After Osama

Osama bin Laden, according to CNN, has been killed in a firefight with US forces in Pakistan and his body has been recovered.

Almost a decade ago, bin Laden, in hopes of, according to some reports, inspiring a jihad and bleeding US financial strength, inter alia, directed the attacks on the Twin Towers and Washington D.C.

Now, only his ghost remains.  The jihad he hoped to inspire has thus far been thankfully quashed, but the US has been bleeding financially for that decade.

What next?

Aside from a substantial increase in Prez. Obama's political capital, which might deflect the right wing's attempts to dismantle the welfare state, inter alia, (and thus indirectly shift market sentiment, to wit, increase negative sentiment on US bonds) direct effects on market psychology and prices (and eventually the underlying fundamentals), at first blush, include:

1) A temporary (duration dependent on, inter alia, announced US policy changes in the next few days) resurgence in $ assets, and consequent decline in Gold and Silver. A rise in US debt market prices. A decline in oil prices.

2) Increased speculation on oversea troop levels in Afghanistan- will they be brought home, will they be redeployed, will they remain the same?

3) Will the Islamic world, in the event troops remain in Afghanistan or are redeployed either in Iraq or Libya, come to the view that US peacemaking after Osama is colonialism in disguise?

4) Medium term, a status quo military presence in the Islamic world, with a significant cause célèbre removed, will not only continue to negatively impact the US budget, it may also increase Islamic resistance (thus further increasing the price of military action), and reduce foreign willingness to finance what may seem more like colonialism than peacekeeping.

The ball is in the Obama administration's court.  Like 9/11, this is a key pivot point.

Much has changed in the US over the past 10 years.  Will this opportunity to change course be grasped, as a similar opportunity was grasped in the aftermath of 9/11?  Will the story simply fade from media consciousness in a few days- signaling an opportunity squandered (or deftly avoided depending on perspective)? What, if any, will the new course be?

From a financial perspective, this seems to me a wonderful opportunity to begin to significantly reduce military expenditure without losing face at home.   US military adventures abroad since 9/11 brought forward the US budget's "day of reckoning" by many years.  Either the US buys some time by reducing such expenditure or the financial day of reckoning will continue to creep forward. 

Without the goal of bin Laden's capture as cloak of respectability, assuming military deployments continue unchanged, the financial day of reckoning might leap instead of creep forward as foreign demand for US debt and willingness to sell oil "cheaply" dries up further.

Ten years ago the world went to war.

What next?

Full Disclosure: Long Gold