Buy or sell the Syrian missile strikes?

The US missile strikes in Syria today create a considerable investment issue.

On the bullish side, US intervention in Syria to help stop the descent into a failed state could stem the flow of refugee from Syria and potentially save hundreds of thousands of lives. Stemming the flow of refugees (the UN estimates there are 4.8 million refugees outside of Syria, and another 6 million internally displaced) would suck the oxygen from a range of formerly fringe right wing parties in Europe who are using the enormous flow of Syrian refugees to gain power. This would greatly improve the political situation in Europe.

On the bearish side, this could be the beginning of a proxy war between the US and Russia. It could be the start of the biggest conflict between major powers since the end of the cold war.

So, do we abandon our overweight equities positions or do we buy the dip?

Based on the news to date, we are not changing investment positions. The situation though is fluid and news over the US Friday trading sessions and the weekend will be important.

If a proxy war appears likely then we will be changing allocations. If it looks like a deal has been done between Russia and the US to remove Assad (presumably with a Russian-friendly government) then we would be buying the dip.

A Syrian Primer

There is no simple solution in Syria.

There is a range of rebel groups, the Kurdish, the Assad regime, the Russians, Iran, Turkey, Hezbollah and ISIS all battling over territory. Israel also shares a border with Syria in the south and Iraq to the west.

The most palatable to the West are the Kurdish, who have significant control of the north, stretching from the semi-autonomous Kurdish state in Iraq across the top of Syria. The Kurdish have been supported by US forces but are unlikely to go much further than the predominantly Kurdish regions in the north of Syria, for a mixture of cultural issues and political issues.

Turkey has trouble with its own Kurdish population and so the rebel groups that Turkey support have three goals: preventing Kurdish expansion, securing the Turkish border against ISIS and also fighting Assad.

There is a broad range of other rebel groups and a range of alliances – too broad for this post to detail them all. Some groups are extremists which Western countries do not want to support and to date, there has been no moderate rebel group large enough to unite forces and attract Western support. A number of major rebel groups were greatly weakened by the loss of Aleppo late last year.

Russian troops are embedded with the Syrian army – the intervention by Russia in a few years ago likely prevented the collapse of the Assad regime. The key Russian interest is probably maintaining a port in the Mediterranean sea. They are unlikely to want to get bogged down in Syria (Putin declared victory to the Russian press in 2016) and so I would guess that a solution where Assad steps down but Russia maintains its influence is probably going to be acceptable. Also, Barrack Obama negotiated a deal where he didn’t attack Syria in return for Russia overseeing the destruction of all of Syria’s chemical warfare capabilities – so Russia is unlikely to be pleased with the most recent chemical attack and may look for an exit.

Iranian troops are also in Iran – Syria is one of Iran’s only allies and so Iran has extensively supported the Assad regime both through its own actions and through Hezbollah, Iran’s proxy in Lebanon.

Israel has largely kept out of the war. The danger for Israel is that if they are seen to support a particular rebel group then that might unite the other rebel groups against it.

ISIS are still active in Syria, however, are greatly reduced as a fighting force. It is unlikely that ISIS will be able to ally with any of the many groups fighting in Syria.

Is this a diversion?

The most cynical Trump watchers may claim this is an attempt to deflect from Trump’s domestic issues or to “prove” that Trump is not a Russian puppet.

This may be true, although I would like to give Trump the benefit of the doubt. Regardless of whether Trump’s intentions are self-serving or not, if his actions result in peace in Syria and stem the flow of refugees then only the most partisan observer would suggest that his intervention is a bad thing.

Refugee Crisis

I wouldn’t underestimate the effect of a resolution to the Syrian crisis on the politics of Europe. There are around 1 million Syrian asylum applications in Europe at the moment – around half of the refugees in any European country are Syrian. Any reduction in the flow of refugees is a positive for European politics which has seen a rise of One-Nation lookalikes which have gained votes on anti-immigration sentiment.

Oil price

Oil may well rally – especially if the US engages in a proxy war with Iran. We are underweight oil in our portfolio so this poses a risk.

Absent a direct war with Iran or Russia though, the fundamentals for oil still support selling into any rally.

What is the likely solution

If Trump is looking for regime change then strap in for a long war.

