War with at least Syria is coming soon. You can hear the rattle of musketry. You could see this one coming a mile off. For some reason the market did not price it in and has sold-off. The sell-off makes no sense. If there is something to truly fear from Syria and their sponsors Iran than it’s a lot worse than a couple of percentage points drop in the general averages.
If you believe in America, modernity, the western world than you still believe in the stock market. Albeit with the usual caveats about selecting the right stock. To my way of thinking the market reminds me of a large bird of prey flapping its wings to scare smaller weaker minded animals; hoping the animal makes a run for it and can be easily picked off as it runs about.
What will they strike in Syria? They will try to cripple Assad’s ability to make war and his ability to use chemical weapons. Some of the rebels are as bad as the Assad forces so expect some two for one deals. Syria will try to engage Israel and will be unsuccessful. The Israelis have been waiting for this one for a long time. The Egyptian military will do whatever it takes to marginalize the Muslim Brotherhood and will not strike against the United States and Allies.
The conflict in Syria will be loud and hysterical but no commodities or trade patterns will be disrupted. Not to many on this planet have relied on Syria.
So because of unbridled fear the stock market will sell off offering some excellent bargains.
The world will still turn to the US Dollar and it will get stronger.
As foreign funds pour into the US Dollar they will be parked in US Debt. Therefore prices will appreciate and interest rates will stay down. This will help the Fed Reserve Taper as more buy Uncle Sam’s paper.
Gold and precious metals will of course strengthen. The rupee will stay screwed up. Oil of course will go up and up and up regardless that any major producing fields will be relatively undamaged. Remember that Iraq has substantial internal strife and car bombs constantly. Yet the oil still flows relatively unimpeded.
The Pentagon will not spend that much because a ground conflict is to be avoided. The missiles have already been paid for and a few new ones will not incrementally cost that much more. The Syrian air force and helicopter capabilities will be destroyed early. Airports will cease functioning.
Syria will descend into a longer cycle of sectarian violence as the ruling Alawite lose their grip. Watch for members of the extended clan fleeing to safe havens around the world and more defections of top military brass. Some front line units will mutiny or disintegrate into roving rabble without effective command and control. They will prey on the population and eventually lose all legitimacy.
As time goes on the investing public will become inured to the Syrian Headlines and life will go on.
So strictly from a stock picking point of view. Keep your powder dry. The market has progressed some feel to far. The Syrian thing will be the pin that pops the balloon; which is exactly what you want.
George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti George Gutowski is bullish on America.