Secrets of an Iran Contra Insider
by Al Martin
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by Al Martin
Longs vs. Shorts:
Realpolitik, Economics and the War on Iraq
(Sept. 23) The bizarre spectacle of Hillary Clinton and Brent Scowcroft appearing together on television to debate the pros and cons of waging war on Iraq is more significant than most people imagine. Hillary Clinton argued that the United States should attack, while Brent Scowcroft called for "restraint." The reason why Scowcroft and others of the old crusty hard Bushonian right are now turning against a war in Iraq is because, through secret offshore trading accounts, they've gone short oil.
In the oil business, it is commonly presumed that in $30 oil there is a war premium of $10 per barrel. Consequently there are people who are increasingly tempted to get short oil. People are betting that this thing with Iraq can be resolved without a huge invasion.
Remember the last time we invaded, oil spiked up $11 a barrel, but it only stayed there for four or five days. That involved a massive invasion of Iraq with more than half a million troops. Whatever military action we take against Iraq now would not be as extensive as it was before. It would not involve as many troops. It would be an intensive type of warfare. The threat of the disruption would be substantially less than it was before, so even if oil spiked up temporarily, it is a likelihood that the price of oil is going to come down.
You are starting to see some of the Smart Republican Money get short long-term oil contracts. But the reasons they're exerting their influence in going to war with Iraq is that they don't want to carry short positions through a spike. That means they would have to come up with a lot more money, margin money.
If they carry short positions into a war with Iraq, it would force the price of oil into a knee-jerk spike, when some of the more speculative shorts get out. The longs will be looking for every last penny they can get, but the big money shorts would be the Smart Money Republicans. Even if the price of oil spiked up five or six bucks, they're going to have to shell out a lot of money out of their own pockets to hold onto these short positions, if you make the presumption that even if you go to war in Iraq, unlike the last time, the price of oil is already relatively high prior to any military action.
Therefore the feeling is that this might mitigate any spike action because there is an awful lot of longs in the oil market (professional trading longs) which are just sticking in there, just waiting. They're going to sell into a spike the minute it happens.
A lot of the open interest in the Nynex contracts would suggest that you've got a big intermediate term trading long position built into the market and a growing short position.
The longs understand that $30 per barrel oil is not sustainable -- unless there's a war in Iraq. It is economically not sustainable. There has to be a war in Iraq for that price to be sustained and even increased.
What these longs are looking for is that they likely will support the market and keep it up around $30 a barrel. They whip up enough war rumors so that it frightens out the speculative shorts, which becomes a floor underneath the market.
What everyone is looking for is a five or six-dollar war spike on the first day or two and then all the longs are going to get out.
What you're going to see is a sharp spike up and a sharp spike down because as those longs get out, there's not going to be any buyers underneath the market.
It's an unusual situation. By that I mean that you have a strong long position and now you have an increasingly strong short position so it becomes a real battle between well-financed long positions and well-financed short positions.
Since both long and short positions are expecting the same thing to happen, that is, a five, six, or as much as eight dollar, one day, two day or three day spike in the price of oil, you have all the longs looking to get out on that spike. And you've got all the shorts looking to increase their short position on that spike. In other words, they then become sellers as well.
The only difference is that they're selling short, but it's the same selling pressure. So now you have the two big money factions -- both turning sellers on any spike. And that's why the shorts feel comfortable in being short in a nervous market because they know that there's a huge long position that's looking to get out and that they themselves, meaning the shorts, are going to take the opportunity of any spike to average up their short position by increasing their selling, i.e. hammering the bids.
Look at this thing six months or twelve months down the line. When oil breaks, there's going to be an awful lot of money made on the short side of the oil market.
All I know about the short faction (the Scowcroft faction) is that they're short, and that it's some sort of shadowy offshore Republican trading partnership kind of deal. George Bush Sr. is involved in it, and so is James Baker, Scowcroft - literally the whole cast of characters of the old Hard Right. They do a lot of business in Nynex oil.
And the proponents of the long faction and going into Iraq? The reason why the Republicans have so much support to go into Iraq is because the big oil companies have been shelling out a lot of money, supporting the idea of going to war in Iraq. They've been giving unusually heavy contributions to both Republican and Democratic parties.
Oil companies are behind a lot of this pro-war pro Iraq invasion advertising we're beginning to see. They just try to hide it under names like "World Resource Council" or "World Hydrocarbon Energy Think Tank," to gussy it up.
After the invasion of Iraq the first time, oil spiked up as much as $16 so that by the fourth day before it broke, oil spiked up to $41- $42 a barrel. After that, it absolutely fell apart.
