Middle East Turmoil: Geopolitical and Investment Dimensions

What if the key to understanding the Israeli-Palestinian conflict lies not in politics but in human connections? Join us on this episode of Skeptic's Guide to Investing as Steve and Clem unravel the geopolitical and economic threads of recent Middle East turmoil. We'll explore the motivations behind Israeli leadership, the role of Hamas and Hezbollah, and the potential for a ceasefire, all while maintaining a focus on the humanity that bridges Israelis and Palestinians. We emphasize the importance of peace and understanding in the face of complex and often divisive narratives.

Can Israel effectively combat terrorism without endangering more innocent lives? This episode doesn't shy away from the tough questions. Our discussion delves into Israel's actions against Hamas, drawing comparisons with historical conflicts. We also scrutinize the broader implications of U.S. military movements, questioning how reallocating resources from Asia to the Middle East could affect global hotspots like Taiwan and the South China Sea. The conversation challenges the prioritization of international conflicts over pressing domestic issues, illustrating the interconnectedness of global strategies.

How do American perspectives on foreign policy shape our national priorities? Steve and Clem dissect the bipartisan consensus on China and the more contentious views on Russia and the Middle East. We analyze how media focuses on pocketbook issues, often overshadowing critical foreign policy debates. This episode emphasizes the need for media to educate the public on broader issues and explores the impact of military engagements on American families. We wrap up with practical advice for your investment portfolios, urging listeners to reflect on whether our foreign policy priorities truly align with the nation's best interests. Thank you for supporting Skeptic's Guide to Investing.

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Chapters

• 0:27 Middle East Conflict and Peace Prospects
• 21:13 Impact of Terrorism and Military Strategy
• 27:54 American Perspectives on Foreign Policy
• 36:21 Investment Podcast Closing Statements

Transcript

Clem Miller: 0:27

Good afternoon everybody and welcome to Skeptic's Guide to Investing. With Steve Davenport and Clem Miller. We are talking today about the entire situation in the Middle East. We're going to focus on the geopolitics of it, the domestic politics of it, the economic implications, investment implications of recent developments in the Middle East. Fortunately I should say unfortunately we can't really get this issue out of the news and you know it's kind of pushed some of the other geopolitical issues to the sidelines, which you know is kind of problematic because there's so many of these issues. So you know I have some views on it, steve, I'm sure you have some views on this. So let me ask you, steve, what you know. Where do you think this is going in terms of a possible ceasefire?

Steve Davenport: 1:37

I was really hopeful, clem. I thought that the protests that we've seen in the last few weeks have given us a feeling that the people of Israel realize this situation has gone too far, and I think that the hostages at this point I question how many of them can be alive through all the bombings, through all the locations in these underground tunne, through all the locations in these underground tunnels. I found this to be a bit of a confusing rhetoric when he was, you know most. He's in charge, he's responsible for the event occurring. He's in charge, he's responsible for the event occurring because of the, you know, ignoring data that they had from various sources that something was going on, and now he's, in my mind, extending this longer than it should be extended.

Steve Davenport: 3:03

think that they've made their moves and they've done their damage to the network of Hamas, and now I think that we could be going a little step too far, and I think that I've all along wondered what his true motivation is and whether he's motivated just to maintain his power and not necessarily motivated to do what's best for Israel. So I feel that there's. They should be moving quicker to us to a ceasefire, and I still don't understand and this is maybe just my international naivete, but I don't understand when he says he needs to eliminate the organization of the people. For an Israeli leader to say that they want to eliminate another group of people is just, in my mind, shocking, given the history of what happened in World War II. So I understand we want to eliminate people who want to try to kill us, but I'm not sure you can. You know you can disarm, you can try to put in more safety, you can try to do things, but I'm not sure elimination of a people is really something that we should be talking about in 2024.

Steve Davenport: 4:34

So in my mind, this has gone on way too long, and now we're seeing the transfer over to Hezbollah and how Hezbollah is a force that needs to be reckoned with and something that needs to be addressed.

Steve Davenport: 4:52

And if Israel keeps looking around at every possible group who is going to be opposed to them, I think this is going to go on much longer and have much more damage to the rest of the world than people. You know this is no longer an isolated issue. With Hamas attack in October, this is now becoming a much wider and wider conflict, and as it becomes a wider conflict, we start to forget that there's still peace as an option, and so I'm hopeful that something these protests that are going on in Israel are going to lead to some people in Israel saying we need to get this done, and I hope that's where we're going with this. But I look at what and how easily things are getting inflamed along the border with Hezbollah. We need to have a real serious conversation about what we can do to make this become more potential for peace in the Middle East.

