Investment Implications of Bin Laden's Death

Osama bin Laden was living not just within the borders of Pakistan, butwithin a mile of arguably the heart of the country's military establishment. Conspiracy theories abound, but it seems clear thatPakistan knew a lot more than it was letting on to its U.S. and NATO 'allies' operating in the region.

From 2002 to 2010, the U.S. gave $20 billion in aid to Pakistan ($13.3 billion in military and $6 billion for economic development). Over $3 billion has been requested for 2011.

At a time when Congress is sharpening its fiscal pencil, it's no surprise to see that Senators are pushing to cut Pakistan's aid. Expect calls for U.S. forces to pull-out of Afghanistan to only grow louder, which in turn will have a destabilizing effect on Pakistan and the wider region.

Investment Implications

Pakistan is classified as a 'frontier economy', and the range of pure play investment options that foreigners can easily make are limited. At present there are no U.S.-exchange traded Pakistan ETFs. However, the Aberdeen Emerging Markets Telecommunications and Infrastructure Fund, Inc. (ETF), and Guggenheim Frontier Markets ETF (FRN) both have Pakistan allocations. And not surprisingly, both have traded down since Monday's news.

Continue reading the full article at SeekingAlpha here.

Podcast: Joseph Nye on the Future of Power

Link to audio here.

Joseph Nye is a long-time analyst of power and a hands-on practitioner in government. His concept of "soft power" has been adopted by leaders from Britain to China and "smart power" has been adopted as the bumper-sticker for the Obama Administration's foreign policy. In this lecture, drawn from his new book The Future of Power, Nye outlines the major shifts of this century: new transnational challenges such as the financial crisis, global epidemics, and climate change facing an increasingly interconnected world; a changing global political and economic landscape, including the rise of China and India; and the increasing influence of non-state actors. Nye explores what resources now confer power, and argues that, in the information age, it might be the state (or non-state) with the best story. Joseph S. Nye, Jr. is University Distinguished Service Professor and former Dean of Harvard's Kennedy School of Government. He has served as Assistant Secretary of Defense for International Security Affairs, Chair of the National Intelligence Council, and a Deputy Under Secretary of State. The author of many books, he is a fellow of the American Academy of Arts and Sciences, the British Academy, and the American Academy of Diplomacy.

Podcast: Brian Christian Discusses AI and the Turing Test

Author Brian Christian talks on the subject of his debut book The Most Human Human, a re-evaluation of what it means to be human in the light of breathtaking advances in artificial intelligence.

Brian Christian is an Author and Poet. He holds a dual degree in computer science and philosophy and an MFA in poetry.

Video: U.S. Government Using Your Tax Dollars to Poison Food

At 1.3 million views and counting, below is the video highlighted in the recent NY Times article on how sugar is toxic.

This is a familiar story for anyone who has read the excellent Omnivore's Dilemma or seen the movie Food, Inc. (both can be found in the 'Good Books and Films' box on the right side of this blog). What may be less familiar is the fact that the U.S. federal government is directly supporting the poisoning of the American public through fructose (corn syrup) subsidies to Iowa farmers.

Please allow me to repeat that: our government is helping to poison us with our own tax money.

While some members of Congress are working to put an end to this deplorable policy, Big Food, the farm lobby and the U.S. Department of Agriculture (USDA) have thus far successfully fought off cuts to corn subsidies.

A perhaps more fundamental way to get a handle on this problem is by replacing the income tax with a consumption tax (which I've written about here).

As an aside, has anyone out there heard Warren Buffet, Coca-Cola's largest investor, address what Dr. Lustig calls the 'Coca-Cola Conspiracy'? It would seem that Warren is turning a blind eye to the fact that he is financing one of the nation's (and now the world's) fastest growing and most serious health epidemics.

Video: Existential Star Wars (In French with English subtitles)

Video: Osama bin Laden Home Movies

Photo: War Dog from Operation Neptune Spear (Bin Laden Raid)

Update: the Bin Laden raid dog was a Belgian Malinois named Cairo. More recently released details on the dog and raid, including an interview with President Obama, here.

We don't yet know the name, or even the breed (most likely a German shepherd or a Belgian Malinois), of the amazing dog which accompanied the Seal Team Six members on the Bin Laden raid.

But here are some amazing photos and more info, from Foreign Policy, about the role man's best friend plays in the U.S. military:

Yep, that's a dog strapped to the parachuter

Daredevil dogs: The question of how the dog got into bin Laden's compound is no puzzle -- the same way the special ops team did, by being lowered from an MH-60s helicopter. In fact, U.S. Air Force dogs have been airborne for decades, though the earliest flying dogs accompanied Soviet forces in the 1930s.

Dogs usually jump in tandem with their trainers, but when properly outfitted with flotation vests they can make short jumps into water on their own. A U.S. Navy SEAL, Mike Forsythe, and his dog, Cara -- pictured above -- recently broke the world record for "highest man/dog parachute deployment" by jumping from 30,100 feet.

