IRAQI FAIRS

Exactly where are we in this conflict? It’s difficult to cut through to the truth with so much hot air coming from all sides. I decided to go back and read the Joint Resolution approved October 2002 by the President and the Senate authorizing the invasion or liberation (take your pick) of Iraq.

It begins with a bunch of whereas clauses summarizing the then current situation: Iraq had been kicked out of Kuwait and had agreed not to develop nuclear, chemical and biological weapons, and Iraq would not support terrorism; weapons inspectors had been forced to withdraw in 1998 and Congress had declared that Iraq’s continued development of weapons of mass destruction threatened world peace; the Iraqi regime continued to brutalize its civilian population; Iraq showed its hostility toward the United States by attempting to assassinate Bush 41 and shoot at US planes enforcing the no-fly zone; members of al Qaida are known to be in Iraq; the regime continues to harbor other terrorist organizations; Iraq might launch a surprise attack on the US or provide weapons of mass destruction to terrorists.

Therefore, the Joint Resolution authorized the President to use the Armed Forces of the United States as he determines to be necessary and appropriate in order to:
(1) defend the national security of the United States against the continuing threat posed by Iraq; and
(2) enforce all relevant United Nations Security Council Resolutions regarding Iraq.

A review of this document indicates the US had several objectives, at least initially, in the war against the Iraqi regime.

+ To eliminate weapons of mass destruction stockpiled or under development by Iraq as called for by various UN resolutions.

+ To implement democracy within Iraq and eventually throughout much of the Middle East.

+ To free the people of Iraq from a brutal dictatorship.

+ To eliminate a dangerous enemy.

+ To prevent Saddam Hussein from working with international terrorist groups that might threaten the US.

Although not specified in the Iraq War Resolution, it seems clear to me that the US was intent on making sure that control of Iraqi oil was taken from Saddam and turned over to a friendly Iraqi government. Removing Saddam also eliminated his threat to Kuwait, Saudi Arabia and other oil rich Middle East nations.

As everyone knows, we did not discover weapons of mass destruction in Iraq. Although there are rumors that these weapons were shipped out of Iraq shortly before the invasion, no hard evidence supports this theory. Therefore, we must conclude that there were no weapons of mass destruction in Iraq during the days leading up to the war. It appears there was a massive intelligence failure not only in the US, but in many other nations as well. Some have claimed that the Bush administration knew all along that there were no such weapons in Iraq, but this claim isn’t justified with evidence. Basically, it was a screw-up of massive proportions.

Iraq does have a democratic government, a parliamentary system where the people vote for their representatives, who join together in political parties and elect a Prime Minister. As described in Wikipedia, a permanent 275-member Iraqi National Assembly was selected in a general election in December 2005, initiating the formation of a new government. The Prime Minister of Iraq is Nouri al-Maliki, who holds most of the executive authority and appoints the cabinet. The current President of Iraq is Jalal Talabani, who serves largely as a figurehead, with few powers. The vice presidents are Tariq al-Hashimi and Adel Abdul Mehdi, deputy leader of SCIRI, the largest party in the Iraqi National Assembly.

Although the government at times seems ineffective, it is an honest democracy. It remains to be seen if additional democracies will be established across the Middle East.

The US-led coalition has freed the people of Iraq from Saddam’s brutal dictatorship, and the new government is not oppressive. However, a violent Sunni/al Qaida insurgency has continued to murder thousands in an effort to plunge the nation into chaos and civil war. The US-led Surge, actually an increase in troops and a change in strategy, has splintered the insurgency and reduced the violence. Although the war is moving in the right direction, Iraq is still a dangerous country, both for the Iraqis and US troops.

The elimination of Saddam’s regime removed a dangerous enemy without question. However, the insurgency is equally dangerous. If our enemies are able to win in Iraq, they may be able to spread their hatred of the US beyond the borders of Iraq and across the region.

There is no hard evidence that Saddam was working with international terrorist groups. There appears to be some contact between al Qaida and Saddam’s regime, but no evidence of any type of alliance. It may be that the US was concerned about the potential for an alliance, given that both Saddam and al Qaida hate us.

Iraqi oil production is about 2.5 million bpd, about where it was before the war. However, the oil is being sold by a friendly government, so we don’t have to worry it will be used as a weapon.

To summarize, we have removed the yoke of dictatorship from the people of Iraq and implemented a democratic, if somewhat ineffective, national government. After years of warfare with extremists, the Surge seems to be leading to a better life for Iraqis. We have also removed an enemy from Iraq, and secured a supply of oil. All good things, clearly. On the other hand, no weapons of mass destruction were found, and the ties between Saddam and terrorists were not threatening. And we paid a heavy price in blood and national treasure.

Was it worth it? Each of us will have to make that assessment.