In late '91 and early '92, Republican fortunes were made on the short side of the oil market. And this is simply what they're looking to do again. The only thing that is different is that you see a bigger trading short position than there probably should be at this time, given that the market is still likely to go against the shorts.
The reason why is that the shorts feel more comfortable. It's because the price is so high that you have a big speculative long position in the market. Anytime there is a big speculative long position in the market, no matter what the fundamental risks are to the shorts, the psychological risks to the shorts are reduced because they know that both they and the longs (the other side of the contracts, in other words) are both looking to do the same thing in a spike.
On the other hand, if we do not go into Iraq and work it out diplomatically or we assassinate Saddam Hussein or whatever, then the price of oil is coming down.
The big speculative long position is going to be looking to liquidate in a hurry. And the shorts are going to be right there to pound the bids. What happens is the shorts sneak in the back door -- when they know there's a huge speculative long position that is every bit as nervous as the shorts are because the price of oil is unusually high.
Therefore the longs are just as nervous as the shorts and they are going to be just as quick "to pull the trigger," meaning get out of their position. The shorts actually have more bases covered than the longs do.
If there is war in Iraq, you're going to see that war premium bleed out of the market. When that begins to happen and oil gets down to $29 or $28 particularly about $26.50 or $27, the longs are going to panic and there will be panic selling. Then what will happen is that the shorts will sneak in the back door and hammer all of the bids.
As the shorts are hammering the bids, increasing their short positions, the oil market, like any other commodity-based market, can go into an absolute frenzied free-fall.
If the longs have to come up with margin calls, and they know the only reason that's been holding up the price of oil is the reason that no longer exists, there is no bottom.
Let's put it this way -- if everyone comes to the same conclusion that there is not going to be a war in Iraq, the price of oil will go from $30 a barrel to $20 a barrel in five days.
This is the way everything works. All markets are based on manipulation. There is no such thing as pure capitalism. We, particularly the Republicans, try to pretend that there is such a thing as pure capitalism and pure free enterprise. There isn't and there never has been. The free market concept - all it ever has been is a "concept."
Markets are not free. Those who manipulate them ultimately direct the direction of all markets. The price or value of an underlying commodity or asset ahs little to do with the availability of that asset or what that asset is really worth on a day to day basis.
Oil right now isn't worth any more than $20 a barrel. The demand/supply picture is such that if it were a pure free market, oil would be about $20 a barrel. That's all its worth, but the reason it's trading at $30 a barrel is manipulation.
The entire free market concept is just a convenient fiction. That's all it's ever been. Its just pabulum for the masses to make the masses actually believe that markets work the way they've been taught they work.
As I've said on radio shows before (just to be confrontational) from the time you were born until now, everything you've learned has been a lie and everything you've ever been taught is a lie. People have a hard time fathoming it.
Most of everything your history textbooks have taught you was a lie, either an outright lie or a lie by omission. Everything you were ever taught about government or the way markets work is a lie.
In this country every politician, regardless of party, runs on the concept that Washington is Fantasyland and the rest of Heartland America, where the American Flag waves, where there is right and wrong, where there is a benchmark and the magic touchstone of truth, is Realityland - but in fact its always been just the opposite.
Washington is Realityland and the rest of the country is Fantasyland. If it weren't that way, our government could not work. Nothing would work If everyone knew the truth as Al Martin knows the truth, having been on the inside at one time.
Why do you think the government, no matter what party is in power, so desperately and incessantly attempts to cover up the truth, about any and all subject matters? If people really knew the truth, the country wouldn't operate and it would simply fall apart. Everyone would just smash windows and do what they want, wandering around the streets, aimless and listless, with bottles of Prozac and Jack.
You have to give the people the lie. The truth is the ultimate anarchy. You have to maintain the lie. Every political regime that has ever existed in history understood that the lie must be maintained and that the truth is where the anarchy is.
The only way around this would be to have a society in which each person is so enlightened that each individual would be a philosopher-king. This is Plato's concept referring to every citizen as a philosopher-king. And that is the only way that democracy really works, when everyone is enlightened to the same extent, so they understand what needs to be done. Until our society or species has evolved or matured to that level, the lie must continue.
If you read "Mein Kampf," Hitler often referred to the Big Lie Principle, which, of course, is what the Bushes were so enamored of. But it's not just the Bushes. Everybody is enamored of the Big Lie Principle because as Hitler said in his book, it is necessary to maintain order. It is necessary for government to rule.
