Archive for August, 2013

1. HAPPY Under pressure the Syrian Government buckles. The Alawites stage a coup against Assad with the help of Russia. This would be the preferred outcome of US, Saudi, Russia. This would spur a rally in the market – Oil USD 95 Chances 15%

2.  SLIGHTLY WORRIED A limited strike against Syria with no major consequences – this would practically take the edge from the Syrian Army (taking down the air superiority). The repercussion will be mainly felt in Lebanon with the Hezbollah under pressure. This would produce a 2-5% fall in the market – Oil US D 115  Chances 45%

3  WORRIED A limited strike against Syria with a limited response from Syria and Hezbollah. The biggest threat from Syria are two. The Syrian Electronic Army (already attacked New York Times, Twitter and the water infrastructure of Haifa (Israel)- attack repelled). This would produce a 5-10% in the market – Oil US D 130 Chances 30%

4 ABOVE ALL FEARS -A limited strike against Syria and full retaliation against Israel and Turkey and US/EU Electronic Infrastructure . As Turkey is a NATO member NATO will have to be involved. Israel will retaliate against Iran and Iran would probably attack also Saudi Arabia (in reality Syria is a proxy war Iran/Saudi) . Critical EU/US infrastructure will be targeted and the US would retaliate with EM Pulse bomb (similar to the one seen in Sci Fi movie such as Transformers). This would be a full blown recession and a second Arab spring . OIL US D 150-200 Chances 10%

Already the fog of war is settling over Syria.

Israel and Turkey have  deployed is missile batteries along the borders.

There are unconfirmed report of Assad in Tehran and a Russian airplane carrying away top Syrian official families.

There are unconfirmed report of Syrian strategic centers to be evacuated.

Even the Al Qaeda jihadist are in a kind of an issue as they cannot be seen supporting the US, but they are (there is even a rift between Al Qaeda core and Al Qaeda Iraq).

Newspapers give list of potential targets as they were lollies

And the first real resistance for oil prices is USD135 (a mini one at USD118), +20USD

Syria Israel

Posted: August 28, 2013 in Uncategorized

As Hezbollah (Iranian proxy) declared that, in case of US Syrian attack, they will attack Israel, in Israel the IDF is starting distributing gas mask and the population is on the verge of hysteria. As of markets..don’t try and catch a falling knife. PS first electronic shot has been done..the Syrian Electronic Army brought down the NYT and twitter websites

I always talked about the US shale oil gas revolution is a world game changer. One of the first hints is a quick data I found: the new smartphone Motorola Moto X made by Google in the US equivalent to the IPhone or Galaxy S4 made in China costs just USD 4 more to make. And no transport. This is just the start.

Obama bluff has been called and there will be war. And there will be death. Americans will be again seen as heroes and ruthless killers at the same time.

Obama last year declared that a gas attack would be a clear red line because he thought Assad was not so stupid to conduct one.

What really happened, nobody will know. has it really been staged by rebels to provoke an attack (smartest move from rebels on a verge of defeat- but they do not seem to have the weapon delivery systems to conduct such an attack – US “Mission Impossible” kind of spies? Difficult – Saudis spies….that could have a chance). Was it Assad? He is not stupid…I do not think so. What I think (and it is of no consequences) is that some rogue part of the Syrian Army (Assad’s bloodthirsty brother or  some Iranian proxy) did it.

As a famous Italian comedian, Pirandello,  says ” It is so (if you think so)”.

The reality is that the Obama’s bluff has been called and war will be. Otherwise Iran and North Korea and anyone else (Russia, China) will know that their own red line do not exist.

Obama clearly does not want “boot on the ground” and has delivery weapon systems to proceed with “stand off attacks” (attacks carried from outside the Syrian airspace). 4 US Navy Destroyers are already in place. Strategic bomber can attack from bases in the UK and Saudi Arabia and the US 5th Fleet with two supercarriers are less than 48 hours away. There is at least one nuclear sub around there.

Thursday the UK Parliament has been urgently recalled.

What Syria (and its allies) can do. Syria has a good air defense system, but very limited offensive capacity (specially considering that they cannot risk to “disturb” also Israel. Iran can be a nasty surprise probably asking Hezbollah to attack/kidnap Westerners in Lebanon. Russia has already played its card with Snowden.

So it should be limited. But war is war. And oil and gold will start running again (well they already started) and the market will have its own (overdue) correction.

Louis Vincent Gave, manager of Gavekal Asian Opportunity is one of the most interesting manager to listen to. And he is worried.

There is a clear dichotomy between the Emerging Markets and there are only three potential reason/outcomes

 

1 The first is to say that the tailwinds to the Western economies (shale gas, robotics, ultra-easy monetary policies, fiscal and
regulatory policy visibility…) are just so strong that the valuation gap between emerging markets and developed markets
can only accelerate from here. In this scenario, one would want to continue buying developed market equities at the
expense of almost anything else.
2  The second is to say that, if developed economies really start growing as fast as Western equity markets are increasingly
starting to discount, then one should not worry too much about a China slowdown. Instead, one should use the recent sell-off
in EM growth stocks as a terrific opportunity to increase exposure to Asian and emerging market equities on the cheap.
3 The third, and more worrying conclusion would be that, while emerging markets are rightly discounting a growth slowdown,
developed markets are not, probably because of the excess liquidity created by central banks. However, if/when the spigots
get tightened and/or growth in developed markets is unable to build on the recent momentum, then the valuation gap
might close not through a re-rating of emerging market equities, but a de-rating of developed markets.
It is this third possibility that has GK worried today. Indeed, with a US economy approaching “stall speed” (whenever US GDP and US
industrial production growth fall below 1.5% YoY, the US economy has always experienced a recession), with growing uncertainty
regarding US monetary policy, with the threat of partisan budgetary battles looming once again in Washington, with Southern Europe remaining stuck in a deflationary bust… a number of factors pushed GK to reduce the overall risk across most of the actively managed GaveKal funds in July. This was obviously not the best immediate decision and helped contribute to the past month’s under performance.

So there are two outcomes …or he is wrong or he simply acted to early. This kind of dichotomy is statistically 70% associated with a crisis.

As of me, my personal scary month is mainly September and part of October – I am very traditional guy indeed 🙂

Countdown to Syria

Posted: August 26, 2013 in Uncategorized
Tags: , ,

An attache’ to President Obama just released notes that indicate that the US will not wait for the full UN investigation into the nerve gas attack.

-It is pretty clear it is a gas attack, confirmed by Medicine Sans Frontier

-the rebel do not have delivery systems to mount a chemical attack.

The easiest way for the US to attack is using cruise missiles (4 warships have been moved in the area, plus there will be some subs around there) aiming at crippling the Syrian Air Force.

Naturally the first consequence for the markets will be a spike in oil and a sell-off in shares. Then we will have to see what happens and hopefully the war will not escalate (already Lebanon is on a verge of a crisis).