Above, a U.S. soldier with the 10th Special Forces Group and his dog leap off the ramp of a CH-47 Chinook helicopter during water training over the Gulf of Mexico as part of exercise Emerald Warrior on March 1.

It's not the gear that makes the dog: Military working dogs (MWDs in Army parlance) may not enjoy all the privileges of being full-fledged soldiers, but the U.S. military no longer considers them mere equipment. (The war dogs deployed to Vietnam during that conflict were classified as "surplus equipment" and left behind.) Today, MWDs are outfitted with equipment of their own -- a range of specialized gear that includes Doggles (protective eye wear), body armor, life vests, gas masks, long-range GPS-equipped vests, and high-tech canine "flak jackets."

The NY Times also has a great story on 'the nation’s most courageous dog'.

Breaking: Greece May Drop Euro & Reintroduce Drachma

From Germany's reliable Der Spiegel comes the predicted but potentially destabilizing late-Friday news bomb:

Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night.

Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro-zone finance ministers and senior staff members permitted to attend. Finance Minister Wolfgang Schäuble of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Jörg Asmussen, an influential state secretary in the Finance Ministry, are attending on Germany's behalf. 

According to German Finance Ministry estimates, the currency (Drachma) could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.

The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads. 

In short, a Greek withdrawal from the euro zone and an ensuing national default would be expensive for euro-zone countries and their taxpayers. Together with the International Monetary Fund, the EU member states have already pledged €110 billion in aid to Athens -- half of which has already been paid out.

A slow motion bank run in Greece, Ireland, etc. has been taking place since this time last year. Any credible whiff of news that a Eurozone member might drop the euro currency could trigger a panic, rapidly accelerating the move out of euros, not just in Greece but other European periphery nations, into safer currencies.

Continue reading the full article at SeekingAlpha here, including thoughts on which currencies stand to benefit most from this development.

Photos: Three Dead Men at Bin Laden House (WARNING: Graphic, All 4 Post-Mortem Photos Here)

Reuters has taken down the article and photos, but below are all the pictures they purchased.

First, a new photo of the highly classified stealth Blackhawk -- and its baffled rotor -- which was scuttled. The tail rotor also had extra blades, which would have made it much quieter than the standard design. Similar modifications to the main rotor would have further silenced the approach.

Also, a "silver loaded" paint job would have also made it difficult for infra-red sensors to detect the helicopter. This would have been particularly useful if Bin Laden had been armed with heat-seeking anti-aircraft missiles.

Next, the photos of the three dead bodies in Bin Laden's house:

WARNING: graphic

Niall Ferguson: Dump Commodities Now

Looks like the good Harvard professor has made a shift in his personal portfolio.

Link to Niall Ferguson's incredibly well-timed (published April 24) Newsweek article here, which focuses on the dramatic story behind the copper boom and its 181% run-up since February 2009 (compared to gold's 75% increase over the same period).

From the article:

So just why has copper been trumping gold as an investment? The answer is partly that the extraordinarily loose monetary policies adopted by Western governments to combat the financial crisis have driven up the prices of nearly all commodities. 

But the key to the copper story is soaring Asian demand. Asians want modern houses with Western-style wiring and plumbing. They want cars. They want electronic gadgetry. So they want copper. In 2005 China accounted for 22 percent of global copper consumption. In 2009 the figure was 39 percent. Try as they may, the copper miners can’t keep pace. And the supply of copper in the world isn’t limitless. Indeed, if the rest of the world were to consume at just half the American per capita rate (1,389 pounds in an average lifetime), we’d exhaust all known copper reserves within just 38 years. 

Asians were shocked by the price spike of 2004–08, which saw copper prices quadruple; hence their recent rush to invest in copper mines. The big question now is whether this new scramble for Africa is worsening the disease it was supposed to cure. Rampant Asian demand has once again driven up prices. Higher commodity prices are feeding into higher consumer prices. Inflation in China hit 5.4 percent last month. That makes the authorities nervous. The last thing they want is the kind of popular unrest that was sparked by higher prices in North Africa. 

All over the world, central banks are applying the brakes. The European central bank has already raised rates. The Fed seems intent on ending quantitative easing in June. The People’s Bank of China, meanwhile, has not only raised rates but also increased reserve requirements for banks. Remember, this comes as fiscal policy is also being tightened in the developed world—even, belatedly, in the United States. Remember, too, that higher commodity prices act as a tax on consumers in importing countries. Higher prices plus lower growth equals stagflation. 

So far these changes have had little impact. But brace yourself. To my eyes, global monetary and fiscal tightening is a clear sell signal for commodities. That could take the shine off copper—and send a blast of cold air down the ventilation shafts of Zambia’s mines.