Yet Another Possible Tipping Point

Tipping points come in all shapes and sizes. This year there seems to be an abundance of possible tipping points. I dont know why that is, but there are several that could jump up and bite us this year.

Each of the possible points we have covered could cause, if they occur, a severe recession or worse.

Iran Revisited

Today the news is abuzz with a couple of tipping points that are making headlines. The first one being the news that Iran has defied the U.N. and broken the seal on their uranium enrichment facility. While we have written about this problem before, it bears repeating simply because the U.S. and Europe have expressed concerns over this latest turn of events. Europe is requesting that the matter be taken to the U.N. Security Council.

Let me lay out a possible scenario here. The EU takes the matter to the Security Council, the Security Council tries to pass resolutions to force Iran to cease and desist, Russia and China veto the resolutions, the U.S. gives the U.N. the ole Bronx cheer and forms a new coalition and goes in with guns a' blazing. Sound familiar?

The only possible wrench may be that Israel gets nervous and bombs them first. This tipping point could hit us before the spring flowers start blooming.

Bird Flu Tipping Point

The other possible tipping point news is the recent outbreak of Avian flu in Turkey. The troubling part of this story is that the World Health Organization sends in the PR guys to calm the nerves of the natives. Everybody is getting a little nervous and the last thing we need is panic.

At issue here is the concern that the flu virus will mutate and become transmissible between humans. If the mutation occurs without any reduction in the mortality numbers, then it becomes a pandemic and we see something similar to the Spanish Flu outbreak of 1918. More people died of the flu than were killed during World War I, which had just ended. The number is somewhere between 20 and 40 million. In fact, more people died in one year from the Spanish Flu than in the four years ofthe Black Death Bubonic Plague from 1347 to 1451.

If this occurs, it will devastate the economy and not just here but abroad. A real doomsday scenario would be if the flu spreads to the U.S. There are already plans in place to restrict air travel worldwide, should this become an epidemic. What most people do not know is that there are plans here to restrict all travel, quarantine entire cities, and mass evacuations to quarantine camps. Forget the economy, just try surviving if this thing gets hot.

The chance of this scenario playing out I would put at slim and none. It is almost impossible to predict as we do not understand how viruses work. Any good virologist will tell you that someday it will happen. It is not a matter of if, but when. The problem lies in figuring out which virus will be the culprit. The reason everyone is so concerned about this particular strain is because the mortality rates are so high. And don't believe that the latest flu drugs will be any help, because they just do not work. They are not cures, they are preventatives that aid the body's immune system.

I realize that since the first of the year we have covered quite a few of these potential tipping points. You never know which one will do the job, but with so many floating around, it is my bet that this year will mark the beginning of the next down phase of the bear market which began in 2000. Keep your eyes open. It is going to be a wild ride.