PAX AMERICANA

When the great Roman general, Pompey, was asked to clear the Mediterranean of pirates he told the Roman Senate that he had to have permission to follow them wherever they landed. He hunted and killed them and established a garrison on each quadrant of the Med. The greatest trade in the history of Rome and 500 years of Pax Romana followed.

The United States under the order from President Obama who ordered the US NAVY SEAL mission to kill Osama Bin Laden ignored  the sovereign border of Pakistan; hunted a criminal and killed him and his "army" right under the noses of those who were harboring them. Let's put this in the context of current events.

Gadaffi has continued his reign of terror in Libya, threatening the flow of oil much like the pirates of 40 BC threatened the flow of grain to Rome in the Mediterranean sea. The negotiations right now must be intense, Gadaffi will see that exile with a ton of his ill-gotten cash is better than the deal that we gave Bin Laden.

Further, while we took out Saddam Hussein for arguably the wrong reasons; there is no denying that having inserted a democratic state between the terrorist factions of Syria and Iran with American logistics (boots) on the ground; ships patrolling the shipping lanes; phenomenal air superiority; communications control, etc. Has allowed the US and its allies the ability to act with total impunity with drones, special team strikes and laser guided precision.

All of this has lead to a rising up of the most oppressed peoples in the world. They're emboldened by a sense that their religious, political and business leaders have enslaved them whether by dogma, embezzlement or sword. In some places one could argue all three.

The killing of Bin Laden, therefore is a water mark in history. It's the continuation of the doctrine first proposed, but abandoned by Clinton after terrorism became the modern form of warfare. The prosecution, invasion and occupation of Iraq by Bush effectively putting a wedge between Iraq and Syria; preventing their literal partners-in- crime alliance against the west. As well as the effort in Afghanistan, which logistically meant that we have the bastards surrounded, has perhaps unwittingly all served to create an opportunity for the US and its Allies to chase them across the borders and kill them.

Some things need killing or one can't have a nice garden.

The markets have reacted.  Be aware that it has nothing to do with killing one man and everything to do with killing one man.  By that I mean simply that the world just changed.  When that happens rules change. When rules change then investments and investors by nature react.

The entire world has seen a continuing total annihilation of debt formation and demand for debt. Sovereign debt, public debt and private debt, which all grew exponentially through the 1990's and 2,000's are now contracting at a rate that can't be 'pumped up' through central banks policies of increasing the money supply. It's as effective as throwing water on a counter-top in an attempt to serve everyone at the table a drink.

The only things inflating right now are those commodities that have speculative markets. What I mean is that the grain complex, the metal complex, the meats, the softs, the energy markets have all exploded. At the same time, the old definition of inflation, "too much money chasing too few goods and services." Has been supplanted with, "too little jobs, inability to qualify for credit, lack of job creation, declining consumer spending, declining public tax revenues, deficit federal, state and local budgets forcing cuts, declining pension benefits, and hedge fund monies chasing momentum models for risk trade returns."

Obama will now claim victory in the War on Terror and establish this victory as his doctrine to continue the hunt using all the intel gained from water-boarding to clandestine missions. I don't blame him, it's how the powerful put a flag in their legacies. But, make no mistake, "if it can't happen then it won't happen" is at full operation here and now. That is, we can't keep spending TRILLIONS chasing every jerk-off in the old war model of assault/ beach-head/ invasions and occupations.  It's way cheaper to send the SEALS (hooo-ah) and bring the rest of them home.  Well, most of them will come home. Like Pompey and Rome, we'll continue to keep garrisons where they serve us and our allies.

Obama will now say that we must fortify our own borders. That our national security is our top agenda even while we maintain a 'presence' in the Middle East, Afghanistan, etc. And that our allies will be more looked to for support as we did in Libya.  These are all good things.  Much as I don't like most of his domestic agenda, maybe this dividend alone will save an otherwise depressing Presidency.

Continuing to move to the center, the United States can no longer afford to give politicians a blank check on the futures of our children and grand-children.  They can't be trusted with it.  Rather than fighting incessantly about debt ceilings an budgets he will be forced by the GOP and members of his own party to adopt (and may even preemptively suggest) a balanced budget amendment.

What an incredible platform for an almost disastrously lost President to be able to run for re-election on! WOW! He would have placated his base by doing as he promised to bring the troops home and at the same time STOLEN the right's best issue against him.  He can then claim victory on two fronts and blame it all on Bush in the process.  In fairness, Bush was caught flat-footed in his last term by the stare down with Ahmadenijad. He lacked the vision or the balls or the timing to do both things himself even as the fruit dangled in front of him.

Unfortunately this won't bode as well for our markets as rule changes never happen in a clean manner. The hedge funds are all loaded in silver, gold, corn, meat, defense contractors, energy etc, etc, etc. And they've paid a tidy premium for them all through the new derivative ETF markets.  There will be some dislocations that scare the be-jesus out of the orderly markets.  Markets don't like surprises and volatility will once again be the assassin that kills your retirement portfolio, kids education, 401k. etc. WHY?

Because as always you will hold on thinking, "I am almost even and now I'll wait until it comes back."  Singing the "Bag- holders blues", again.  This will take 10 years to work out. In the meantime, while interest rates are low... they'll go lower as US T-bonds/ notes and bills become a sanctuary as safety is once again worth a premium.  In the words of my old mentor, "Screw return 'ON' my money. Let's first talk about return 'OF' my money.

And the mania of metals and commodities represented by the new derivative "ETF's" is the spider that delivers another surprise.