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Bill Cara's columns :
07/05/2006	Equity Bear Markets in Progress and Why
03/27/2006	The importance of holding cash
03/06/2006	The issues are becoming clearer
03/01/2006	A Focus on Yields
02/21/2006	Geopolitics and capital markets >>
01/16/2006	North American markets are losing momentum
12/19/2005	North American markets are nearing a cycle top
12/12/2005	North American markets readying for winter
12/06/2005	North American chill in the air
11/21/2005	Friday afternoon trapped the bears
11/14/2005	Traders have turned bullish, but I'm sitting out
11/07/2005	When everybody turns bullish, bad things happen
10/31/2005	When told of the impending rally, I ran for cover
10/24/2005	One Traders Conundrum
10/17/2005	Bear markets come and go
10/10/2005	Stagflation - the financial pandemic
10/03/2005	Sold to me!

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Bill Cara – Trends and Cycles in the US and Canadian Markets

Bill Cara has enjoyed a highly successful securities industry career in Canada and abroad. Today he publishes one of the world's most popular and widely acclaimed trading blogs (www.billcara.com ). His weekly column for ADVFN looks at trends and cycles at work in the US and Canadian capital markets.

Geopolitics and capital markets

02/21/2006

Three Americans, two Egyptians, two Thais, one Briton and one Filipino have been captured by militants in Africa, but the world has been taken hostage. Al Qaeda we all know about, but until today I had never heard of the Movement for the Emancipation of the Niger Delta.

Today (Feb 20, 2006) the rebels, who apparently control a large oil-rich region of swamps and estuaries of Nigeria, where 8 million locals are living dead poor, said they planned to broaden their military action against the helpless government.

The focus of their attack has been against the assets of Royal Dutch Shell (NYSE: RD), which apparently has rejected blackmail demands of $1.5 billion for the nine hostages.

And today, because attacks on oil installations have already cut about 455,000 barrels of daily production, or 20-pct of Nigeria's oil output, April Brent crude futures rose $1.47 to $61.36 a barrel on London's ICE Futures exchange.

Such is the impact of geopolitics. Where a small guerrilla army brandishing rockets against oil drill ships, tankers and pipelines, can immediately make the world pay out billions.

No, this is not a Hollywood movie. It is the reality of the 21st century.

As the world becomes a smaller place, even the poorest people in the most remote places of it, see all. Through satellites, the Internet, and mobile phones, the poorest people of this world can easily see the great financial wealth of others. And they want their piece.

And as it happens, a growing global economy needs the great commodity wealth of these remote places, and it is being taken from these poor people.

Yes, there is a conflict; it is all about capital markets and social equity.

Whether it is in Nigeria or Afghanistan, Palestine or the inner cities of America, this conflict is a simple one to understand.

As I see it, for many years going forward, there will be a growing tension between the haves and the have-nots, leading increasingly to military conflict. And building aggression means building defense, which means that capital that otherwise would be deployed for investment that creates new wealth is going to be increasingly squandered.

Growth in the money supply of nations without a resultant increase in economic returns means just one thing. It means inflation. And that means higher interest rates and more devaluation of currencies, which in turn leads to higher commodity prices.

So whether those commodities are oil and gas, precious or base metals, or agri-related, we are going to pay more.

We have paid much more for oil and gas in the past year. We have also paid much more for the metals. And soon, we are going to pay much more for the food produced from the land and sea in these poor countries.

Many commodities are in short supply. It also takes much in time and money costs to recover them and process them for consumption, and ship them to consumer markets. It takes a lot longer and more work to do all that than it does for governments to print paper money.

But the biggest problem is that these commodities are mostly found in lands controlled by relatively poor people, and relatively rich people, who don't want to pay much, take them.

Wars start this way. They always have - from time immemorial.

Nobody wants war, but then again nobody seems to want to meet the needs of the poor, so war is inevitable at times.

When the world is at war, commodity prices are favored. When the world is at peace, financial asset prices are favored.

As you know, my portfolio is over-weighted in shares of companies of commodity producers, like the oil and gas producers and the metals producers, and their suppliers. And when the global economy starts to pick up, or gives me an indication it will not go into recession, I'll add some shares of the chemical and paper and forestry companies, which along with some of the golds is the place to be looking for values today.

If war (or what President Bush refers to as "national security issues") is going to be a regular event this decade and next, then other than aerospace and defense and heavy construction of the industrials sector, I think these sectors (energy and basic materials) fundamentally are the two safest places for traders to be long.

Without the use of graphics, this is a simple looking list. Of course, it includes many stocks that are presently over-priced for the short-term, based on RSI technical indicator studies of the weekly price data, and the list also contains some companies that are not financially strong or operating successfully today.

Because of geopolitics, it is a starting place to find good candidates relative to market conditions.