The entire Mid East geopolitics has changed this past month andit is largely due to Iron Dome combined with the Shiite threat tothe Sunni rulers. Egypt is now closely aligned with Israel and iskey to making certain Hamas is decimated and unable to rearm. It isalso key to keeping the funding from Qatar and Turkey out of Gazawhich they have been doing lately. Hamas can demand whatever itwants, but Israel and Egypt and Fatah will not allow them to riseagain. Egypt essentially wiped out the Muslim Brotherhood and willkill any new Brotherhood leaders who try to emerge. What is sodifferent is that now Israel is closely aligned with the Saudis,Jordan, the Emerates, as well as Egypt. Fatah has a goodrelationship with Israel and stands to gain control of Gaza oncethe war stops. All Hamas can promise the people is moredestruction, while Fatah can point to the West Bank and the lack ofany destruction, a growing economy and a relatively peacefulrelationship with Israel. You might notice there was almost nodisruption in the West Bank during the Gaza war. No anti Israeldemonstrations in Egypt, Saudi Arabia and Jordan. Meanwhile Gazalay in ruins. Point counter point. It is there for all the Muslimsto see how cooperating with Israel against the Iran backedterrorists is good for their lives. They also see how ISIS brutallykills Shiites.

|

So what does all this mean. The war between Sunni and Shiite isjust getting underway in Iraq, it is full on in Syria and now it isspilling into Lebanon. That will go on for several years andthousands on both sides will die. Turkey is on the wrong side ofthis battle as is Qatar and they will pay a big price for that withthe Sunni Arab states. The US must become oil independent. We musthave Keystone and a lot more fracking and offshore drilling. Windand solar barely make a dent now that Obama has decided to killcoal. Coal was 40% of US power production. Wind and solar are lessthan 5%. It is hard to know yet how energy costs in the US will beimpacted, but likely for the good vs Europe and China if frackingand Keystone are allowed to go full out. That will mean morefactory production in the US if they ever change corporate taxrates.

|

In Europe, Putin is not backing off. The Europeans and Obamahave shown him they are afraid to take him on in any real way. Theydo nothing of material significance because the “don't want toprovoke him”!! I am not sure what invading another country andshooting down a civilian airliner is if Obama is afraid to provokePutin. Russia is a serious threat to European growth and stability.It may become a threat to the stability of the Euro one day. It ishard to know where all this goes from here since Obama has not donewhat needs to be done to speed up LNG shipments to Europe. Merkelhas shut the nuke plants and banned fracking for ten years.Combined these actions mean Putin has control over Europe via thegas lines. He will use that to lever them to be less punishing toRussia than they might otherwise be. Putin will now not back downand so it is hard to judge what investing in Europe might look likewhen you go to exit in five years.

|

Africa is where the offshore action is ramping up rapidly. Chinais pouring in billions to help it develop. That is where the realopportunity might lie if you have the stomach for it. In contrastto Europe, there is potentially unlimited resources and growingdemand in Africa. It is corrupt, hard to do things there and risky,but my point is what consider less risky-Europe and maybe parts ofthe Middle East may become more risky then they have been.

|

China is going through a major transition with a major effort toreduce corruption which is rampant, but the Chinese are also nowwaging a subtle battle against large US companies like Microsoft,Qualcomm and McDonalds in order to help grow their owncompanies.

|

Bottom line to all this is that the US remains a far lower riskfor investing than Europe or anywhere else if you look at a fiveyear exit date. Asset prices in Europe may be more attractive, butrisk adjusted it is much less clear. The rest of the world is amess of huge proportions, as Madeline Albright said recently. TheUS has a foreign and defense policy of appeasement and an inabilityto protect American interests in various places where we never hadthat worry before. The just released defense analysis says theObama defense cutbacks are leading to a dangerous level ofinability for US forces to respond. I know from sourcesinside the Pentagon that this has already become very serious. Ifyou are investing in a place where US military power is potentiallyneeded one day, don't count on it because it will not bethere. More reason to invest in the US and be exposed to muchless risk over the next five years.

|

The world is extremely uncertain and getting much more so by theday. The terrorist in Iraq will try to come here with some new9-11somehow, one day in the near future. You need to be insured forthat. While it is true that during several other war scenarios likeKorea and Vietnam, the US economy was relatively unaffected, thisis a much greater risk scenario and it is ramping up.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.