2007) has an article that sheds more light on last week's Bullish on War piece. Before I go any further, let me say that I have ambivalent feelings towards the New York Times. On the one hand, I recognize its place as a filtered mouthpiece for establishment propaganda (remember Judith Miller). And I know that not all the "News that's fit to print" makes it into the Times (e.g. scant news about the 911 truth movement, except to ridicule it as a conspiracy). On the other hand, the paper is filled with news that you're hard pressed to find anywhere else. As a result, one has to learn to read between the lines, try to tease out the facts and come to one's own conclusions. In other words, the same rules apply when reading the Times as when reading anything, on the internet or elsewhere. Use your best judgment. Most of the real propaganda appears on the front page anyway. Deeper within the folds, the news seems to be a little less managed.

This particular article from page Page A10 is titled, Arab States, Wary of Iran, Add to Their Arsenals but Still Lean on the U.S., disucsses the massive weapons shopping spree that Arab states across the Persian Gulf are engaged in. In the print version, there is a picture of a standard tradeshow showroom, only the products on display are huge bombs, taller and certainly heavier than either the sharp looking, business-suited bomb salesman or the potential bomb-buying customer dressed in a traditional white Arab dishdashah. The bombs appear to be special showroom models, with cutaway views that reveal thousands of gumball to golf ball sized pieces of shrapnel. The bombs are designed so that as they explode, the shrapnel balls are hurled out in all directions with the intent of killing as many people and creating as much destruction as possible.

The article states that while the mostly small and vulnerable Persian Gulf monarchies and sheikdoms, such as Kuwait, Qatar and the UAE have traditionally relied on the US military for their protection, they are now realizing that this protection might not be around forever. After all, the US military is being stretched pretty thin. Furthermore, as a result of the increasing tensions in the region - the US has two aircraft carrier battleship groups glowering at Iran - they're thinking it wouldn't be a bad idea to have their own weapons anyway. Just in case. Therefore, these nations are going on a public weapons shopping spree at the semi-annual Idex military trade fair, which is held in Abu Dhabi, UAE and sponsored in part by you, the American taxpayer (and also Time's person of the year, don't forget) via the US Government/Department of Defense.

This is the region's largest arms market, featuring close to 900 weapons makers from around the world, 37,000 military and business visitors, plus 650 journalists and media personnel from over 150 publications. That's a lot, because a lot of money is going to be spent, according to the article:
The Persian Gulf has been a lucrative market for arms. Saudi Arabia, Kuwait and Oman spend up to 10 percent of their gross domestic product on the military, amounting to nearly $21 billion, $4 billion and $2.7 billion, respectively, estimates John Kenkel, senior director of Jane's Strategic Advisory Services.

If they follow through on the deals announced recently, it is estimated that countries like the United Arab Emirates, Kuwait, Oman and Saudi Arabia will spend up to $60 billion this year. The biggest buyer in 2006, according to the defense industry journal Defense News, was Saudi Arabia, which has agreed to buy 72 Eurofighter Typhoon combat jets for $11 billion. It also has a $400 million deal to upgrade 12 Apache AH-64A helicopters to the Longbow standard. The kingdom also reportedly plans to acquire cruise missiles, attack helicopters and tanks, all for a total of $50 billion.
This helps explain the bullish chart of the Amex Defense Industry that I published last week:

Bullish on War

It is not just the US government, but the entire world that is stocking up on weapons. Even pacifistic Japan recently upgraded its Defense Agency to a full Ministry position, something that was downplayed in the press as a matter of little consequence. But history teaches us that these types developments do have consequences. Momentum is not easily reversed, and arms buildups inevitably lead to war.

As the old pros say, there is always a bull market somewhere. For the foreseeable future, the world remains bullish on war.

Next week, part 3. Sign up to be notified.

As always, comments on this story are welcome here.

Also of interest:
Nemesis - The Last Days of the American Republic
Bullish on War, Part I
Ron Paul: Inflation and War Finance
Alan Greenspan 1967: Gold and Economic Freedom
Must See/Listen Video: Dr. Bill Veith with Alex Jones on the Fiat Money System
McNosis, Retiring Boomers and the Silent Crash
Tough Times Ahead for Elder Boomers?
A New American Dark Age
Wheat Shortage? The Emerging Bull Market in Wheat

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