Blog : Benghazi and My Bad Calls

by Peter Leeds on November 7th, 2014

It will affect you and stocks as Libya collapses into chaos

Predictions from 2012 Revisited

• Oil-Rich Libya is About to Collapse into Civil War

• Oil prices will spike on the coming supply disruptions

• A risk premium will inflate in oil and precious metals

• the Volatilty Index (Fear Index - VIX) will spike

• This will affect related ETFs like VXX for the better, and the inverse XIV should be weighed down

• You will pay more for fuel, while fuel-dependent industries (airlines, couriers, limos and taxis, shipping) will feel the hurt.

All of these concepts will be affected to an even greater degree as nations like Turkey, Iran, and Egypt get more and more involved.  Then it will just get even more incredibly ugly than it already has.

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Predictions from 2 Years Ago

I got plenty wrong (so far), and lots right.  Here were my main thoughts for events shaping stocks and penny stock investments from back in 2012:

• Republicans try to win back the White House with a ticket of Mitt Romney and J.C. Watts
• Obama wins re-election
• Occupy Wall Street soldiers on, but in a dramatically different form
• Unemployment rate slips in 2012 from 9% to 7.5%
• Libya becomes much less stable (see below)

I was very wrong about the J.C. Watts call, that I admit.  (Watts would have been a better pick, between me and you.)

Obama was a no-brainer... do the math. To win the Presidency, you need 270 Electoral College votes.  Just look at uncontested States or those in which Democrats led significantly. California = 55 Electoral College votes, Hawaii = 4, Washington = 11, New York = 33... The total got to 270 pretty quickly, and factored into our analysis when a year before the election, I declared the Obama would not only win, but win pretty handily.  Many months later, when the actual election took place, Democrats won by a landslide.

Don't let the media fool you.  They attached the "but that is within the margin of error" to every poll result they revealed, so that you weren't sure who might win.  Of course, knowing ahead of time when no one else seems to can create your investment opportunity.  For example, a Democrat is better for the stocks of stem cell Research companies, while a Republican will be friendlier to natural resource penny stocks and investments.

Anyone could have known the eventual outcome months ahead of time... except anyone who believes CNN when they act like it's a tight race... (and Mitt Romney apparently).  He is surrounded by Yes men who tell him what he wants to hear.

An interesting note which has NOTHING to do with penny stocks or anything, is that Mitt Romney's wife, Anne, as well as Michelle Obama's father, both had or have Multiple Sclerosis (MS).  I only notice because I also suffer the disease.  You can check out what I'm doing about it here.

Occupy Wall Street went exactly as you would expect.  I love the message, I never agreed with the way it was handled.

Unemployment Rate:  People forget what it was like back in 2012.  The number of people without jobs, or under-employed, affected almost everyone, either directly or indirectly.  With unemployment sitting near 10%, most thought things might only get worse, or at least never improve.

Well, since then the economy has improved dramatically, and there is still room to go.  Employment is a lagging indicator remember, meaning that it gets better AFTER the economy gets better.  Like now...

Libya is Collapsing:  This matters to you because it will spike the prices of oil, and eventually cost you more in gas.  It will also bring Turkey, Syria, Iran, Libya itself, United States, England, Canada, France, and numerous other nations into a battle with absolutely ZERO clarity.

Two years ago, I mentioned that Libya was on the verge of civil war.  Gaddafi was the strong-man who held 140 different tribes together into one nation.  Much like when Saddam was killed, the nation no longer had to "behave or die."

Libya is not a nation, it is a collection of 140 tribes.  Each has it's own loyalties, religious beliefs, claims to oil rights, scores to settle, military capabilities, and intentions.

Very few in Libya do, or ever did, trust or back the U.S. imposed leadership structure, known as the National Transition Council.  It was actually acting Prime Minister and Chairman Mahmoud Jibril who stepped down almost immediately, citing that, "Libya is a conflict without boundaries." 

It is my opinion that:  Libya will collapse into civil war, and right now there is much more chaos than your conventional news is reporting.  Oil prices will spike on the coming supply disruptions, and a risk premium will inflate in oil and precious metals.  The Volatilty Index (Fear Index - VIX) will spike, affecting related ETFs like VXX for the better, and the inverse XIV should be weighed down.  You will pay more for fuel, while fuel-dependent industries (airlines, couriers, limos and taxis, shipping) will feel the hurt.

All of these concepts will be affected to an even greater degree as nations like Turkey, Iran, and Egypt get more and more involved.  Then it will just get even more incredibly ugly than it already has.