Clem Miller: 6:18

So, steve, I don't think you'd be surprised to learn maybe you would be that while I agree with you on some things, I disagree with you on other things about this. So let me just be skeptical if you didn't.

Clem Miller: 6:34

Let me just take you back. Take us all back to several years ago, prior to October 7th. So you know you had a circumstance where you know Netanyahu, you know he some folks call them extremists who would rather kick people out, kick Palestinians out of the West Bank, you know, certainly move them out of areas that are desired by some of the settler groups. So his power depends on that. He's trying to stay, uh, in power, because if he doesn't stay in power he could get prosecuted. So he's uh, he's concerned about what works like, he's concerned about his political future, uh and uh. And then you have a very weak left and center in Israel who really can't do anything about that, even though there's more of an emphasis there on having accommodation with the Palestinians. So what's interesting is that for several years you had a circumstance where Netanyahu was trying to be too clever than he should be, and so he allowed Qatar to provide aid to Hamas, with the idea that he would be able to keep the Palestinians divided between Fatah in the West Bank and Hamas in Gaza. So we actually allowed aid in. I don't know how many people realize that Netanyahu was responsible for some aid going into Hamas. One has to believe that a lot of that money was used by Hamas to build tunnel systems, wasn't used to support the people. One area where I want to really emphasize here is that and Netanyahu does not represent yeah, he's the prime minister of Israel, but he does not represent the views of Israelis. And I would, at the same time, say that Hamas doesn't represent the views of Palestinians. You know Hamas is a. You know they have a governing power. They're a terrorist group that has that, unfortunately, has achieved governing power in in the Gaza Strip. So you know, you've got these two diametrically opposed powers that really do not represent the, the majority of the people in both of those areas who, on a person to person level, get along just fine. Right, there's a lot of, you know, there there've been a lot of personal to personal interactions between Israelis and Palestinians who have gotten along just fine, and so there's there's sort of a, a human basis for thinking that there could be peace, but the people who are in charge, you know, don't look at it that way. So you had, you had October 7 come around and you had this, this. Let's talk about what it is. It was an invasion by Hamas of southern Israel and it was shocking to the Israelis, obviously. I think it may also have been shocking a little bit to the Hamas leadership, because I don't think they really expected it to. I don't think they expected the Israelis to have their guards down, and I do think it's fair to say that Netanyahu wasn't prepared for this. He had some of his military resources actually in the West Bank and not along the borders with Hamas, with Gaza. You know the israeli people, as you can imagine just like the us after 9-11 was very united in supporting their government, so in the case of of israel, it was united in support of what netanyahu and the military wanted to do. And so, knowing that gaza had this, uh, this tunnel system that Hamas had built and that Hamas would have access to it, not the people of Gaza this isn't Ukraine, where the tunnels are open to the Ukrainian people. This was Gaza, where the tunnels were basically a system for allowing Hamas to hide. So Israel went after Hamas.

Clem Miller: 11:52

Unfortunately, they killed a lot of Palestinians in doing so. Now you know an argument has been made by the Israelis that well, they use pinpoint techniques and warn Palestinians to get out of the way. And so you know, as when you look at the numbers. You know some people say, well, 40,000 dead, you know is is a lot and I would agree with that. Others might say, others in Israel, certainly Netanyahu, would say, well, 40,000,. You know that doesn't come even close to, uh, allegations of large-scale death, because you know it's not like millions of people. You know there are two million in gaza. So what is 40 000 right? Would be the the counter argument for that. But still, 40 000 is a lot. And you know, some people would say, well, some of that is moss. Well, yeah, some of it is, but a lot of it is not Hamas right.

Steve Davenport: 12:49

Yeah, I mean, I don't think we're disagreeing that much here, plum yeah.

Clem Miller: 12:57

So you have all this death and destruction that has been wrought by the Israelis in response to what Hamas did. And you know the? U has provided, continue to provide, weaponry. The only times when they've sort of hemmed and that the US is hemmed and hawed about weaponry was in providing those giant bombs that you know kill more people than they kill the enemy, and so there's been some hemming and hawing about that, about the supply of those kinds of bombs, but in large part, the US and other countries have provided weaponry on a continuing basis to Israel because of the threat of Hamas, and not just Hamas but, as you pointed out, hezbollah on the northern side too. And just a general recognition that what's going on with Hamas, what's going on with Hezbollah, the Houthis in Yemen, are all part of a proxy war that's being waged by Iran, right, right. So several more things, steve, and then I'll let and then I'll come back to you.

