2010: The Year of the Insurgent
I love early year predictions. We have people debating gold vs. oil, worrying about Peak Oil (a really stupid idea), even Peak Gold (an even dumber idea), and other scary scenarios that will wipe out your portfolio unless we implement eugenics.
As for me, I have yet to come across a single 2010 market prediction that takes into account one simple reality. The largest economy in the world is currently engaged in two long, losing wars that are draining resources out of the private sector at a clip of roughly $700 billion per year and growing (not to mention the somewhat inconvenient fact that people who could otherwise engage in productive activity are getting wiped off the face of the Earth. It's a minor issue.)
2010 will be the Year of the Insurgent. Allow me to explain. (I'm pressed for time so you'll just have to accept that I've taken the proper historical context into account. Meanwhile I'm watching The Goods, so I'm a little distracted.)
After 7 years in Iraq and 8 years in Afghanistan, the United States is no closer to victory than they were at least a half a decade ago. In fact, since there is no clear objective, and never has been, one might be tempted ask not "Why hasn't America won already," but rather "Why haven't the guerilla insurgents already emerged victorious?"
Well the answer to that second question is there if you're familiar with the history of successful and failed guerilla insurgencies. For the successful there are many examples: the American Revolution, Mao in China, Ho in Vietnam, Fidel in Cuba, etc. For unsuccessful, how about the Mau Mau rebellion? What happened in Kenya that allowed a force of six million to lose so decisively to a handful of British colonists? (Read more on your own time. It's quite a funny story.)
As historian Mike Resnick explains in How to Lose A War:
1. They went up against an enemy with superior firepower.
2. They failed to protect their supply lines.
3. They failed to rally the people to their side.
4. They failed to protect their troops.
5. They chose uneducated, inadequate military leaders.
6. They lost the propaganda war.
7. They were underfinanced.
So which of these applies to the Iraqi and Afghani insurgents, and why do I think this will turn around in 2010?
Issue #1 has been effectively neutralized in 2009. We see this in the barbarians ability to hack unencrypted UAV feeds. Today, insurgents can see everything that the U.S. command sees on the ground. The Air Force's leadership knew about this weakness as far back as 2004, and were aware of insurgent hacking since 2008, and yet they did nothing. This in spite of the fact that General Atomics Inc., the defense contractor operating the feeds, makes over $580 million per year in government money. The insurgents cracked the feeds with $26 software. Classic.
Issue #2 has never been a problem. The politicized American presence always gives ample warning to the opponents before they attack. There's never any surprise. So protecting supply lines has never been a problem.
Issues #3 and 6 are the crucial ones. For the first few years of the wars, unruly insurgents indiscriminately killing Iraqis and Afghans wasn't very good for public relations. Thankfully for them, the U.S. has dug in, built up, and left tons of shiny targets called State organizations for them to target. Do you know the Iraqi sympathizers that work for the U.S. are now on insurgent hit lists? These sympathizers were promised all kinds of wonderful things by the U.S., including visas to America. They didn't get em, and now they hide for their lives. The insurgents are targeting fewer open markets and more Iraqi and Afghan State buildings. They're gettings smarter. Slowly but surely. When they figure it out, that you can't win the public side by blowing up chicken markets, the U.S. is in big trouble.
4, 5, and 7 has never been an issue. If anything, it's the U.S. that is underfinanced for such a large occupation and lacks the proper military leadership. America has a military made up of Paper Generals and wealthy contractors filled with their own hubris and bloated with an unearned sense of superiority. Pride goeth before the fall.
This is why 2010 can be the Year of the Insurgent. How would a few military setbacks impact your portfolio? How will the market respond if the U.S. military suffers a crushing and inexplicable defeat? If a bomb rips through a chow hall or barracks in Iraq killing 300 soldiers?
It's going to be an interesting year. Even if it turns out that 2010 is yet another stalemate in the War of American Occupation of Muslim Land, there's no doubt that this is the most ignored story of all the market forecasters.
May your 2010 be more successful than the U.S. military's.
David in Qatar