If he is looking for the removal of Assad and some sort of unity government, where the unity government retains relatively deep ties to Russia and Iran then there may be the possibility of a negotiated truce.

Will we see Trump’s close and somewhat suspect relationship with Russia yield a peace dividend?

Watch this space.

Damien Klassen is Chief Investment Officer at the MB Fund launching in May 2017. Register your interest now (if you haven’t already):

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Damien Klassen is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.

 

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Comments

  1. noticed the VIX term structure inverted yesterday? Have calls on SDS and calls on UUP, so naturally hoping for risk off / vol spike!

  2. Ronin8317MEMBER

    It’s too early to say whether Trump is serious about regime change. His Trumpcare plan is DOE, and his tax plan right now is also DOE, so Trump will be trying to increase his popularity via bombing Syria to get more political capital. His approval rating should get a lift, and his approval has to be in the 40%+ to have a chance to get his tax bill through.

    • This whole article is a misdirection.
      1.The ‘gas attack” was known in advance, was released by an islamic 2 days before in twitter. UK had supplied gas masks by then. Clinton had arranged sarin gas to be shipped from Iraq/mosel area to Syria in 2016.
      The US needed to have ships plus armaments ready, takes more than an hour or day to get ready.
      The gas WAS NOT sarin, the pretty and clean White Hat propaganda ISIS/Al NUsra award winning actors were bare handed touching people. Sarin is transmitted by a touch and persists on surfaces.
      2. The US creates failed states. Assad is democratically elected, his people are loyal still. It was a stable well run country prior to US and the others activities. Assad with the support of Russia, Iran, Hezbollah and the Kurds and again just about won. US had backed down and it looks hopeful. Each time he wins this happens. The last 2 times were shown to be fake. The RAAF bombed and killed 88 and wounded many many more of the Syrian Army last November when ISIS was being pushed back.
      3. Israel? it gives open medical support to ISIS. It also bombs. Recently 4 Israeli bombers were fired on by Syrian downing one. Turkey? wants kurds sorted and to take syrian land over the border. It has odd relationships with variety of countries. It supports ISIS and had an open border of iSIS for trucking archaeological artifacts and a continuous convoy of oil, shipped by Erdogans brother to Israel, europe etc ,and gave medical support to ISIS.
      4. Why are the US and Israel interested?
      The huge gas fields, NOBLE GASFIELDS found the waters belonging to Syria Lebanon and Gaza.
      Not just Greater Israel, no just the stolen Syrian oil, nor the lands of Golan Heights..

      This article is incorrect and misleading in every way. Even to the cheap trick reference to Trump/Russia… just look at Trumps family, the Kushners for answers and the 94million dollar replacement business for missiles.

      • And re metals: 500 oz silver per cruise missile. 30,000 oz silver vaporised in the strike.

    • I think people are missing the point with this article. Regardless of who did what, where and when, the article is written from an investor’s point of view. When faced with uncertainty, do you buy? sell? (and WHAT do you buy or sell?) … or do you hide?
      The primer seems to go through the relationship of the larger players, but the key point is the discipline of determining a plan of action – if this happens, then I do what? And even if the primer is wrong, the discipline of pre-thinking means you can cope better when markets open and news comes through and you have to react. So the article is a useful example of the process even if the conclusion is wrong. Especially because the pre-thinking allows you to react and manage exposures down when the market moving against you, at least as quickly as the volume of counterparties will allow.

    • Ronin8317MEMBER

      Clinton would have started bombing Syria on day 1, Trump lasted til day 76 before he, too, become a “warmonger”. The ‘Deep State’ always wins.

      • No such thing as the deep state… unless you like heavens gate like cults thingy….

        disheveled…. I hear your ship is coming soon….

        PS. I hear Allan Jones is the Cap…

      • C’mon Ronin. Clinton may be a warmonger but Drumpf has proven he will do the same if he can gain political capital AND lie about it. Everything he has grabbed in 74 days has turned to crap and on day 75 Assad handed him a gift (paranoid minds might think it actually came from Russia, with love). We can all play at this BS with a little imagination… (sigh)

  3. So the USA who killed 1m + in Iraq killed 250 two weeks ago all civilians , blew up Libya and turned it into a failed state. Clandestine wars under Reagan in the 1980s is now going to Bomb Syria into a Jeffersonian Democracy .
    You have to be fucking joking ?

