Monday, August 27, 2007


The fuse to a potential news bomb has been lit. So far, there has been little reaction from the market but the fuse is burning.

Yesterday, a deal was made in Iraq that met some of the demands of the Sunni minority leadership. The deal will allow former members of the Bathist party to participate in the new government, opening up many potential jobs including the police force and the military. The pressure is the leadership of Iraqi to make this deal along with an oil revenue sharing deal. Progress on the one is moot without progress on the other. That is most likely the reason for the moot reaction so far. Still, progress is progress. Should a deal be made, a rapid increase in oil production in Iraq should be just around the corner. An increase of 2 million barrels per day would be on the immediate horizon (of less than 2 years). An increase of 3 to 4 million barrels per day would be on the more distant horizon.

Investors should note that President Bush will pull out all stops to get this deal done while he is still in office.


If a deal is made to share the oil, the Iraqi people will have a strong economic incentive to end the blood shed. The bad guys will be asked to leave or be reported to the army. On September 15, General Petraus will report that the surge is not working perfectly but it is working well. A new political coalition and a new oil sharing deal would support this contention. The war is not lost. Terrorists are active in countries around the globe but the number of countries actively working together to stop them is as high as ever and the number of countries quietly supporting them has declined. The world is a safer place than it has been in years. Conditions are ripe for economic deals of many kinds to be made between many governments.

The BOOM, BOOM, BOOM is here.