Every once in a while a pitch comes along that looks like the sweetest, juiciest, fattest pitch you are ever going to see. That is what you wait for. — Warren Buffett
In watching the US pensiveness and inaction regarding Libya, I couldn’t help but think of the above Warren Buffet quote. Here we have a moment that is absolutely perfect for US intervention, the fattest pitch US policy makers could have ever hoped to receive, an opportunity to put the failures of Iraq and Afghanistan on the backburner for a while and both do good by ending mass civilian killings and also helping secure oil supplies. Yet we can’t swing. We simply don’t have the capital and wherewithal to do so.
As Warren Buffet and other value investors well understand, you don’t always need to act. In fact it is better be patient and wait until the moments when the course of events throws up an opportunity where the reward is maximal and the risk is minimal. If you act before those moments then you run the risk that when those moments arrive you are not ready. Many of us experienced what that feels like in the spring of 2009. We knew that markets were at a low and it was a great time to buy but we just didn’t have the capital to do so having wasted it on moments where the risk/reward was less obviously skewed.
Libya right now is in many ways a Dow at 6,500 type moment. The rewards for acting far outweigh the risks. However, like many investors in 2009 our capital and attention is too tied up in disastrous investments in this case Iraq and Afghanistan for us to make a move.
So what are the rewards exactly? Well for one, we could get oil flowing again. Libya is the largest oil producer in Africa and the troubles there have caused oil prices to spike above $100. Killing this oil price rise would be worth hundreds of billions of dollars to our domestic economy. Furthermore, we can show the world that our military is still capable of doing good. The Libyans unequivocally want Gaddafi out. He is killing civilians and destabilizing the region so his neighbors want him out as well. America would win this PR battle very easily and see its international reputation which has been battered by the wars in Afghanistan and Iraq rise as a result.
So what are the risks then? Well the obvious risk is the loss in military life and the potential of a protracted expensive conflict. However, a quick glance at the facts would reveal that to be unlikely. First of all, Libya is a very small nation population wise – 6 million versus the 35 million in Iraq. Secondly, the part that is supporting Gaddafi is an even smaller fraction of that 6 million and is centered entirely in Tripoli. If we secure Tripoli, we secure the nation. This likely would not take very long as those soldiers who still are loyal to Gaddafi would immediately become unloyal the second America showed up. Their loyalty to Gaddafi runs no deeper than the money he gives them.
At the moment though, no such military action looks to be forthcoming. America like myself and others in spring of 2009 is passing up on an opportunity to make a move at just the most opportune moment. …