  4. Making money by speculating on blowing stuff up. Pretty much sums up what is wrong with the financial mindset.

  5. Gut feel says Buy it! Trump acted quickly to save face due to a chemical attack you’d have to be silly to believe was intentionally ordered by Assad. Why do i say that?

    1. This is the most effective control Assad has had over the country virtually since this thing started. Controls the pivotal areas in the East.

    2. Just last week Tillerson said he can stay and regimen change in Syria is no longer US policy. This would have infuriated the hawks.

    3. US troops already moved into Syria weeks ago to cut Assad regime off in the West in potentially a portend that they will carve out a state for the Kurds.

    4. The first chemical attack was a false flag and it nearly made the US and others depose Assad by force. Why use Sarin when you know the potential response will be your own demise militarily in a war where the tide has almost decisively turned in your favour?

    Other reasons as well, but essentially this might be a limited strike that achieves a few objectives for the US:

    1. Gives them more leverage in a negotiated settlement in Syria than they had yesterday.
    2. Russia more than likely to grant these concessions
    3. Easier that one of these us a real or defacto partitioning of Syria.

    Let me add another reason. It quickly puts to bed the asinine Russia election narrative in the press.

  6. Damien,

    This article by you is ‘way-above’ average – unique and really quite smart, actually.

    You should be very proud of it … keep it up.

    Regards.

    • It’s not bad, but i take some issues with the “Primer” part of the article in particular.

      ” A number of major rebel groups were greatly weakened by the loss of Aleppo late last year.”

      This narrative in general and the language used. When Aleppo was taken by these terrorists (not rebels) the Western media narrative was full of stories of atrocities being committed in Aleppo against minorities and non ISIS sympathisers. When it was retaken by Assad forces, the narrative was about ” the loss” and “fall” of Aleppo, rather than what was actually happening – its liberation.

      “The key Russian interest is probably maintaining a port in the Mediterranean sea.”

      The key motivations of Russia’s objectives are not very well explained here either. The above is a consideration, but far from the key one. The port was (and largely still is) decrepit. Russia’s motivations in no particular order are:

      1. Creating the conditions for a political solution that favours the existing regime and Russian interests, by stabilising the existing government and allowing them to re-take effective control of Syria.

      What are Russia’s interests?

      – Preventing a gas pipeline from Qatar through Syria and into Europe and losing influence and the efficacy of its own Turk Stream pipeline. Coincidentally this is one of the objectives of the coalition of Wahabi’s backing ISIL in Syria militarily and financially, with US support.

      – Preventing Syria from becoming another Libya from which Chechens and other extremists can launch attacks on Russia’s soft underbelly in the Caucuses region. It’s a 20 hour drive on flat terrain.
      – Preventing a US, KSA etc friendly regime in Syria that will further encircle Iran and Russia militarily.

      – Allows for greater leverage in Ukraine – and in some ways is pay back.

      – A grander “bargain” with the USA about how foreign policy is to be conducted, especially in relation to Russian concerns.

      – Keeping Tartus.

      There are others.

      • Yes, Russia has stated this. For its own safety it needs a stable ME.
        Putin also stated his position re US hegemony at the UN in Oct 2015.
        Further the Noble gas fields–enormous– are in the ocean waters of Gaza(Palestine) Lebanon and Syria.

  7. rob barrattMEMBER

    It’s no longer really about Assad. In effect, once ISIL (as a coherent force) is removed from the picture the fragile alliances of the myriad other parties is going to fracture. Essentially it will come down to:

    • Iran backed Shia forces (including what’s left of the Syrian army);
    • Saudi (& other oil states) backed Sunni forces;
    • The Kurds;

    Turkey will do all it can to sabotage the Kurd’s aspirations;

    Russia will put in just enough effort to ensure Assad (or a proxy) will stay in the chair in the West, purely to make sure they (the Russians) keep hold of Tartus;

    The Sunni oil states will keep pumping money & arms to the Sunni factions to limit Iran’s ambitions and achieve their own.

