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Osama Bin Laden is Dead

In a huge win in the war against terror, Osama Bin Laden was killed by US Navy Seals yesterday, in Abbotabad, an affluent town a couple hours from Islamabad.

MSNBC has some initial details and a video. Two "couriers" were tracked as information delivery mechanisms to the man who sold terror. He was in a compound that was a "mansion" 8 times the size of other houses in the area, supposedly for the last few months. The house was built with extreme security and had no telephones or internet connection – suspicious I imagine.

A great source of links and info is Yahoo’s live report on it.

Now for relevance. Markets should have gone up. Indian markets have not. The rupee is down, presumably because of oil payments, but we must assume that dollars are not flooding in. In a way the market + rupee down, and US futures up nearly 1% leads to the conclusion that money will flow into the US for a while to rejoice, until they realise it’s just another battle in the war on terror.

Nevertheless, I believe that the US will eventually leave Pak, and that Pak will suffer a loss of the huge military cash they’ve been getting so far. This does two things – first, it helps the US budget in the longer term, even if they have the bigger problems of Medicare and Social Security haunting them.

The second consequence, more important for us, is that Pakistan gets more into trouble. That state is really scary and those people face terror every single day from terrorists bombing bazaars, to ministers killed to what not. Without the US forces, there will be substantial degeneration there, and it’s likely that to bring things back into shape they may choose the bonding experience of going to war with India. (War is a great way to unite a fragmenting country – just get a common enemy)

For India, that means preparation and that means we have to be ready for some of the consequences. The war on terror is ours as well, and it doesn’t die because someone killed an Osama (though we should rejoice – it is hugely important to celebrate). It means we must be prepared for the aftermath and the doctrines that have stumped us so far must be re-thought. We can’t, for instance, officially chase terrorists back into Pak territory – but obviously, we should, and I hope the political and military brass are considering it.

I don’t think a war is likely but there will surely be some aggressive behaviour on both sides. In that context, I think the speculators will be looking out for stocks that benefit in case of a war or in case of aggression. I remember thinking of that as an idea after 26/11, but gave up after I realized we were sissies at that time. Now, again, it’s important to that list in case hostilities increase.

Lastly, remember that markets place more importance to RBI’s potential rate hike tomorrow. It seems like that, at least. So while we rejoice on the death of a disgusting terrorist, the markets probably don’t care enough.