Clem Miller: 14:12

So, first of all, you know you pointed out that Netanyahu makes a statement that we need to destroy Hamas. What that statement? There's something that that statement really misses. And, yeah, he could kill a lot of Hamas, he could reduce Hamas down to just very small numbers, but the idea of Hamas is ideological and you can't kill an ideology. Muslim Brotherhood, which had a stint in Egypt, you know, has a sort of an ideological ancestor in, you know, with the current regime in Turkey. You know this is an ideology, and so what will? And so what will happen is that you have the sons and daughters and brothers and sisters of people who have been killed in Gaza, who are tomorrow's terrorists. So you really have to wonder you know to the extent that Netanyahu is killing Hamas? You know, or, and especially, killing civilians in Gaza. You know how many future terrorists is Netanyahu actually creating?

Clem Miller: 15:50

I think Israel has to worry about that, that Netanyahu isn't thinking beyond the current conflict and his current tenure in office and is running the risk of creating another century of conflict by killing all these people. So I think that should be a very big concern. The last thing I would say, steve and I know I've been dominating this the last thing I would say is that it's not solely a question of Israel versus everybody else in the Middle East. The Middle East is complicated the other Gulf states and Israel against Iran and its proxies, the Hamas, the Houthis, hezbollah and some groups in Iraq and Syria, and this is a regional conflict where your enemy's enemy is your friend and all that kind of stuff. Right, you saw that with the Iranian attempt to to bomb, send missiles over to Israel, a lot of them were shot down by, of all people, the Saudis and the Gulf States and Jordan and and and so it shows that the situation is much more complicated, and I actually I don't think.

Clem Miller: 17:12

I think Netanyahu feels he's got some freedom of movement here because of what the other countries are doing in terms of not supporting, or I should say, not doing in terms of of how they're viewing the Palestinian question there. Doing in terms of uh, of how they're viewing the palestinian question. They're uh, it's not like they're um, you know, it's not like they're providing, uh, a lot of support to uh, hamas. It's the iranians, it's not, you know, the saudis aren't sending in military support. The egyptians aren't sending in military support. The egyptians have created this huge barrier so that the Palestinians can't cross into the Sinai Desert. So it's not a situation where it's Israel versus the rest of the world. It's really Israel versus the proxies of Iran. It really is an Israel plus Saudi plus some other countries versus Iran and its proxies war, and the sooner that that conflict can be resolved one way or another, the sooner that you can have some I think some negotiating uh overall towards uh, you know, creating regional peace right.

Steve Davenport: 18:51

Well, I, first of all, I I don't think it's a regional conflict, because I think when you get China involved and China is concerned about their flow of oil and we've got Russia involved, because guess what if the Middle East source of of energy were to get disrupted, who's one of the bigger providers of energy that might benefit from a higher price on the black market for their oil? I think that Russia is engaged here. I think that the United States, you know, was the reason I bring up this idea of Israel and getting to a peace, is that when I see us move another carrier group towards the Middle East and take it away from Asia to me, that says we've got a problem here, houston and there's, you know, something that we need to do soon, because if these carrier groups are going to defend Israel and become located there more permanently, I think the situation is, you know, has a Vietnam-like presence, and I don't think we can really justify to people putting our troops in the middle of this when this situation has, in my mind, a lot of politics around it with Netanyahu. It has a lot of history around it with some of these. As you say, we're creating terrorists in the future with this when we kill innocent people.

Steve Davenport: 20:28

I look at companies and I look at countries. In many ways similar. You have goodwill. Goodwill is an asset for a company, for a country to eliminate or hurt or kill others. In that, trying to eliminate your enemy, your goodwill gets burned up. And so, to me, israel is burning up its goodwill at a rate that is. You know, it's going to be very hard to recover that goodwill, hard to recover that goodwill. So when you see something happening and you say, oh well, you know they're doing this, it's against.

Steve Davenport: 21:14

What most people would say is normal reaction. I think that, yes, I think they had the right to react. I think they had the right to act against Hamas and I think they did act. The question is, do you act forever against Hamas or is it a you know? Is there some point at which you say my use and destruction of this culture, this group? I agree, all Palestinians are not bad. All Palestinians are not. When I say Israel has to act against Hamas, yes, I understand that. But they also have to act in a way to treat the people who are non-combatants just like they would if they were fighting, you know, a conventional war and a conventional. These people are non-combatants. They shouldn't be in the range or feeling the wrath of Israel when they didn't come over the border and attack Israel. I mean, out of the million and a half Palestinians, how many are Hamas? What do we think that?