    The only possible outcome will be the effective splitting up of Syria into warlord run fiefdoms. This will probably happen after much more fighting. The end of ISIL is by no means the end, more the beginning of a highly fractious end.

  8. The ball is in Mr Putin’s court… he doesn’t get mad, he gets even but his revenge is served cold. This is a huge loss of face for China to do it now.

    As for investment… risk management is a lost art in Australia. Another huge drop over the next few years will make it impossible to make retirement targets after the last couple…….We won’t live long enough.

    https://www.advisorperspectives.com/commentaries/2017/04/03/the-world-s-second-most-deceptive-chart

  9. Tokenism – Russia was warned of the intended strikes and most likely Syria also.
    And Russia possibly had to even lower their air defence shield to allow the USA tomahawk missiles thru ..

    So ‘strikes on an airforce base’ lots of good video,
    but most likely as staged as the poison gas attack.
    Some video of some old stuff being destroyed to make the media happy and feel something is being done….

    The question is why would Assad use poison gas.
    He was fully legitimatised last week as being ‘left in charge’ no regime change,,, by the USA.
    So zero motivation and both the UN and Russians as guarantees resolution to make sure he has no capability.
    And by some accounts : the SU-22 jets used in the attack on the Idlib terrorist arms depot can’t even technically deliver a ‘Sarin Gas bomb’.

    This all looks like Ghouta in 2013 when Saudi & Qatar brought in poison gas via Turkey – for their Islamic wahabbi jihadist foreign terrorists to stage a similar event and try to drag the USA into the war.

    Saudi and Qatar have spent tens of billions on this attack on Syria and east Iraq Anbar for their Qatar to EU gas pipeline corridor (v the rival Iranian pipeline from same shared Pars gas field – the world largest.
    This would be like Australia v Indonesia sharing the worlds largest gas field and a proxy war with everyone involved in who gets to run the pipeline to Japan Korea and China – the winner in a pipeline over shipped gas then is ahead hundreds of billions.

    The Saudi Qatar foreign mercenaries have lost.
    What they want is a UN enforced partition for their gas pipeline corridor.

    So they have every motivation to stage this poison gas attack under cover of a Syrian bombing of their arms cache.

    Neither Russia nor the USA want a Qatar to EU,
    or the competing Iran to EU gas pipeline.

    Both are motivated for this war to continue low key, and that neither Qatar or Iran ‘win’.
    Russia then gets to maintain east EU gas supply.
    The USA gets western EU gas supply as the ‘contingency supplier’ and trade balance and that was Obama’s plan.

    So as is : not a real escalation of a USA Russian conflict but the poison attack an expected staged event or trigger by Saudi Qatar GCC & their Islamic mercenary terrorists as they are losing..

    And now some stage play theatre by Russia and USA as a response.

    • “This all looks like Ghouta in 2013 when Saudi & Qatar brought in poison gas via Turkey – for their Islamic wahabbi jihadist foreign terrorists to stage a similar event and try to drag the USA into the war.”

      Yes it does — Spot on.

    • Ronin8317MEMBER

      Pretty much everyone who has been paying attemtion dint think Assad did it. So why us the USA blaming it on Assad? At this point, it doesn’t matter if Assad did it or not. Trump just signaled the USA will not let Assad win back Syria.

      • Neither the USA (now with new exportable gas reserves exceeding many others but no one to export to.. except western Europe)
        or Russia as an existing supplier to the Europe have a strategic interest in allowing either the Pars field Qatar to EU (via Saudi Iraq Anbar Syria Turkey) or the Iranian Pars to Europe alternative route to be built.
        That will destroy the gas price : esp for USA east coast to Western Europe shipping to be economically viable.

        So west Iraq & Syria and the corridors will remain in war as both Russia and the USA mantain that.
        This cruise missile attack is just theatre.
        The Russians were warned in advance & would have had to agree to stand down their missile defence systems to let the tomahawks thru.

      • Because of a rogue statelet’s aspirations to complete hegemony in the Middle East, and the world.

        You can guess who they are: it starts with I and rhymes with Hell.

    • I do enjoy these dark conspiracy theories but as is almost always the case, when choosing between conspiracy and stuff up it’s more likely to be a stuff up.
      A miscalculated overreach by a governement with a history of using chemical weapons to kill and terrorise its civilian population into submission.
      A strategic error is more likely than the specious conspiracy theories so beloved by the Zerohedge crowd.

