Obama Now Has Small Stones

Long War: Yesterday it looked like Obama was willing to use military force against Gaddafi. That was the reason for the rally. And it seemed that Gaddafi himself, for a short while, thought he was going to get vaporized. That was the reason for his talk yesterday of a negotiated settlement. Today Gaddafi is talking tough again because it looks like the US has a hands off policy toward the Rage Rebellion and LCW.
As time goes on the whipsaw effect generated by the Libyan Civil War on the markets will diminish. One day it looks like the good guys are winning and the next day the opposite is true. That has been the case so far and the market has been shooting up and down as a result. But a more clear picture will emerge as the major characters settle into predictable roles.
The worse case scenario would involve Gaddafi not worried about tangling with the US, then he will launch a counter-offensive designed to gain control over energy assets: ports, pipelines and oilfields. He must believe that when and if he has control over Libya's oil, the US won't be able to prevent him selling it on the global markets. He could then finance his war and eventually win it. The best case scenario is he loses quickly with US help.
I've been caught up in the day-to-day events of the LCW just like everybody else. Stepping back and thinking about parallels to the original Cold War helps bring perspective. The coming elections in Egypt and Tunisia obviously are analogous to the 1948 Italian election in the Cold War. And the Libyan Civil War is much like the Berlin Airlift of that same year.
The Soviet Union made one of its first big aggressive moves by blockading Berlin. If the US had sat back and done nothing while the Soviets started grabbing pieces of Europe in 1948, the consequences would have been disastrous. So Obama must deliver something like the Berlin Airlift for the Long War to continue going well. And he has to deliver good results in the North African elections this summer, just as Harry Truman did with the Italian election. Obama still has time to deliver, but we need to see evidence that something is being done to remain bullish on stocks.