Will Verizon Screw Bond Market $VZ $BOND $TLT $VOD $T

Verizon (NYSE:VZ) needs to raise a lot of cash to buy out Vodaphone  (LSE:VOD) and finally control their own sandbox. Much speculation reigns about a proposed $25-30 billion dollar bond offering which would be a record size deal. At the same time they increased their dividend slightly to keep their shareholders warm and fuzzy.

Not saying the deal isn’t going to get done. But trying to price the deal just as cruise missiles may be coming down on Syria is a little difficult. Verizon will be driving for the best price and if they’re smart for the longest term possible.

Conflicts create uncertainty. Stock markets hate uncertainty and sell off. But geopolitical conflicts create a flight to strength and quality meaning the world will buy US Dollars and then invest in bonds driving down yields.

At this point Verizon will strike putting their credit quality out there and drawing in every bond nickel that they can find.

This is one set of circumstances where market conditions will twist the deal in favour of Verizon and disadvantage the bond investor, which in this case may be every institutional bond investor in North America and a few biggies from Europe as well.

George Gutowski writes from a caveat emptor perspective. follow him on twitter @financialskepti

 

 

France’s Reason for Supporting US Strikes Against Syria $SLB $TOT

France has two very large cap reasons for supporting US cruise missile strikes against Syria. Schlumberger (NYSE:SLB) which has operated in Syria will stand to gain huge repair and construction contracts. The civil war is creating a lot of damage and eventually economic thinking will prevail. Schlumberger with offices in Houston is headquartered in Paris.

Total Petroleum (NYSE:TOT) is the French Oil company with a deep background in Syria. Syria does not rank with Iraq or Saudi Arabia for reserves. But the oil is commercially feasible and can easily be exploited.

Currently because of EU sanctions Europe is not importing oil from Syria. At least that’s what the regulators are told. But it is so close it makes sense to ship to Europe.

Before the current stupidities over half of Syria’s oil exports were split between Germany and Italy. European recovery would be well served by cheap supplies close to home controlled by European companies.

France understands geo-political leverage and will fight alongside Americans to get it.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

Will France Screw America in Syria? $GAZ $OIL $XOM $COP $BP $TOT

Politics makes strange bed fellows. A left wing government in France wants to back an Obama Whitehouse in a punishment action against Syria. France with a militant Muslim population sees thing differently.

Before the USA welcomes the French with open arms it is time to open eyes. France with it’s colonial past has long been involved in Syria. This dates back to when France and Britain were carving up the middle east for their own colonial purposes.

The French to counter the influence of other Arabic factions helped support the Alawites and brought them into the military. Eventually this seeded Alawite control of the military and led to their ability to establish a military dictatorship.

So much for the moralization. The Middle East from the Western point of view is about Oil. Economic engines run on Oil. Most of Iraq’s oil flow through the Straights of Hormuz and are subject to the vagaries of Iran’s intentions.

Syria provides a strategic land bridge for pipelines to the Mediterranean which by pass Iranian threats and cut down on shipping times through the Suez Canal. The pipelines will be enormously profitable and provide for energy security for their owners.

France will engage in Realpolitik locally to achieve national objectives. The US still hasn’t figured out what’s its interests are. France will help only to the extent their neo-colonial interests are served. America will be blind sided and probably will not see it coming.

George Gutowski writes from a caveat emptor perspective.  Follow him on Twitter @financialskepti

Syria Will Cause Commodities Deflation Read How $VXX $VIX $GLD $JJC $JJM $JJN $JJT $JJU $FOIL

Connect these dots. Syria gets punched in the nose, hard real hard. Iran comes on the scene and gets kicked in the balls with no remorse. Iran stops sending oil to China. China shakes, shimmies and weaves about. In the mean time as China slows down they reduce demand for commodities. Copper, Tin, Nickel, Aluminum and a host of other commodities stay in the ground. Commodity prices fall hard and splatter.

If China is smart they will try to buy the miners at depressed prices. They will deal directly with cash impoverished host countries who will see their royalty revenues drop dramatically. Mines will be reverse purchased allowing mining companies an exit from poorly producing properties.

Connect the dots.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

War with Syria-China Damages $VXX $VIX $DJX $SPX $FXI $EWH $OIL $GLD

War with Syria is almost a safe bet. Syria’s sponsor and pay master will not stand by idly and watch the Alawite’s lose control. They cannot go to other clients and ignore losses in Syria without putting up a fight.

While Iran will be nasty it will not ultimately destroy the US. Iran’s best bet will be a shadowy terrorist war trying to hurt America. But how to bring Iran to its knees. It takes money to be a terrorist. That means oil sales. Much Iranian crude goes to China. By boat through the Straits of Singapore.

The sudden disruption of oil supplies will disrupt the Chinese economy. Plants will shut or reduce. Public energy consumption will be curtailed. Brownouts and long line ups at the gas pumps. It will pay to be a member of the communist party just for the gas privileges.

Reduce China exposure or if you are brave enough short. In the meantime China will be throwing around its huge reserves of western currency especially the US Dollar buying up whatever oil it can get its hands on.

Watch for selective destruction of Iran’s oil infrastructure. Opportunistic. Much of the infrastructure is old and crumbling. Destroy enough to cripple the Mullahs and spark an overthrow. Then bring in Western Oil Technology and bring everything up to date. About a year for the round trip.

In the meantime China takes it on the nose so sorry. Globalism is a double-edged sword.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

War Soon. How to Profit When the Shooting Starts. $VXX $VIX $SPX $DJX

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.