      • Total BS ! Only an idiot believes the MSM – – get out & read some alternative facts.

      • Agreed Andrew.
        FeS Don’t be so defensive if others don’t want to drink your alternative juice.

      • Nothing dark or ‘conspiracy’
        That war in Syria has been coming for 20 years.
        Go look at a map or ask anyone who has live there.
        (Was there 2010 & 2013)
        The foreign mercenary attack on Syria (greenlighted by the USA) started in 2010 – 2 weeks after Syria refused Qatar demands on colonisation for a gas pipeline corridor. The terrorists were / are trained armed and supported by Qatar Saudi GCC & USA.
        All the fighting – in fact the whole ISIL (Islamic state & & Levant) is about the gas pipeline corridors.
        Iraq West Anbar & Syria East / North was plan A.
        Iraq West then north into Turkey was plan B. (Mosul).
        Basically all the terrorists in the region be they Wahhabi or khajirites are foreign paid contract killers for Saudi and Qatar.
        USA : Obama has been very clear about the USA gas exports to Europe – that’s what TTIP was ALL about.
        But shipped gas is far more expensive than pipeline gas.
        So the USA needs to choke supply / price it up – be it Russian sanctions or whatever.
        And quite obviously neither the Russians and USA would not want to see a high volume very low gas pipeline to EU from either Qatar or Iranians from the shared Pars gas field.
        And now the Jews have discovered gas fields and have their own plans for a pipeline..

        So a reasonable assumption is both the USA and Russia & the Jews now will all continue to meddle in Syria & Iraq to block any massive new player low cost gas pipeline supply from Iran or Qatar.

        Mosul is plan B
        Assad / Syrian government has no need or motivation to use gas weapons but the Saudi Qatar GCC terrorists do have every motivation and previous form.

  10. Their is NO doubt at all that this is a False Flag incident promoted by an out of control regime. The USA is front & centre GUILTY of the worst War Crimes ever seen since WW2. They couldn’t stand the humiliation (from their bully boy perspective) when Russian started cleaning out the real bad guys. Also the humiliation of Russia giving refuge to Snowdon.

    Hopefully they get some real retribution for this cowardly war crime committed with NO proof & against all UN principals.
    Fucking Yanks – the A$$holes of the World.

      • “The skies over Syria just got more dangerous for Australian pilots…”
        Yes it did & if one or two get knocked out of the sky I’d clap!
        They shouldn’t even be there -NO invitation etc.
        Just there for target practice – Not supposed to be in any danger otherwise wouldn’t have been sent. A/holes

    • Methinks you lack the evidence and are falling prey to confirmation bias. In international politics there are no goodies or baddies, only allies of convenience. So calm down and wait to see what happens vs imagining what is happening.

  11. Snip:
    “Don’t be fooled by appearances.
    President Trump is only at war with the Deep State on one level.
    On another, the Deep State already run everything – when it comes to foreign policy, economics, politics and the mainstream narrative that is meant to set & sync headlines, clocks and consumer habits around the world.
    War is brewing, as Trump hinted strongly in his upstart presidential campaign, but it will come, ultimately, at the terms of the long-running organ that actually steers U.S. policy.
    After a very dubious “chemical attack” in Syria to stir the pot (the White Helmets did not even use gloves when picking up, touching and treating supposedly contaminated children), it is clear that war could erupt overnight with any number of middle eastern ‘enemies,’ or with North Korea, Russia or just about anyone else.
    And one narrative that has been almost constant from the establishment power base and their media lapdogs during the last cycle has been dogging Russia in anyway it can – from baseless hacking accusations, to controversial sanctions talks, to attributing ultimate responsibility for chemical warfare attacks.
    One can clearly see that a fight is being picked. If the story doesn’t fit, they’ll force it, or just find another excuse.”

