Outside the Box

Terror Incorporated

They say that one man’s terrorist is another man’s freedom fighter. But either way, these are people that seek to overthrow an established order, for good or ill, by the use of violent insurrection. Usually, we think of these rebels as small groups of passionate amateurs. But the latest uprising in Iraq has signs of being run by a large and professional organisation. Has rebellion moved into the corporate era, and what does it mean?

Say the word “terrorist” to someone and it usually conjures up images men living in Middle Eastern caves, plotting their next plane hijacking…or huddled in bleak terraced houses in Northern Europe, using strong accents to plot whose knee caps to shatter…or small groups dressed in green, traipsing through some dark South American jungle in search of their next kidnap victim.

…produces detailed financial accounts, that keeps human resource databases, or that produces an annual report running to several hundred pages bragging about its achievements.

What it doesn’t tend to spring to mind is a multi-billion dollar organisation, that has grown from nothing within a few years. An organisation that produces detailed financial accounts, that keeps human resource databases, or that produces an annual report running to several hundred pages bragging about its achievements. That’s what you’d expect from a corporation listed on the stock market.

And yet there is evidence that the insurgency in Iraq is being run by just such an organisation. We appear to be witnessing the first true example of a full blown terrorist “corporation”. Just as brutal as ever, but far more organised than before.

The group in question goes by the acronym ISIS, which (confusingly) stands for Islamic State in Iraq and the Levant. According to this map from the British Broadcasting Corporation, it’s operational across a wide region spread between Syria and Iraq.


ISIS territory

The Guardian, an English newspaper, recently published a useful summary of the background and capabilities of ISIS. This group appears to have sprung out of the insurrection in Syria against the government there. Initially funded by private donations, it has then earned income from oil fields seized in the East of Syria, from looting antiquities, and more recently from robbing banks in captured cities in Iraq.

Recently seized computer files suggest ISIS had cash and assets of $875 million before its latest actions. But that’s believed to have swelled to around $2 billion with the subsequent seizure of bank cash and military assets (e.g. tanks) in Iraq.

To put that into perspective, it’s about the same as the net assets of professional networking company LinkedIn Corporation

To put that into perspective, it’s about the same as the net assets of professional networking compan
y LinkedIn Corporation, which were $2.6 billion at the end of 2013. That was after the company had raised $1.4 billion in their initial public offering (IPO).

The only major difference is that ISIS steals much of its money by force, whereas LinkedIn raised its capital from voluntary investors. Although, on a P/E of 757, many would argue that there isn’t much difference, from a purely financial perspective….

So ISIS has a lot of money. And its number of members are estimated to be between 7,000 and 10,000. And ISIS keeps detailed accounts and records to keep track of it all. But, perhaps even more amazingly, it has produced an annual report since 2012 that documents its “achievements”.

As reported by zerohedge.com, the latest version runs to 410 pages that document assassinations, bombs planted, prisoners freed and successful new conversions to the cause.

Terror Incorporated

Why would a violent organisation go to such trouble to produce such a 410 page annual report? At least three reasons spring to mind: demonstrating success to past donors, as a recruiting tool, and as a prospectus to raise new money.

These people may follow a violent dogma, but they don’t appear to be just a ragtag bunch of lunatics. It takes serious organisation to keep records and produce reports of this kind. This is Terror Incorporated.

And as an aside, it shows how pointless the deluge of (US led) bank regulations to prevent terrorist financing have been. Whilst ordinary people and businesses throughout the world bear the cost and inconvenience of endless red tape, the people it is meant to target just continue to subvert the system with violence. This is yet another economic own goal scored by the “West”.

Here at OfWealth we are never happy to see violent conflict of any kind, whatever its supposed justifications. Our core team grew up with it in our home countries in Europe and South America (I interviewed for my first job in the City of London a couple of months after a massive bomb had been detonated a few blocks away). We pity the ordinary people caught up in the middle of it all. We mourn the casualties.

This latest manifestation of the violent breed may signal a new era of professional organisation by rebels that we haven’t seen before. The world has always been full of uncertainties and conflicts. But the latest events serve as a reminder that all investors should remain diversified at all times.

Spread your money around, and make sure you own some physical gold. You never know what’s around the next corner.

Stay tuned OfWealthers,

Rob Marstrand


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Rob is the founder of OfWealth, a service that aims to explain to private investors, in simple terms, how to maximise their investment success in world markets. Before that he spent 15 years working for investment bank UBS, the world’s largest wealth manager and stock trader with headquarters in Switzerland. During that time he was based in London, Zurich and Hong Kong and worked in many countries, especially throughout Asia. After that he was Chief Investment Strategist for the Bonner & Partners Family Office for four years, a project set up by Agora founder Bill Bonner that focuses on successful inter-generational wealth transfer and long term investment. Rob has lived in Buenos Aires, Argentina for the past eight years, which is the perfect place to learn about financial crises.