SUNDAY 6/15/14; Iraq Turmoil Dominates News

The Pentagon directs US warships towards Iraq. The ISIS radicals are only 50 miles from Baghdad and Americans are evacuating the city. ISIS is aligned with the Sunni. The US began the Iraq War in March 2003 which removed Saddam Hussein from power. The war started a 4-1/2 year cyclical bull rally that ran to the October 2007 market top. Saddam was aligned with the Sunni. Iraq is made up of Sunni, Shiite and the Kurds in the north. The Sunni make up the minority at about 20% of the Iraq population. Many Sunni regrouped in western Syria as the Iraq war continued. Now these Sunni ISIS extremists are back in Iraq moving south through the country to extract revenge against Shiite.

ISIS is releasing thousands of prisoners from the cities they capture. Many of these Sunni join the radicals. As the Iraqi forces crumble without fighting, ISIS takes control of the weaponry and fire power and pushes south. The goal of ISIS is killing Shiite leaving a wake of beheadings in their path. Iran is now offering help to Iraq to fight ISIS if requested. If ISIS should push into Iran the Middle East would explode into chaos since Iran would become fully involved in war. Iraq appears to be on the brink of collapse.

PM Nouri al-Maliki is the feckless leader of Iraq that never made an attempt to unify the country’s three main tribal factions. Young men in the Shiite population are enlisting to fight against ISIS. The Shiite forces have successfully pushed the extremists back in one town indicating that the ISIS push south may stall at Baghdad.

The Iraq turmoil dominates the Sunday political talk shows. 4500 US soldiers died during the Iraq War, another 32K are injured and over $1 trillion in taxpayer money was spent, some say wasted. The speed of the potential collapse of Iraq is breathtaking. Iraq will likely revert back to tribal roots and the region will split into three factions; Kurd, Shiite and Sunni. Foreign leaders including former UK PM Tony Blair criticize President Obama’s Middle East policies. Blair says the US pulled out of Iraq too fast and the Syria civil war and Iraq turmoil are dragging the Middle East into chaos.

Gold remains steady at 1277 not moving up to any great extent and instead staying within the 1200-1400 14-month range. All eyes are on the oil markets. WTIC crude oil 106.91. Brent crude oil 113.50. Gasoline prices will be on the rise further hurting consumer sentiment. Oil prices are elevated due to Iraq but remain relatively in check. This is because three-quarters of Iraq’s oil production is in the south so as long as the ISIS radicals are prevented from taking Baghdad, oil prices should stabilize.

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Honda is preparing for a large recall involving air bags supplied by the same company that provided the TM air bags that had to be recalled. HMC says the recall may total over one million vehicles and will be announced over the next couple weeks. President Obama intervenes in the Philadelphia transit strike forcing mediation to resolve the dispute so union workers are returning to the job today. Germany’s Martin Kaymer wins the US Open Golf Tournament pleasing sponsors Mercedes-Benz and Hugo Boss.

At 7 PM EST, Middle East stocks trade lower with Dubai, Abu Dhabi and Qatar down from -1.5% to -5.0%. Crude oil is stable with WTIC at 107.34 and Brent 113.10. Natty gas is moving higher at 4.805. Dollar/yen 102.01. US futures begin on a sour note with S&P -3. At 8:30 PM, S&P -8. Dow -62. Nasdaq -16. Asian stocks are set to begin slightly weaker due to the Iraq turmoil.