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HCA Buyout: Diamond Or Rust? Oil & Commodities: XOI Still Strong. Stocks: Now What?

by Dr. Joe Duarte,
Dallas, TX, July 26, 2006, 08:00 EST

Pre-Market Summary:

Traders will be looking at the Middle East, oil supply data, and the action on the trading floors and trading screens.

Today's Economic Calendar: 7:45a.m. ICSC Store Sales Index For July 23 Wk. Previous: -0.6%. 8:55a.m. Redbook Retail Sales Index For July 16 Wk. Previous: -2.2%. 10a.m. June Existing Home Sales. Previous: -1.2%. 10a.m. July Conf. Board Consumer Confidence Index. Consensus: 104. Previous: 105.7. 10a.m. July Richmond Fed Manufacturing Index. Previous: 4. 5p.m. ABC/Wash Post Consumer Conf For July 23 Wk. Previous: -9. Source: Wall Street Journal.com, Marketwatch.com.

Israel: Doubts About War?

Beyond The Mainstream Reporting Lies A Down Beat Story

Almost two weeks into the war against Hezbollah, there are key questions being raised about Israel's strategy, ability to persist, and odds of success.

According to the World Tribune.com, key Israeli military leaders "have been stunned by the failure of Israel's air war against Hizbullah, which has shrugged massive air bombings on its headquarters in Beirut to maintain the rocket war against the Jewish state."

The report suggests that at least some of the modeling used to predict the potential for success against Hezbollah was based on the Palestinian experience in Gaza. According to the report: "the General Staff quickly learned that Hizbullah was not a Shi'ite version of the Palestinian insurgency in the Gaza Strip. For years, the air force boasted of its ability to kill Palestinian insurgency leaders while glossing over the failure to halt missile strikes from Gaza towns only three kilometers from Israel."

The World Tribune reports that Israel's command was so sure of success that "the air force did not even deem the purchase of deep penetration munitions a priority. Earlier this year, Israel decided against purchasing U.S.-origin bunker-buster weapons regarded as a requirement for any air strike against Iran or Syria."

Complex And Complicated

Stratfor.com's George Friedman notes that "Historically, Israel has tried to fight wars as quickly as possible," and that "There are three reasons for this:"

1. "First, Israel is casualty-averse and fears wars of attrition. The rapid destruction of enemy forces has always been a principle."

2. "Second, large-scale mobilization is extremely expensive for Israel economically. Wars need to end quickly, so as to keep the costs of mobilization low."

3. "Third, Israel has a dependency on the United States. An example is its need for additional precision-guided munitions and for jet fuel. The United States normally supports Israel but usually wants to see cease-fires put into place as quickly as possible. Therefore, Israel typically has to end major, conventional combat operations as quickly as possible. In previous wars the Israeli model has been sudden, surprise initiation of war or -- when not possible, as in 1973 -- rapid seizure of the initiative, followed by rapid termination."

It's quite obvious that Israel is in a difficult position, since it is now in what could be a protracted, long term, battle, which has the potential to turn into a situation similar to the one the U.S. is facing in Iraq.

According to Friedman: "Israel clearly has not achieved either of its two objectives. First, rocket fire from Hezbollah has not been suppressed. Israel seems to be having the same problem in this area as the United States had in 1991, with its famous Scud Hunt in Iraq. It could eventually work, but it hasn't yet. Second, the air campaign, from the little we have seen, does not appear to have broken Hezbollah's will to resist."

Friedman makes several other key points, that are being glossed over by over simplistic mainstream analysis that portray Hezbollah as an Iranian/Syrian puppet.

According to Friedman: "There is an assumption that Iran or Syria could simply order Hezbollah to stop the fighting. In our view, this vastly overestimates the political influence of Tehran and Damascus -- or the unity between Iran and Syria. "

Instead, Friedman paints a more complex picture of the relationship between the three entities, Iran, Syria, and Hezbollah.

With regard to Iran and Syria, Friedman suggests: "Each has different interests in this fight, the governments are wildly different regimes, and neither has as much trust in the other as might be imagined. Iran is very far away and, though it has covert levers, it has few overt ones."

Hezbollah "has its own interests in this war -- and though Iran and Syria are enablers, providing the militants with weapons and training, that does not ultimately give them control over Hezbollah. Put it this way: Hezbollah would not be what it is without Syria and Iran, but it does not follow that it is under the control of Syria and Iran. At this point, few if any weapons are getting to the militants anyway. Hezbollah is playing its own game."

Conclusion

Israel is running out of time. As Friedman succinctly puts it: "In the early days of the air campaign, there was a surprising amount of international support for Israel. As the air campaign wears on and the pictures of civilian casualties beam around the world, that support is deteriorating. Israel is coming under greater political pressure. Shortly, the United States will be experiencing it."

Furthermore: "An extended Israeli air campaign that is not reaching any recognizable goal will generate pressure inside the United States and might force Washington to pressure Israel to terminate the campaign. Israel will not be able to resist that pressure -- not while it requires re-supply from the United States. Bush, with his poll numbers and increasing problems in Iraq, cannot resist indefinitely either."

Friedman puts forth one daunting thought: "One other possible explanation for events (and perhaps this is the surprise) is that Israel has been taken aback by Hezbollah's abilities and resilience, and that the Israelis are not certain they can attain their political ends militarily. In other words, the cost of imposing defeat on Hezbollah might be seen as so high, or perhaps unattainable, that the outcome of the war must be something of a stalemate. If that is the case, the balance of power in the region has shifted dramatically and Hezbollah has, in fact, won a victory."

Our own conclusion is that air wars are not particularly successful against a well dug in enemy. The war in Iraq has clearly proven that.

That somehow this remains a viable thought within high military circles in Israel, the Pentagon, or anywhere else is mind boggling.

More interesting is once again the notion of how pre-war intelligence in Israel, as it was in the post 9/11 period in the U.S. is far from being as effective as anyone within the military community perceives.

The lack of knockout ability in Iraq, as it is becoming possible in Lebanon, in our opinion, is what should be worrying the powers that be, as it is clear that Islamic militants are clearly gaining ground, if not militarily, than certainly psychologically.

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