This week I want to share with you one of the more important tools in my arsenal for keeping up with what is going on in the world. As I’ve told you before, George Friedman and his team at Stratfor are my go-to guys for geopolitical intelligence. Their insights into this facet of the world are simply without peer.

Now I want you to see their Intelligence Guidance which they publish each Friday for the upcoming week; last week’s edition is below.

The Intelligence Guidance is an internal document that guides their intelligence team for the upcoming week. It’s not a forecast of what’s going to happen (more on that in a minute) but a list of potential inflection points that bear close scrutiny. On a short term basis, these are the critical items that can move policy in one direction or another. I put this side-by-side with my calendar of Fed meetings, statistics releases, and earnings announcements to get a holistic picture of what’s going to be driving markets and plan tactics. I highly encourage you to click here for a Stratfor Membership, at special prices available to my readers, and add Stratfor’s Intelligence Guidance to your weekly thinking.

Now about that forecast. Stratfor is just about to issue their third quarter forecast, and you definitely want to incorporate this thinking in your strategic planning. Stratfor’s past calls on everything from the Asian currency meltdown to China’s internal problems have proven to be eerily prescient. And I should point out that they also provide a scorecard that makes it very clear where their calls have been off, too. The Quarterly Forecast is included free as part of your Stratfor Membership, so click this link for the special deals available to my readers and make sure that you don’t miss out on this important look ahead.

Intelligence Guidance Summary:

The following are internal Stratfor documents produced to provide high-level guidance to our analysts. These documents are not forecasts, but rather a series of guidelines for understanding and evaluating events, as well as suggestions on areas for focus.

Analysis

All guidance from last week remains in place (see those below). Supplemental guidance:

1. The situation in Iraq: Let’s spend next week focusing on something that is not happening: the war in Iraq. The bombing in a Baghdad market really drove home how few there are. So did indications that Iraq is going to open the oil fields to investment. We need to review the status of the war carefully. Our perception has been that the war is winding down and the general outlines of the resolution are in place. Time to do a net assessment re-evaluating our position.

2. China and oil prices: China has lifted the caps on oil prices, the Saudis are promising to raise output and consumption appears to be dropping. That would indicate that oil prices will fall, but that is not our business. Our business remains figuring out what higher energy prices do to the international system. The China watch remains essential. That is the center of gravity of the problem. They are still trying to ride it out with subsidies. Questions like “What is the status of their cash reserves?” and “What is happening to export profit margins?” become very interesting. They are spending real money to keep these caps on to keep those margins up. We do not know where prices will go but we know where they are. Let’s drill into the reserve and margin question.

3. Venezuela and Cuba: Venezuelan President Hugo Chavez tried to create a police state then backed off. Next thing we hear are stories the he is giving sanctuary to Hezbollah, which we assume is psychological pressure from Washington. Then he turns up in Havana for talks with Fidel and Raul Castro. In the meantime the European Union drops whatever sanctions are left on Cuba. Cuba needs Venezuelan help on oil. But it also seems to want to get out of its isolation. It’s not all that interesting what Chavez said to the Castros, but it would really be interesting to find out what Raul said to Chavez. Fidel cranked him up. Is Raul following the old line with Chavez, or telling him to calm down?

4. Israeli domestic politics: What is holding Israeli Prime Minister Ehud Olmert up? In any other country the allegations alone would have bought him down, not to mention Ehud Barak, a coalition partner, calling for his resignation. With the Syrian talks clearly proceeding and Hamas agreeing to a truce with Israel, things are at a crucial point. Since this is the Middle East, that’s usually when disaster strikes. Olmert’s fall would seem to derail everything, but he does not fall. Let’s dissect the Israeli situation and see what we can learn.

5. Zimbabwe and South Africa: Zimbabwe is not important in itself. South Africa is, or more precisely, the degree to which South Africa plans to exercise power in Africa. With commodity prices high, Africa becomes important, and as the Chinese increase their presence, the South Africans could use their longstanding close ties to move in as well. It would make geopolitical and business sense to do that. Zimbabwe is the test for South Africa. If either South African President Thabo Mbeki or African National Congress President Jacob Zuma can help pull Zimbabwean President Robert Mugabe out of office, his authority in the continent will be solid. Mbeki and Zuma have the power, but it isn’t clear they have the will. If they do not have the will in Zimbabwe, they will not have it to create a sphere of influence elsewhere. The Zimbabwe crisis is in a quiet phase but that won’t hold indefinitely. We need to watch South Africa to see if it will act.

Ongoing items:

1. Oil and food markets: Oil and food prices remain at the top of the list. We need to be watching carefully what the Arabian Peninsula is doing with its money and what the Russians are planning to do. In the immediate, we need to be following global crop forecasts. Unseasonable rain in the U.S. Midwest has threatened to bring the corn harvest down by about 10 percent this year. Flooding is hitting China’s harvests right now as well, and corn crops in Mexico have been threatened by unseasonably dry weather. As other crops see seasonal disruptions worldwide, we could see increased fluctuations in the prices of these goods. Particularly vulnerable to increases in the price of corn are Japan, South Korea, Mexico and Egypt. Mexico and Egypt are particularly prone to food-related civic unrest, a development that must be monitored carefully. Along those lines, all food crops around the globe must be carefully monitored as prices continue to climb. This is much more immediately significant than oil prices right now. If there are crop failures larger than the U.S. corn crop looming, prices are really going to soar. That is not going to result in a one or two point drop in gross domestic product; it can result in chaos in large parts of the world. We don’t know if this is going to happen, but we need to be on top of this whole process hour by hour.

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