Clem Miller: 22:26

percentage is Two plus million people in Gaza and then another three and a half, I think, in the West Bank. So there's almost. And then when you add in the, when you add in Israeli Arab citizens who are also Palestinian, you actually have as many Palestinians under Israeli control and within Israel proper than you do Jewish Israelis. So it's a more finely balanced situation than I think many people realize. If that entire area came under Israeli control, including West Bank and Gaza, it would be a finely balanced situation on the religious and ethnic front Right.

Steve Davenport: 23:18

But the Palestinian versus Israel would be similar, but Hamas as a percent of the Palestinian.

Clem Miller: 23:26

Well, you know, hamas is a terrorist group and it shouldn't have control. It ideally needs to be rooted out. There's no question about that. It really should not form a part of any government, right?

Steve Davenport: 23:42

My point is is it 50, 60, 70 percent of Palestinians are Hamas?

Clem Miller: 23:48

Oh, I would say or is it 10? Much less than that, ok. So that's my point.

Steve Davenport: 23:55

If you've got nine innocents for every person of evil, then you can't really effectively eliminate this group, because you can't differentiate.

Clem Miller: 24:10

So let's, I mean let's. Well, that's what the definition of terrorist is.

Steve Davenport: 24:15

Without a uniform or without, you know.

Clem Miller: 24:17

Let's take an analogy. Let's take an analogy of terrorists, nazi Germany, right? So what was the percentage of Germans who were not culpable? I would say including not culpable would include all those in the German army who were drafted as opposed to volunteered. I would say it's probably the same percentages, right, non-culpable to culpable. And yet, you know, the US and others bombed the heck out of Nazi Germany in order to remove that government, so that was perfectly justified.

Steve Davenport: 25:03

You know, if you look at People, wore uniforms and that's the difference, I think, between what we're if you represent yourself as part of Germany versus you represent yourself as part of the Hamas army and you're identifiable by soldiers in the field. That's a terrorist to say I'll mix in with the population and you won't know I'm not distinguishing.

Clem Miller: 25:28

I mean, I would say that the Nazis and those who volunteered for their army were terrorists. Ok, they were terrorists. I think that. I think that you have a similar situation. I mean, one interesting analogy would be Vietnam, where the vast majority of the people of North Vietnam and South Vietnam, you know, were not culpable at all. You had a small group of you know you can call them insurgents. I mean, today you call them insurgents simply because they won, right, but they were viewed as terrorists at the time and they were a small minority, and yet the US bombed the heck out of Vietnam. And so I think this is…. Technology has changed hasn't it, klum?

Steve Davenport: 26:22

I mean, we've become much more capable of isolating damage, whereas in the 60s and 70s, you know, the technology was quite a bit different. So I don't want to get too far down this path of comparison, but all I'm saying is it feels to me like the situation is growing, not mitigating. It feels to me like the situation is becoming less clear versus clear, and all I'm saying is I think that the expansion and the movement of carrier groups is now putting at risk other areas, because as we move our carrier group out of Asia, is there anybody in Asia who might be interested in that carrier group being moved, who has an offshore entity that it would like to control? Again, we know that China and Taiwan are still there, but we've decided to make the priority Israel and Hezbollah.

Clem Miller: 27:21

Right, and not just Taiwan.

Steve Davenport: 27:22

Not just Taiwan Does everybody get onto that is everybody behind that and why, as a country, are we talking about? You know taxing tips instead of you know carrier groups moving to help Israel.

Clem Miller: 27:40

So it's not just the Taiwan issue with respect to China. China has been doing a lot in recent weeks in the South China sea, correct With the Philippines, and so I think that's that's an issue. I think, you know, china is the one area of of cooperation and unanimity between Republicans and Democrats in this election, and so I think China doesn't show up as much in this election I think Russia does. There's different views on Russia. I don't really even think there's that many different views on Israel and the Palestinians. I mean, the propaganda from both sides would suggest that, but I don't think there's that much of a difference.

Clem Miller: 28:35

I think both sides support Israel and don't want to see more Palestinians killed. Both sides want that. But China is a position of unanimity, and you're right, you're absolutely right that the US strategic position in the Pacific, in the Asia Pacific, is weaker because of our greater focus on the Middle East and the fact that we're the Middle East and the fact that we're putting ourselves in a position of having to defend not just Israel but Gulf Arab states against whatever Iran might do.

