Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
The WSJ report details the evolution of the Iran nuclear issue and the efforts of the United States and Israel to stop the troubling ambitions of the Middle Eastern keystone. It begins with a description of cohesive allies working together in all regards to stop their mutual nemesis which possesses clear ill-intent for each. However, the story goes on to show a mutating relationship as power shifts occur in both Israel and especially in the United States. Once President Obama took office, a relationship of trust mutated into one of distrust and dysfunction, full of secrets and spying on one another as much as the mutual foe. The story is a must read, but let me detail for you what I found most telling about it.
Israel and the United States had worked in concert to slow and disrupt Iran’s nuclear efforts. Over time, it became evident to Israel that its actions from distance could only go so far and that a more aggressive engagement would be necessary to deal Iran a hopefully more conclusive blow. However, President Obama came into office after promising the American public that the era of American military engagement in the Middle East would come to an end. His hopeful speech in Cairo was admirable, but only led to an Arab Spring that ushered in chaos and disorder in nations that were at least orderly before. Egypt, Libya, Iraq, Yemen, Afghanistan and Syria fell into chaos and the Islamic State came into being to replace a void left by the American presence now absent. Everything happened just as Mitt Romney and John McCain warned it would, with Obama’s on the job training in foreign policy proving dangerous. The foreign policy damage done by the Obama Administration could take a decade or more to repair if it is reparable at all, and Iran could become a nuclear power in the meantime.
As a result of the President’s plan for peace, and Israel’s disbelief in his logic, the two sides strayed. The President began to covertly work to open channels for discussion with Iran. He reportedly kept Israel in the dark because Israel showed a propensity to leak information it did not agree with, but I believe also to prevent Israel from acting unilaterally against Iran before a deal could be reached. Not much escapes Israel’s highest profile intelligence agency, and the Mossad learned of the secret talks. Distrust was born between two key allies, and the relationship has not been the same since. Benjamin Netanyahu’s National Security Advisor in 2013, Yaakov Amidror, revealed Israel’s awareness to the Obama Administration and said importantly that it was a big mistake to hide the talks with Iran from Israel. I believe the distance that formed between the two nations, and America’s interest in knowing what Israel was up to, may be one of the key reasons the United States spied on its close allies in Europe around the same time. If Israel was no longer working closely with the U.S., perhaps it had formed closer ties with other western powers. The U.S. would want to know what Israel was up to.
The article shows how Israel neared acting unilaterally in 2012, but backed away from military engagement. Israel was able to do so because of the help of the United States to work against Iran via other means. The United States stood strongly against Iran at the time and worked with Israel to unleash a computer virus on Iran’s facilities (Stuxnet) which caused considerable damage and delay. Israel was also active killing key nuclear scientists in Iran and further impeding the process. But Israel realized its efforts were only slowing Iran, and so planned more aggressive action.
I found it revealing that the Wall Street Journal article was altered since it was first published. One of the altered points was that Israel had accomplished a dry run and actually crossed into Iran with aircraft and commandoes in 2012. The article was altered to read that some in the Administration mistakenly believed Israel had done so. Another interesting detail was removed from this report: that Israel was perhaps working with Saudi Arabia because its aircraft could not manage the distance without a rest and refueling along the way. I read that there was the possibility of a temporary airbase being constructed in the desert to allow for that. Saudi Arabia has good reason to assist Israel in its effort to stop Iran, but it also has good reason to keep its assistance secret. And the final point that I noted altered was the portion about Israel’s plans to attack on the darkest of nights. Initially, this read that Israel was targeting exact dates of the new moon in the lunar cycle, or when there is little moonlight. Well, the next new moon is November 11, 2015 (tonight), and Israel has good reason to act sooner rather than later, as the article also reveals. Keep reading…
Importantly, while the US says it will include Israel in information sharing about Iran’s compliance with the nuclear deal, Israel retains its right to act covertly on its own against Iran. Meanwhile, the article suggests that a clause in the nuclear agreement indicates the major powers must help Iran safeguard its facilities against such sabotage. It does not outright indicate that the U.S. should stop Israel from bombing Iran’s facilities, but it is clear that once the deal is in place, Israel will be in a tougher spot. Thus, Israel has to go with its attack before the deal is sealed and the parties involved are complying with their responsibilities. So every new moon should be watched closely now as carrying the potential for war and chaos.
The west’s deal with Iran led by the U.S. looks to me like President Obama’s desperate attempt to stop war from breaking out in the Middle East; and to stop Israel from attacking Iran to start such a war. I wonder if U.S. negotiators even went so far as to tell Iran that they had better work with them or likely face war (we all knew that anyway). If Iran were to garner nuclear weapons and later use them on the United States, I wonder if these efforts for peace won’t be seen as treasonous, if not perfectly ignorant. Netanyahu said that he believed that the parties involved had sincere intentions and the best of them, but that good intentions do not prevent the worst of outcomes. I agree, and highly suggest any doubters read the writings of Iran’s Supreme Leader, through which he guarantees Israel’s nonexistence in a few decades. It’s his goal in fact, the man we just shook hands with.
The Wall Street Journal says its report was based on the accounts of nearly two dozen high ranking representatives of both countries, but I wonder. Has someone in the know revealed these details to the Wall Street Journal at this timely point before the deal is fully enacted in order to make it more difficult for Israel to move unilaterally? Was Israel’s Benjamin Netanyahu invited to the White House this week to ensure Israel does not act during this new moon? Or did Netanyahu come to forewarn the President of an imminent action, or to forewarn other allies of his in the United States. Would Netanyahu even warn the U.S. at this point in time? I perceived high concern on the face of our president and a secret behind the smile of Israel’s leader yesterday in their joint photos. I believe Netanyahu will be back home in time for Israel to still strike tonight (check that), but perhaps Israel would act on November 12 or 13 instead, to allow for the passing of the date that might be in the focus of its enemy now. Or does the alteration of this information within the WSJ piece mean they will go tonight or at the next new moon or near after?
