Capital markets will likely have to deal with a terrorist attack in the U.S. before the November presidential election, according to Marvin Zone, professor emeritus University of Chicago Graduate School of Business.

Speaking at the Association for Investment Management & Research’s annual conference in Denver yesterday, Zonis suggested that there’s an “extraordinarily high probability” of a major attack on U.S. soil before the election.

He claimed that the Federal Bureau of Investigation (and other U.S. authorities) have already quietly thwarted planned attacks against major bridges in the U.S. He added that Department of Homeland Security believes there are plans to target bridges in the coming months.

Zonis also noted that London’s police chief is expecting a terrorist attack of its own before the year is out. “I think that ought to answer the question of what will the effect [of terrorism fears] on the investment climate be between now and the election,” Zonis said.

Turning to the other major geopolitical issues for the markets. Zonis called the current U.S. occupation of Iraq a “tragedy” and a “catastrophe”, suggesting that it will take 50 years to live down the latest revelations of prisoner mistreatment in the Middle East. He also warned that the U.N. is hated in Iraq, too.

The solution to pacifying Iraq, Zonis said, is to send large quantities of troops — a task that would require the cooperation of major Western allies, which the current administration has not been able to secure. Zonis also argued that the problems with the Middle East can’t be solved without resolving the Israeli-Palestinian conflict.

He warned that Iran is definitely developing nuclear weapons, and that it is not a country that the U.S. can hope to deal with militarily.

As well, he said that the pressure on oil prices isn’t likely to abate any time soon.

Zonis suggested that Osama Bin Laden will be captured or killed by the end of the year, but he also said that Bin Laden’s right hand man, Ayman al-Zawahiri, is a much bigger concern.

He also warned of a big credit bubble in China, and the threat from “failed states” around the world, particularly in Africa.

http://www.aimr.org/conferences/04annual.html