This Week in Barrons - 9-8-2013

This Week in Barrons – 9-8-2013
 

Send lawyers, guns and money?

Forget all the U.S.’s feelings about humanitarianism.  Our involvement in Syria has nothing to do with helping the good people of Syria with their plight.  That’s just a sound bite, and a good cover story.  So why would a broke nation (the U.S.), tired of a decade of war in miserable places, want to get involved with yet another nightmare?  The answer is always the same – money and power.

Saudi Arabia and Qatar are the big dogs in the energy patch.  But it is Russia that is making Billions by supplying Europe with natural gas.  Qatar has the largest liquid natural gas (LNG) operation on the planet, and they have tried for years (to no avail) to get a pipeline through Syria – in order to dramatically reduce Russia’s LNG pricing – as well as taking over supplying the region with LNG.  There is only one problem – and that’s the Syrian Assad regime.  Assad (whom Obama wants out) said ‘NO’ to Qatar coming onto his land, and instead is penning his own deal with Iran to take some of their natural gas from the southern border and pipe that on through to the European region.

Saudi Arabia is also against the Assad regime – and has spent billions to get a puppet government installed in Syria in order to use it as a transportation hub, and control the energy flow to the southern European region.  Therefore, you have Qatar and Saudi Arabia supplying billions of dollars and arms to the rebel factions to take out Assad – and presumably replace him with a very pliable puppet that will allow them to make untold billions on LNG – all the while – closing the door on the Russians.

As you can imagine Putin is not in agreement with this strategy.  He knows full well that if Syria falls into the ‘wrong’ hands, it will be just a matter of time before Russia’s energy income will be dramatically reduced – due to the Saudis and Qataris supplying the region with virtually all the LNG and natural gas.  So, Russia is a steadfast ally of the Assad regime.   Russia needs him there to keep the Qataris and Saudis out of the region.  Therefore, Russia is not amused, when we say that we have ‘proof’ of Assad using chemical weapons as our reason to get involved.

But why would the U.S. want to get involved in the first place?  Simple – (1) because of Saudi oil, (2) Obama's relationships with Saudi royalty, and (3) with the deal Qatar has with shipping LNG around the globe; the U.S. stands to win on two fronts.

-       First, with our shale oil discoveries, we are rich beyond belief in Natural gas, but we are not set-up to export it - Qatar is.

-       Secondly, Russia gets crippled – while we make billions selling discounted natural gas.

The problem Obama had (before chemical weapons) was – how can we get involved without looking like we’re going to war ‘again’ over oil, energy and power?

Now, maybe as important as crippling the Russians and making billions selling LNG – is sending in our military.  Our central bankers have been making noise about beginning to ‘taper’ the buying of U.S. Treasuries.  The Ben Bernanke is having a hard time justifying his pace of $85B a month because The Fed has succeeded in cleaning up much of the available supply of U.S. Treasuries.  And at this pace, future QE would be just ‘flat out’ money printing.  In other words, currently The Ben Bernanke is not really printing money that gets injected into the system; he's simply buying enough treasuries that are issued to keep the demand high enough that rates stay low.  But as the supply of these treasuries diminish – why would he need to spend $85B a month?  Therefore, the U.S. needs to INCREASE it's debt in order to keep The Ben Bernanke buying, and keeping interest rates low.

What would cause the U.S. to have to offer up more treasuries?  What sort of spending scheme could our government ‘hatch’ in order to inject billions more in debt – without presenting another useless social or work program?  What could they conjure up that won't be knocked down by the political right?  How about a military bill for lobbing hundreds/thousands of missiles?  How about the flight times, energy costs and the whopper of a bill that comes with moving a huge portion of the Navy fleet to the area? War costs big money.  The U.S. would need to sell a lot of treasure notes to finance this war – and The Ben Bernanke suddenly has his reason to keep buying.  As has oft been quoted: “War is a racket, and the biggest money maker of all time.”  Banksters create wars just to finance them.

