Al-Qaeda's Islamic Emirate in Libya

Long War: The Libyan Rage rebels have taken control over most of the oil producing eastern portion of the country and are readying an assault on Tripoli, where Gaddafi is holed up. Gaddafi's position is not as weak as it seems because he controls a huge force of mercenaries, who were mostly outside the country when the revolt broke out. Gaddafi is assembling his mercenary army and only now beginning to strike back. One town that had been firmly under rebel control is now under attack by the mercenaries. The rebels have made big territorial gains in the east while Gaddafi's forces have been busy reestablishing control over Tripoli. Probably Gaddafi will start to do a better job of fighting back soon. He has been planning for this day for years.
There are three separate reports (from the Al Arabiya news outlet, the Italian government, and a human rights monitoring agency) saying that AQIM (Al-Qaeda North Africa) has established an Islamic Emirate in the eastern Libyan city of Derna. Al Qaeda is said to be broadcasting from its new emirate on an FM radio station and has established its usual harsh version of sharia law. Rebel groups that have seized control over other eastern cities vehemently deny that AQIM is even remotely involved in the uprising.
In the past every uprising in Libya has been led by jihadists so it is virtually impossible that AQIM is not neck deep in this uprising. And yet there is tremendous pressure on the US to create a No-Fly Zone (NFZ) over the part of Libya that Gaddafi controls. This would mean NATO jets must shoot down Libyan aircraft that are strafing a city Al-Qaeda has seized control over. If AQIM really has established this kind of foothold there will come a day when the USMC must once again land in Libya and destroy the bad guys.
President Obama, meanwhile, has not even called for Gaddafi to step down and is instead calling for a lengthy UN debate over international sanctions against Libya (good delaying tactic, Barry). There are many different ways that the civil war in Libya could play out. The most likely is the de facto creation of two countries (East Libya and West Libya) that are in a perpetual state of war like North and South Korea. The scariest part of the Libyan crisis is that the US is being tugged by public opinion at home and in Europe to act against its own interest. And the reason for this highlights the big difference between the Long War and the original Cold War: Many Western voters don't even believe that there is such a thing as the Long War. The reality is (of course) that there is such a global conflict going on and that for the last decade the good guys have been winning. In the Cold War there was an entire decade (the 70s) where the good guys were losing. There will certainly be decades like that in the Long War. If we are entering such a decade, investors and voters will be shocked at the consequences.
The US started losing the Cold War with the 1968 Tet Offensive in Vietnam. In real terms (accounting for inflation) the S&P 500 did not gain back the 1968 peak until 1992, nearly a quarter century. I'm not saying that the US is losing the Long War yet. But we are investors, not patriots or cheerleaders for the good guys. If the good guys really do start losing, we need to get out of equities.