Steve Davenport: 29:16

Right when we look at things. I'd love to believe that the media and the issues of magnitude that are discussed on the evening news are somewhat related to our own interest. And when I see these pieces on, you know, tax-free social security, and I see tips, and I see these things that I look at as issues, but with a small eye. And then I look at some of these other things and I sit there and I say I think this is information that we should understand as a country so that we could say, yes, that makes sense and yes, I'm behind that, and yes, this area needs more attention, needs more attention.

Steve Davenport: 30:12

But when we look at the magnitude of the spending on weapons in Ukraine and Israel, I have to somehow go back to is this the best we can do? Is this the best country we can be? And if it is, then fine. But I don't feel like there's been a real discussion as to whether some of these things shouldn't be and could be resolved by a more forceful government who would say to Netanyahu all right, this has gone on long enough. So all right, this has gone on long enough. And I think that we need to somehow get a priority list and start to focus on those things, Because I don't know how we expect politicians to cover and maintain the country we want to have when, in reality, they're focusing on things that only affect a small percentage of the country.

Clem Miller: 31:12

Okay, I'm going to disagree with you here, steve, on this one, right? So you know, the foreign people who are focused on foreign policy and on foreign military engagement, I think are a relatively small portion of the US population, right, I think that you know we might be, because we sort of live in this. You know, I'll be the first one to say I live in a bubble, right, a foreign policy type of bubble. I live in the Baltimore, Washington area and a lot of of people here who focus a lot on this, right. But if you move into the middle of this country, the so-called blue wall states, the Great Lakes and you move into places like some parts of the South, you can speak even more eloquently than I can about Georgia and North Carolina and so on.

Clem Miller: 32:12

People don't really care about foreign policy. They care about what's important in their lives in terms of putting some extra dollars in their pocket. That's what they care about and that is what this, that's what folks in this election, the candidates, are focusing on. You've got, you know, trump and Trump. Both Trump and Harris are focusing on aspects of this, of this issue Trump more on the inflation thing and Harris, you know, more on, you know, higher wages through unions? Yeah, they're both. They thing and Harris, you know more on. You know, higher wages through unions, yeah, they're both. They're both focused. I mean, they're approaching it different ways, but they're both focusing on issues that are important to American voters. And you know, this other stuff foreign policy issues is is kind of tangential. I'd be very surprised if any of this, or a lot of this beyond maybe one question or two questions, comes up in the debate.

Steve Davenport: 33:18

I understand why people talk about pocketbook issues and I understand why they want to appeal to whatever that state and that area has. All I'm trying to say is that as individuals we should always be trying to broaden our understanding and perspective and we expect somehow people are going to broaden their views of things without the major media talking about it. I think that's a non-starter. We are in great part dependent upon a media to deliver and explain ideas that are not always easy and I'm unrealistic and idealistic to expect something different. But I don't think I'll stop bringing it up, because guess what, if we don't bring it up, glenn, who is? If we don't talk about it and it ends up affecting people's portfolios and people's lives? Will we feel better that we kept it to pocketbook issues? I don't think we will.

Steve Davenport: 34:26

Yeah, and that's why, I'm not going to apologize for bringing up the movement of the carrier groups. I know there's people who have children that are on those boats, concerned about them moving into the Middle East and out of Asia. And this is why I look at people who have thousands and thousands of employees of the armed forces who are putting themselves in danger, and I look at that and say, are we understanding the reason we're putting ourselves in danger? And yes, it's an ancillary issue. I understand.

Steve Davenport: 35:03

I am off the you know, I am off one edge of the deep end. I realize that it's not conventional, but I'm skeptical of what we're doing and talking about and saying maybe we should be talking about something else and I could be completely wrong. This might all get resolved and a peace treaty is signed by the end of the week and this episode goes into the netherworld and never has impact anyone again. But there is a possibility that they don't sign the peace treaty and this does become a wider conflagration and therefore we have something and someone says how did this get to there? Why did it get to here? What could we have done differently? And then we said, well, if we never talk about it is it?

Clem Miller: 35:54

likely that it will ever get to be something different, and our job on this just to bring this closer to a conclusion our job as podcasters in this area of investments really have to be focused on broader issues. We can't just talk about valuations and AI and so on. We do have to talk about geopolitical considerations. I agree, steve. Do you have anything else you want to add to this?

Steve Davenport: 36:25

No, I think we've beaten this horse and I'm sorry to say we went a little long, people, but I appreciate all the listeners and ask that you please try to share and like and let others know about Skeptic's Guide Skeptic's Guide because we're really happy to be here and trying to help you with your portfolios and trying to help you with your general knowledge. And thanks again for listening. Thank you, steve.