Window Into Vulnerability

Like many others, I have been keeping up with the geopolitcal
developments of the past few weeks. There were no real surprises
until yesterday when a souped-up Katyusha rocket fired by Hezbollah
struck well into the port city of Haifa. That Hezbollah and perhaps
Hamas might now have even mildly upgraded weapons systems puts a
dangerous new spin on the Israeli - Arab conflict.

Israel will obviously want to re-establish buffer zones in southern
Lebanon as well as Gaza. Moreover It must make a fresh assessment
of its vulnerability to rocket fire, and It will want to probe
Hezbollah and Hamas positions to discern whether It may be
subject to other upgraded weapons. At a minimum, Israel will
want to establish large enough buffer zones to better protect
population concentrations. The hits on Haifa put the President of
Iran's recent comments about the destruction of Israel and Zion
into a more concrete context.

Of course, Israel always knew this day would come, when its
vulnerability to larger scale destruction would become more apparent.
To me, it adds a major new element of uncertainty to the usually
precarious mid-east military calculus.

Perhaps near term Israel can chase Hezbollah and Hamas far enough
away from its borders to secure its position and bring the
several hundred thousand Israelis up from shelters. Longer term,
Israel will have to look at how it might disable these two
hostile factions because allowing them too much proximity to its
borders could prove extremely dangerous if we are at the beginning
of an era when terror can bring heavier destructive payloads.

The easy thing for a veteran investment professional and trader like me
is to sound worldy about the current crisis and advise that we have
seen it all before and to be ready to jump on opportunities that may
come up as geopolitical tensions further rattle nerves in the markets.
But, critical differences arise from time to time, and we may have one
now with Israel in a tighter squeeze than usual.

I'll be lokking at the markets over the weekend, but I plan to study
the Israel vs. terror groups conflict with even more emphasis.