Truth is the ultimate evil from that perspective because as Hitler said, there is chaos and anarchy in truth - unless everyone has the attainment of being able to navigate in this kind of universe. Like Hitler said, you have to give the people a set of heroes to worship because everybody wants to be a patriot and everybody wants a set of national heroes to worship and that's why every lie must be employed to give those people a set of national heroes to continue a national spirit.
People invariably want to worship somebody that they believe is smarter than themselves, braver than themselves, and I think that's part of the human condition to want to do that. That's why we so want to venerate the Founding Fathers. You can't say anything ill about Washington, Franklin, or Jefferson. We put them up on pedestals and every administration except their own went to every length imaginable to cover up things and to lie about them.
You read children's history books and they have changed very little. When the liberals took over our public education in the mid 1960s and began to change the content of a lot of schoolbooks, the one thing that was left sacrosanct was the Founding Fathers because of our need to put them up on a pedestal. That's why I say that they should be honored for their deeds but not as individual men. They themselves in their own writings warned against that.
To update the Al Martin Raw.com "Smart Republican Money Index," a proprietary index we created, despite recent attempts at rallies in the market, rallies of a short-covering nature, the preferred strategy of shorting the rallies and covering on the dips remains intact. Also the Smart Republican Money Index gold-dollar spread closed last week at a +14, indicating continued holding of the spread (Short Dollar; Long Gold).
To reiterate, obviously the "Smart Republican Money Index" went short the day George Bush was elected. When a Bush gets elected, that's what all the Smart Republican Money does in recognition of what Bushonomics does to our economy. That's why Republicans are so cohesive as a vote.
Unlike Democrats, Republicans indeed do vote their wallet knowing that the big money is made on the short side and that when you put a Republican in office, they're going to wreak havoc with the economy. It becomes a very safe play to institute long-term short positions (contracts known as LEAPS).
Since forty million Americans have lost half or more of their IRA/ 401(K) accounts by being long, they are the suckers.
The proof is to look at another coincidental index maintained by the American Policy Institute which tracks the total amount of private wealth held by the top one percent of the people, of whom 78% are Republicans.
It's not exactly true when economic pundits say that since the election of George Bush II, there has been $5 trillion of market equity lost. The stock market is after all a zero sum game. The $5 trillion that was lost just belongs to other people. And who are those other people? People who were short. It was just a giant transfer of wealth.
And who owns that $5 trillion, which was previously in the possession of all the little people? Just look at the coincidental indicator of the top 1% of the nation. On the very day that George Bush was elected, the top 1% of the American people controlled 61.9% of all of the private capital in the United States. Twenty months later, the top 1% of the population now controls 66.5% of all the private wealth of the nation. Therefore it isn't hard to figure out where the $5 trillion went.
This is what the Bushonian Regime is all about - the massive transfer of wealth from the little people to the Republican hierarchy at the very top. Declining stock market prices, which in turn are purposely instituted by Bushonian economics -- this is something, which is done by design. Bushonian economics purposely hurt the economy, which in turn causes markets to decline, which in turn causes those are short, principally Big Money Republicans, to make money.
On a more humorous note, I ran into one of the Neighborhood Watch Association oldsters who stopped me to complain about the Fluffster (See Adventures of Fluffy story).
Anyway he's standing there wearing his white naugahyde shoes and white naugahyde belt, and to deflect the conversation, I was looking at him and I said, "Don't you know it's not politically correct anymore to wear all that naugahyde?"
And he looks down at himself and says, "What are you talking about?" And I said, "Where do you think naugahide comes from? It comes from naugas, those little white furry creatures that live in the Arctic that get beat over the head with clubs. And he got real serious, "Oh I didn't know that." And he got a really concerned look on his face.
Another guy I told this story to took it very seriously. He was going to put a poster on the clubhouse wall and tell everybody that "naugas were on the endangered species list."
Those poor little naugas. There really should be somebody looking out for their interest.
AL MARTIN is America's foremost expert on corporate and government fraud. A relentless whistleblower, he has written a book called, "The Conspirators: Secrets of an Iran Contra Insider," which chronicles his adventures with the Bush Cabal (National Liberty Press, Order Line: 866-317-1390). This detailed account of government criminal operations, namely State-sanctioned fraud, drug trafficking and illicit weapons sales, is unprecedented in publishing history. Al Martin is also well known for his great charm and profound insights into world events, and he is frequently interviewed on many talk radio shows across the nation. His weekly column "Behind the Scenes in the Beltway" is published regularly online at Al Martin Raw, (http://www.almartinraw.com).
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