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How to Profit from a Gaddafi Defeat


Oil prices were falling on Monday as news broke that Rebel fighters were pouring into the Libyan capital of Tripoli in what seemed to be a final push to oust long time Libyan dictator Colonel Muammar Gaddafi.

The market seems to be anticipating that Muammar Gaddafiís rule will soon come to an end and that Libyan oil production will return to the levels they were at before the civil war began.

However, itís still unknown how much damage has been done to Libyan oil facilities or how soon the country will be considered safe enough for foreign workers to return to their jobs.

Although Muammar Gaddafi has vowed to fight on, rebels met little resistance after entering Tripoli and they have reportedly captured Gaddafiís sons Saif Al-Islam and Mohammed.

Investors who feel that the fall of despots like Libyaís Muammar Gaddafi will lead to greater stability in the Middle East and North Africa may want to consider the SPDR S&P Emerging Middle East & Africa (NYSE: GAF) and the WisdomTree Middle East Dividend (Nasdaq: GULF) ETFs.

Although the regionís stock markets arenít popular with Western investors, that could change if the so-called Arab Spring leads to greater political and economic stability.

The PowerShares DB Crude Oil Double Short ETN (NYSE: DTO) or the United States Short Oil Fund (NYSE: DNO) could also see their share prices climb higher if tensions ease in the oil producing states and causes oil prices to fall.

However, even if the current group of dictators are forced out thereís no guarantee that what follows will be an improvement.

One only needs to look to Iraq for just one example of how badly things can go after a long term dictator is forced from power.

Thereís also the fear that followers of a radical version of Islam could come to power and lead to a form of government like the one in Iran.

If the Arab Spring actually leads to governments that are even worse than their predecessors, the hoped for stability in the Middle East may never come to be.

If this is the case, oil prices could climb even higher, pushing up the share prices of ETFs like the United States Oil Fund (NYSE: USO) and the United States Brent Oil Fund (NYSE: BNO).


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