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Modern day Iraq exists on what was once called Mesopotamia, Greek for “between the rivers.” Mesopotamia is considered the cradle of civilization. The Garden of Eden, where mankind is believed to have originated, is said to be in Babylon, which is located in the rough sands of this war ridden Country.

It was home to several ancient cultures because of the fertile land created by the two rivers. The Sumerians, one of Mesopotamia’s earliest cultures, created some of the earliest writing ever found. There is also evidence of sciences, math, law and philosophy in their ancient writings.

During the spread of Islam in the 7th and 8th centuries, Baghdad was built. The Arabs ruled the region for five centuries and Baghdad became a center for learning and culture. In the 13th century, the Mongols conquered the area and Baghdad was destroyed.

The Establishment of Iraq the Nation

After the Mongol invasion, Baghdad was rebuilt and the surrounding area changed hands a few times. By the 15th century, the Ottoman Empire ruled the region. Their rule lasted until World War II.

During the war, the United Kingdom drove out the Ottomans. Afterwards, through a series of treaties and agreements, the nations of the Middle East were established. Britain was given governance over Iraq and Palestine. The United Kingdom put King Faisal in power, and appointed other government officials.

By 1932, the king successfully petitioned for independence. The kingdom of Iraq lasted through 1958, with many attempted military coups and a brief period of reoccupation by the United Kingdom.

The Republic of Iraq

The Iraqi army successfully overthrew the monarchy in 1958 during the July 14 Revolution. After the coup Brigadier General Abdul Karim Qassim was in power. Colonel Abdul Salam Arif overthrew General Qassim in 1963. However, his rule only lasted until 1968 when the Arab Socialist Baath Party took over the capital in a military coup.

Saddam Hussein eventually gained control of the party, mainly by killing his opponents. Hussein led the country through the Iran-Iraq war from 1980 through 1988. Iraq used chemical warfare against both the Iranian army and civilians. During that time, Hussein also committed atrocities against his own people.

Modern Military Campaigns against Iraq

In 1990, Hussein invaded Kuwait and started the Gulf War. The United States, among other countries, participated in the war. Economic sanctions were also imposed on the country. The intent was to persuade Saddam to destroy his weapons of mass destruction. The conflict ended in 1991 and resulted in the liberation of Kuwait, but not the end of UN sanctions.

In 2002, the United States led a coalition of nations in an invasion of Iraq. They contended that Iraq had not followed the UN mandated destruction of chemical and nuclear weapons. The coalition forces were successful in ousting Hussein from power. A new democratic Iraqi government was voted into power in October 2005. Coalition forces still remain in Iraq to help the new government maintain order.

It is advisable and an advantage for investors to have an understanding of financial statements. It enables investors to draw their own conclusions about the company and possibly survive in challenging markets. However, it is not a simple task. Thus, it is probably easier to assess a company by using basic yardsticks.

Business
Analyzing the business of a company provides an understanding about how well positioned the company is in the industry and also the potential growth of the industry itself.

You should understand and identify what type of business and industry the company is in, what and where the risks could come from and what is the market segment of the business.

Management
Good people will run a good company. In fact, most goodwill built over the years is largely due to good management. The honesty, integrity and commitment of the people are a crucial determinant of the success of a business. Dishonesty and mismanagement can easily bring about the downfall of even large multinational companies like Enron, WorldCom and the National Australia Bank.

Earnings
To provide an estimation of how well the company is doing, investors should assess the nature, quality and predictability of future revenue streams, as well as earnings before interest, tax and depreciation.

The earnings of a good company if not growing, should be sustainable. The earnings of a company should justify the capital employed as in the long term; investors would withdraw their support if profits of the company do not justify their investment value.

Cash Flow
Most analysts will consider a company’s cash flow as the best way to determine the company’s health. Cash could come from three sources; operating activities, investing activities and financing activities.

The cash flow statement provides detail of all incoming and outgoing cash from each of the three sources. Revenue from the operating activities is consists of cash items only. Cash flow from investing activities includes the purchase and sale of property, plant and equipment. Cash flow from financing would show any monies raised or paid out to shareholders (including the dividends payment).

Dividends
For a company that does have a dividend policy, it’s good to know whether it employs a constant dividend growth policy, residual method or none. For a profitable company with a lack of investment opportunities, it would be wise to return part of the profits as dividend to its shareholders. In most cases, profitable cash generating companies in mature or slow growth industries are the common dividend distributors. By knowing a company’s past dividend distribution and the management’s intentions, a good gauge of future distributions can be made. Popular models to value dividend paying companies are to discount the future dividends using either a constant or multiple period growth rates.

To determine the value of an investment requires ascertaining whether a current price reflects sufficient growth to allow an investor to generate a return that meets their cost of capital. Clearly, all the above have to be considered collectively for a fair assessment of a company’s valuation.

By learning to recognize the tell tale signs, you are better prepared to protect your interests. If you can interpret the information, you able to determine the magnitude of any underlying problems.