In 2012, when the U.S. was concerned that Israel could act, it sent battle aircraft and a second aircraft carrier to the region, “just in case all hell broke loose.” Last week, the U.S. sent dogfighters, or aircraft that can only fight other aircraft to the region, it implied to protect our bombers from potential engagement by the Russians. That could be true, or they could be there to assist our allies in the event of all hell breaking out… And, maybe the Russians are not there for the reason they state they are either. Recently (last week), the U.S. Air Force took part in an exercise with the IAF; was that to keep an eye on the Israelis or is a joint plan in progress despite all the deal talk?
One thing seems clear to me, Israel believes it has no other choice now but to act unilaterally, though perhaps with assistance from certain allies. If the only thing that stopped Israel in 2012 was its other options thanks to the help of the United States and the economic blocks placed against Iran, then what’s to stop it now? If in the near future the west is obliged to safeguard Iran’s facilities, then why would Israel wait for that complication?
Readers of mine know that from time to time, and all throughout this Iranian nuclear story, I’ve expected conflict. In the early days of my blog I discussed a chance encounter with a French diplomat at a Greek restaurant that threw me for a loop. I could not at the time contemplate how a UN diplomat could believe that Iran wanted nuclear knowledge for any other purpose than to weaponize it. And at certain points in time, I’ve authored similar articles to this one. But, I ask you to review the last speech of Netanyahu at the United Nations, within which he paused for a full minute and stared down the representatives and asked them if they would be so passive if it was their nation under threat by this Iranian regime. I believe Netanyahu has reached the end of his patience and that Israel is about to bomb Iran.
Israel, in the past, asked for bunker buster bombs and Osprey air craft from the U.S. and was denied them. Perhaps Israel has developed or otherwise acquired the weapons it needs over the last three years. Or, perhaps because of the WSJ revelation about Israel’s plans to use commandos to destroy Iran’s facilities from the inside, it is now forced to use nuclear weapons to destroy Iran’s nuclear effort. So you wanted nuclear weapons Iran? Well here they are. Imagine the consequences.
Friends, an attack by Israel on Iran could set forth a series of events in the Middle East, given that far too many players are in the arena today. How far would Israel go and how far would Iran go in its response, assuming it will be capable of one? Will Saudi Arabia be involved? These types of questions and the importance of the region mean that oil prices will skyrocket on the sudden change in paradigm. The dynamics at work in energy prices today are of economic significance solely, and they are forcing oil prices to new lows as I scribble here. I wonder if Saudi Arabia has stubbornly kept to production in order to purposely deflate oil prices ahead of an event that would catapult them. At least, from a lower base point they might be less disruptive and reach a lower high point.
Nonetheless, I expect WTI Crude, today at roughly $43, would immediately surge to $60 and within minutes to $80 or higher. As investors contemplate the new paradigm and the possible repercussions (what Iran might do) over a series of days, oil prices could surge further to $100, $150 or even $200 as events unfold and depending on how they evolve.
Gold is today trading at a spot price of $1084, pressured lower by a strengthening dollar and expectations for Fed tightening. But the Fed will not matter for gold once global chaos is at hand, or regional chaos that could go global. Under similar circumstances and expectations for the Fed, when Russia invaded Ukraine, gold still surged higher despite the dollar factor. It would do the same here. Spot gold prices would surge and not look back until peace was once again at hand. And if any regional conflict at any time threatens the United States in any manner, gold could revisit its highs of the last decade and surpass them.
Indeed, an Israel attack on Iran is a special sort of event with dire consequences and meaningful impact for securities markets. Stocks would crash, just as they did during the Saddam Selloff of the early 90s. But this time, the outcome would be less certain and would take longer to be realized, so stocks could sink further and fail to recover immediately.
This is the sort of “crazy talk” you will never find from a major publisher because of their conservative nature, which results from a fear of risk taking at large organizations. But it’s the type of break-through contrarian work I’ve never strayed from sharing and never will. The only reason I held back this long was for concern of how intelligence agencies might construe my knowledge, which has come purely through discernment (and I may be wrong).
What I am saying here is that a geopolitical risk that has been all but forgotten is as hot as ever and should be given weighting now. As it has not been, investors foreseeing it have an opportunity to capture value. And given the players currently at play in the tight quarters of the Middle East, other error could also drive a similar result even if Israel does not now act on Iran. I feel the risk/reward highly favors buying energy here, and I am long the United States Oil (NYSE: USO); investors could also use the iPath S&P GSCI Crude Oil (NYSE: OIL), the Energy Select Sector SPDR (NYSE: XLE) and the SPDR S&P Oil & Gas E&P (NYSE: XOP) as well as other energy issues to capture this opportunity. Gold investors might use the SPDR Gold Trust (NYSE: GLD) and the Market Vectors Gold Miners (NYSE: GDX), or physical gold if you are very worried. Investors seeking bets against the market or hedges against it could apply the ProShares UltraShort S&P 500 (NYSE: SDS) or simply short the SPDR S&P 500 (NYSE: SPY) via put options. Highly sophisticated investors who understand the security’s risk could use the iPath S&P 500 VIX ST Futures ETN (NYSE: VXX) to hedge their portfolio against risk. I believe the best bets are made on oil on this thesis, and then gold. Follow my blog here, my feed here, my Seeking Alpha column here, my Twitter here, my Facebook here and my email list here.
Kaminis is long United States Oil (NYSE: USO). Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).