    Read the rest — – –
    “Nuclear War Much More Likely” Paul Craig Roberts: In Dangerous World, Putin Will Not Trust America
    http://www.zerohedge.com/news/2017-04-06/nuclear-war-much-more-likely-paul-craig-roberts-dangerous-world-putin-will-not-trust

      • start with Dulles, the end of WWII and denazification and work forwards…
        …John R…disappointed that the exisitiing paradigm of no MEMBER next to the disheveled marsupial’s moniker has persisted…

      • @Kanga
        Go & have a good $hit & get rid of your bile.
        And join up -you tight cunt 🙂

      • Try ALEC for starters… but that’s not even a sound means of evaluation of a dynamic sociopolitical enviroment…

        “And join up -you tight cunt”

        Disheveled… coming from a gold bug that is absurd…

      • Barrack Hussein Obama
        CIA CCI Unit
        And a large cohort of subversive & seditionist actors including still within the USA administration.
        As outlined by Wikileaks.
        As shown with the Susan Rice exposure.

      • Not a quantifier for deep state… yeah…. power nodes can a line when it suites the group… but at the same time there are multifaceted aspects which are quite diverse and in flux.

        disheveled… seems the American MSM is leg humping el’trumpo all the sudden…. eh wing nuts…

        Matt Stoller ✔@matthewstoller
        “That awkward moment when Trump notifies Russia he’s about to strike Syria, but not the US Congress.” pic.twitter.com/mRwX7ESZgg
        11:10 PM – 6 Apr 2017

      • Donald J. Trump

        @realDonaldTrump

        Be prepared, there is a small chance that our horrendous leadership could unknowingly lead us into World War III.
        7:46 PM – 31 Aug 2013

        65,462 65,462 Retweets
        45,260

    • Before anyone takes zerohedge articles seriously do some research the origins of the website – Russian agitprop.

      • @Matthew — Before anyone takes zerohedge articles seriously do some research the origins of the website – Russian agitprop.
        What a smart guy you are ! So it’s a Russian web site & I presume you think they have no right to speak out ?
        For your sadly lacking filter ability let me tell you that the Russian News reporting is 100% more believable-than from the mainstream Western Media who all parrot the same USA Bull shit. I take that article very seriously.

      • @Matthew – – here’s a “new” article today from a USA Web site – –
        BUT will you believe their facts ?
        “False Flag: How the U.S. Armed Syrian Rebels to Set Up an Excuse to Attack Assad”
        http://www.thedailybell.com/news-analysis/false-flag-how-the-u-s-armed-syrian-rebels-to-set-up-an-excuse-to-attack-assad/

        The most difficult subjects can be explained to the most slow-witted man if he has not
        formed any idea of them already; but the simplest thing cannot be made clear to the most
        intelligent man if he is firmly persuaded that he knows already, without a shadow of
        doubt, what is laid before him. Leo Tolstoy, 1897

  12. Not a Trump fan myself, but this was actually surprisingly measured. It took out the airbase where the Assad Government were to store their chemical weapons before the deal fell over to remove them from Syria, so the West knows where the weapons were most likely coming from. It was not like Trump attempted a “death blow” to the Assad regime by trying to get Assad directly or something crazy like that.
    Russia can respond but will need to equally keep it proportional. If they over react, they lose.

    • It’s theatre.
      Syria and that Syrian airforce are protected by Russian S-400 air defence that can easily counter and destroy multiple barrages of tomahawk cruise missiles.
      The Russians were told a USA posture of tokenism was needed.
      The airbase and number of aircraft were removed
      Only the ‘non Russian’ part of the airbase was targeted.
      The Russians then allowed the 59 or so tomahawks thru and supplied media plus posturing.

      So now we have three facts that jar the whole narrative of Assad being a poison gas murderer etc.
      1. The SU-22 jets can’t deliver poison gas bombs.
      2. Assad has zero motivation or need to use poison gas.
      3. The Russians would have to turn off their air defence shield to allow the USA tomahawks to even get thru.
      Here’s the s-400 spec.
      https://thaimilitaryandasianregion.wordpress.com/2015/12/06/russias-s-400-missile-defense-system-has-no-equal-globally-sputnik/#comments

      Everyone knows this poison gas attack was initiated by Saudi Qatar and the Islamic terrorists.
      All the rest is just theatre to make noise.

      • According to Hala Jaber, some of the cruise missiles were shot down by the S 300 and S400. Still early days though. Great Journo and on twitter