JOURNAL: Opportunities in Nigerian Outcomes

Port Harcourt, Nigeria. There have been two large robbery/raids on corporate compounds in the past week. The first was on Agip's (an Italian oil company) headquarters where seven were killed. The most recent was on Saturday when Daewoo's (a South Korean conglomerate) compound was raided and $285,000 was stolen. The objective of these raids and recent kidnappings, beyond the immediate financial gain, is to coerce corporations. It's working.

In further signs that this movement is adopting global guerrilla methods: 1) they have released the foreign hostages after a payment of $770,000. The moral damage to the marketplace was already maximized (Shell has withdrawn 500 employees and hundreds of contractors have fled), and a bloodless release makes it easier for corporations to deal with them in the future. 2) the group has set a GOAL (!) of a 30% reduction in Nigerian production by the end of February!

Naturally, the research analysts at the major global banks/hedge funds and government agencies are scrambling to understand the implications of this new wave of violence -- given that the fate of several major corporations, a trillion dollars of oil, and the world's oil price is at stake. Unfortunately, this effort may fall short given that the type of warfare that is evolving in Nigeria (and other places) is very new and complex. To really take full advantage of this opportunity (for financial speculators) or to mitigate the risks (corporate participants that want to limit their downside risk), a team that combines expertise in the oil market, regional knowledge, and this new form of warfare (this analyst has built an excellent track record by anticipating outcomes in Iraq, Nigeria, and Russia) should be assembled to build an actionable model and potential scenarios. Further, this model could even be built as a service delivered via a private Web site for a hefty subscription (also something I have tons of experience with). The potential profit here is limitless and the downsides are catastrophic. Things are starting to move in earnest.

UPDATE: It appears that some global hedge fund managers think the same thing (although their scenarios need lots of work).

Comments

[enigma_foundry]

John:

It would seem that the types of global organizations that will arise from this effect will be massively decentralized, with the flow of information dramatically increasing, while the flows of manufactured objects reducing, and commodities becoming more dear, rapidly and temporariliy in some cases.

The really interesting thing, once we get past the immediate and obvious effects on the price of commodities is the effects on Science and Technology, as replacements for certain commodities are sought, and the R&D funding for replacements becomes economically sound.

The re-localization of manufacturing seems to be another developing trend here, with the only necessary global flows being of IP.

[John Robb]

EF. You are exactly right. Resilient decentralization is the inevitable long-term answer. Unfortunately, it's not something that most people want to hear.

Despite this, in the meantime, there is LOTs of money to be made during this correction. I generate billions (no joke) in the 90s during the last big global trend, and I think this one has a similar opportunity.

[P-]

One evening while on a bike ride, it poured rather heavily in neigbourhood. Decided to stop at a petrol kiosk and stay dry. There was another person there too trying to stay dry. To cut a long story short through the process of small talk i lead up into the question and asked him... "Who will be our greatest enemy/ies for the next 50 years?"
I was expecting the name of a country/-ies but what i got was "Corporations." Has the answer of what would normally be empires and colonialist nations the era of conquistadors and bring back untold riches to the homeland, evolved into 'corporations' in this modern times of ours? The corporations(the answer); the Agips, the Daewoos, the Wal-Marts... It would be fascinating if the complexities would reveal itself, the works of corporations, bankers, financiers & industralists could be responsible in not producing good but also the bad. It really isn't in the interest of oil rich nations to let global cos set up shop when they can't or don't have adequate infrstructures and resources to combat acts of terrorism. These terrorists will see it for what it is an opportunity for them to send a message...

(excerpt from your previous journal post about Georgia)

However, its clear that Russia's dispute with the Ukraine provided the impetus for some guerrilla strategist to make the leap to systems disruption. We saw the results of that inevitable leap on Sunday. We can expect to see more of this in the future.
---------------------------------------------
... for they've made the "evolution" jump that will ensure the survivability of their ideology... the vehicle of perpetuation.

Hey John that Update to "some global hedge fund managers' link was interesting. Ifound it on another blog.

One thing that these and a host of other information streams have made known to me is that this a country is very, very vulnerable. We're talking about a great superspower, a young nation in the scope of great nations... but we're painting ourselves into a picture for the next 50 years that's very difficult even for the history of great civilizations to be friendly to us.

