Ref: 0901-NASA-006 of 14-Jan-2009

War Drums Beating on Iran -Attack Imminent

CAUTION: Following situation is based on strong media reports. The events may or may not happen. However, we try to
err on safe side. Please exercise your discretion. Do not take holiday if you are seized up with large portfolio.

News - Date of News or Event: 2009/01/14

There are reports that
1. Israel is planning massive strike on Iranian Nuclear facility with the blessings of United States.
2. Iran had earlier mentioned that should Israel or US attack Iran, there will be counter attacks on
Israel and 32 US bases in Middle East. There could be battery of attacks from Hezbollah in
Lebanon and Hamas from Palestine.
3. Although President Bush has officially denied any support for such operations, his ex-hawks in
United Nations Mr. Bolton has indicated such actions are more closer to reality.
4. There is a growing feeling that Bush wants to get into the final act of the war before he officially
departs on 20th of January, 2009. It will be final act of devastation from the reckless President of
United States who will leave a legacy of not only bankrupt banks and economic mess, but also
physical blood and body parts flying around.
5. The attack may take place in next 5 days.
6. There could be a war between India and Pakistan due to recent non cooperative attitude of
Pakistan in dealing with the terrorists. If the war erupts, watch out for the damage on refineries
in Gujarat as Pakistani Intelligence strongly dislike Modi, the Chief Minister of Gujarat.
7. In short, Middle east will be the hot bed of war on multiple front.
8. BEWARE of WAR DOGS

Analysis
Logically, a sitting and departing President is not supposed to get into war gears, but the President
Bush, a republican and his War Monger Vice President Mr. Dick Cheney, want to help the war industry
as much as they can during final phase before Obama takes over. They want to leave such legacy that
President Obama will be left with no choice except to adapt to war and be dictated by what is left
behind.

This will be a foreign policy matter which will be managed by another hawk Hillary Clinton. She is in
deep debt after losing primary democratic election. It is said that she is in debt in excess of US$ 7
millions. The only way she can mitigate the debt is to appease the War Industry in United States who
need desperate orders after sudden calm in Iraq and Obama’s avowed intention to leave Iraq as soon
as he can.

There is more logic in above reports. Recent Israeli incursion in Gaza, largest since 1967, was a
preparatory exercise and practice ground to launch massive attack on Iran. Israel killed over 800
people and lost only 5, 3 of whom from its own friendly fire, which clearly shows the disproportionate
use of force. The attack was also intended to incite Iran into action which may justify the war later on.
Iran so far has avoided such instigations.
If the war does erupt, there will be wholesale chaos every where.
1. Oil prices will suddenly spurt to extremely high level.
2. Oil Futures for February will be expiring on or about 19 January, so the rise in oil prices will be a
distinct possibility.
3. Gold and Silver may rise, if US$ falls as result. Of course, the forces are at play to prop up the
dollar and spread its acceptance as “haven” in the time of war.
4. Government of India who wanted to reduce oil prices further, may be forced to wait on such
announcement or may make sudden U turn on its proposed policy.
5. Oil; Producers like ONGC may rise
6. Refiners may fall due to contraction of their margin again. Reliance Industry may have to prolong
the closure of Petrol Pump stations much longer as result.
7. Government of India may be forced to suspend any announcement on lifting of price control on the
petrol.
8. Fear of inflation amid deflation and recession will rise. Interest rates may also perk up on Libor front
9. Rupee may weaken by 2% to 3% due to rise in oil bill and lower export revenue due to Satyam
saga affecting Software industry. It will be a time to send remittances to India during sudden
weakness.

Strategy
1. To stay away from Air Line stocks for the time being.
2. to stay away from Auto Stocks of high value. Take this opportunity to build position in Ashok
Leyland
3. Although refiners may suffer, the stocks are so beaten up that this is perhaps last time you may be
seeing the lower level. These stocks, especially State Owned Enterprise like HPCL, BPCL and IOC
are showing signs of good strength. War related weakness provide good buy opportunity.
4. To build up the position in Cairns energy slowly. The company may come into production at good
time – rising oil prices again. Watch this counter to buy in correction. The company may come into
production in June 2009
5. Gas stocks may rise again. To build up position in Petronet and Gail
6. Metal stocks may gain due to rise in inflation. Commodities may rise a bit.
7. Australian currency may also gain due to rise in metal stocks and commodity prices.
8. Interest rates may not rise due to rise in inflation. Government is in dilemma – to go here or there.
That is if they raise interest rates, the recession will deepen, and if they do not do anything, the
inflation will raise its head near election.
9. Major blue chips and finance stocks may go south or lower.
10. Cash rich companies like HLiver, ITC may do better.
11. There may be good correction in mid caps after strong rally in last 1 month or s.
12. Avoid banks and financial stocks. We may also see some bad news coming from this sector in USA
during reporting season for Dec 08 quarter.

Actions
1. Reduce the position by 60% in non core stocks as above
2. If war does not take place before Bush leaves White House, you may re-enter
3. Gas stocks are the best choice in the world. In India, Petronet, GSPL and Gail are the best
4. Please note that the situation may go either way. The market risk has increased. So do not attempt
to get rich in 3 days.

Anil Selarka – Hong Kong

Blog: http://anilselarka.com

Ref: NASA – 0901-006 of 09.01.14