The Middle East - Update

During the weeks ahead we suggest investors, planners adhere to our anchor and acknowledge the glaring risk associated with this region. Course of least resistance for crude prices to remain higher over the intermediate term. Higher crude is not an inflation threat, it is a retardant, and a powerful one if maintained through Q2.

We have seen the beginning of a movement which will swing the entire region. For us it’s a birth we predicted (prematurely) 4 years ago. The little infant’s a tad late but just as welcomed nevertheless.

Pessimism re this region comes easy for world observers. Many confidently await a reversal. As Thomas Sowell maintains, “There is very little sign of tolerance in the Middle East, even among fellow Muslims with different political or religious views, and all too many signs of gross intolerance toward people who are not Muslims.”

This time will be different. “Today’s rebellions are animated, above all, by a desire to be cleansed of the stain and the guilt of having given in to the despots for so long,” Fouad Ajami reminds us. Protests have been more orderly than most expected, devoid of any radical political agenda. Yes, thugs still abound; one is killing his own people and we just this moment heard of violence in Alexandria; yet, subsurface there is a maturity to this movement, a demonstrated sense of responsibility that we have not seen before. The people have shown courage, character and a deep yearning and appreciation for consensual gov’t.

Yes, this time will be different but still fraught with awful risk. This is why we said earlier that any investor would be just plain nuts to listen to authority figures who assure them they are looking at a blip. We set the upside on WTI at about 120. Of course we don’t know for sure and hope we’re wrong but you’re a whole lot more likely to see a 120 print before you ever see 75 again.



Robert Craven
The Craven Report