May we change for the better... Peace

P-

[Eric Stepp]

P - your comment reminds me of the basis for much of William Gibson's fictions (which has an eery propensity to turn factual over time). The role of corporations do seem to cut both ways, especially when global markets are taken into account (as Robb talks about).

However, corporations can also play a beneficial role in global politics. Take the nuclear standoff between India and Pakistan. It wasn't the UN, the US or any other world political body that helped defuse the situation a few years ago. It was the major coporations using India's IT/IP infrastructure that pressured India to stand-down from its rhetoric and posturing.

[Duncan Kinder]

"UPDATE: It appears that some global hedge fund managers think the same thing (although their scenarios need lots of work)"

Note: once again we see that the global guerillas are operating within an economic context in which commodities producers ( eg. Iran and Venezuela with respect to oil ) are struggling against price controls effected by hedge funds and other risk managers.

Global guerillas, whatever their own motives may be ( religious, criminal, etc. ), nevertheless disrupt things. This disruption makes risk management more difficult - hence advances the interests of commodities producers.

While much of our discussion focuses on oil and other energy resources, the same reasoning would apply to pork bellies, sugar beets, copper, or any other commodity.

[Don Marti]

What if anonymous out-of-the-money options on crude oil futures were as easy to get as lottery tickets, and possible to redeem in cash?

People hear things, people decide to make a little money off an attack they know about...pretty soon they're (1) giving you warning of attacks and (2) skimming off the terrorists' "hard-earned" trading profits.

[John Robb]

Duncan, you are exactly right. The availability of energy can also have a direct influence on many other commodities (as well as direct disruption).

Don, in many respects, they already are. However, I know where you are going with this. Betting markets to include local offline purchases.

[Eric Stepp]

Don Marti said:
"People hear things, people decide to make a little money off an attack they know about...pretty soon they're (1) giving you warning of attacks and (2) skimming off the terrorists' "hard-earned" trading profits."

Don, isn't the scenario you're talking about similar to that Rumsfeld (I think) broached with regards to a global "options market" for terrorism? I didn't really follow it at the time, so I don't know if it was economically motivated or threat-awareness motivated.

[Josh Koenig]

Heh,

Well, if you need a web programmer for such a venture, drop me a line. I have plenty of experience building private blogging tools.

[jon]

If I remeber correctly Rumsfeld was talking about using the options market as a system of predicting terror attacks. I think this would be like the principle behind James Surowiecki's book, "The Wisdom of Crowds"

Basically, if all the people in the world got togethar and talked about what they thought would happen you'll be pretty damn close to accurate. Certainly closer than if you got together 100 experts on whatever topic.

[John Robb]

One of the reasons I would like to get into scenario modeling for hedge fund speculation is that I think it would be extraordinarily lucrative (for all involved, particularly for the speculators that back us) and provide a platform for attracting a team of the best minds in next generation warfare. Their output, if correctly packaged would become global treasure in no time.

Given that the DoD is going to be starved for cash in 5 years (due to a combo of skyrocketing debt payments and unbounded social programs), we need to get creative about building long term security resources. This group could provide the intellectual platform for that.

[business babe]

I am so thankful for blogs like yours that keep me up to date on what is happening in Nigeria..it seems like much of these happenings is largely ingnored by the general populous.

[Movie Guy]

"Daewoo's (a South Korean conglomerate) compound was raided and $285,000 was stolen."

It's more than a South Korean conglomerate. It's also an arm of General Motors vehicle production.

[enigma_foundry]

John: one note, when you said "Resilient decentralization is the inevitable long-term answer. Unfortunately, it's not something that most people want to hear." you slightly changed the meaning of the point I was making. Decentralization will occur at very different paces depending one what system you are talking about--the globalised flow of information will continue, but the flows of people, manufactured goods and commodities will be changed, each to a different degree.

"Given that the DoD is going to be starved for cash in 5 years (due to a combo of skyrocketing debt payments and unbounded social programs), we need to get creative about building long term security resources. This group could provide the intellectual platform for that."

Yes, we do--and the understanding that our economic topology and in the era of bio-terrorism, our health care networks will be the front lines of this next war, we need now new thinking about what is 'defence spending' It meshes with some of the social and environmental programmes of the old left. A lot of people don't want to hear that, for sure.