So the Saudi’s, Qatari’s, and Obama have wanted to get rid of Assad for a while now, but the stars haven’t been aligned.  With interest rates here in the states starting to rise – and killing housing and this so-called recovery – all they need (to kill three birds with one stone) is to get involved in Syria.

-       (1) The military bills would keep The Ben Bernanke busy buying up billions in Treasuries,

-       (2) We would help Saudi Arabia and Qatar get what they want (AND create a pure pathway to the Euro zone for our natural gas reserves), and

-       (3) It would cripple Russia.  The perfect trifecta.

But the U.S. still needs a reason.  We need something to point to as a "red line" that if crossed would drag us in on humanitarian principles.  So when asked: “Why is the U.S. so desperate to get involved in Syria?” – now you know.

But that then brings us to Part Two.  At what point does something go horribly wrong and this escalates into a real WW3?  Putin isn’t bluffing, and is not going to take kindly to the U.S. helping cripple his energy deals.  Iran could easily look at this as a reason to strike Israel.  Israel could easily retaliate and obliterate Damascus, and half of Iran.  What happens if one of these US missiles hits a Syrian nuclear energy depot and radiation alarms spread for 200 miles?  What if some lonesome general in some rebel camp decides to launch saran gas into a U.S. base and/or Israel? 

I'm against the U.S. getting involved in this.  I do not want our men and women getting shot – so that some oil monarch can run pipelines.  I do not want to enrich the war machine.  I’m hoping that we don’t go in.  But I think the die has been cast – and the show of going through Congress is just that – a show.  I think we'll start with the missile attacks, find that it "wasn't enough" and sure enough will send in our ground troops yet again. This is not a pleasant thought.

The Market:

Friday was the all important non-farm payroll report.  Honestly – it stunk like five-day old fish.

-      The top number came up short and missed estimates.

-       The last two monthly reports were revised lower by tens of thousands of jobs.

-       And the “labor participation rate" (which is the number of people out trying to find jobs) – fell to a 30-year low.

But Friday wasn't just about a lousy jobs report; we also had Obama on TV talking about the G20 meeting in Russia and the Syria situation.  It was an embarrassing TV appearance by our president – because (honestly) he had no idea what to say.  He's in a box (and he knows it), so each question brought on a slew of "uhm” and “aah's”, and more “hmm's" as he tried to quickly come up with something that made sense.  It really was embarrassing to watch.

The market didn't like what it saw at first, and soon after the open we had fallen 150 DOW points.  But then (like clockwork) the Plunge Patrol Team stepped in, and speculation started that the jobs report was so bad that The Ben Bernanke couldn't possibly taper on the 18^th.  So, from down 150 we were actually green with 35 DOW points by noon.

Welcome to the world in 2013.  Every day we're told that the global recovery is in full swing – and yet we know it is all a smoke screen.  Over in Poland word has that their government is set to nationalize the private, pension funds.  So this global recovery consists of:

-       Governments stealing private pension funds,

-       Going to war to create stimulus for the military complex,

-       Going to war to give bankers more to finance,

-       48 million U.S. citizens on food stamps – with untold millions more on some form of Government hand out,

-       China building cities that nobody lives in,

-       Japan pushing more stimulus into its economy in 2 years, than we have, and

-       India is going broke, with their government is contemplating the confiscation of their citizen’s private gold holdings.

This is NOT a recovery; this is “Fiat Money Printing Gone Wild!”  This doesn't lead to the “Leave it to Beaver” (good times of the 1950’s) returning.  We’re not investing based upon earnings or financial statements, but rather we’re investing in QE.

In the next 12 days we have some serious challenges.

-       Mr. Putin said on Friday that if we bomb Syria, he's going to back Syria. That puts Obama in a bind.  You really don't want to have a true stand off with the Russian bear.

-       With The Ben Bernanke, I'm still slightly in the camp that says they don't taper, and if we do lob missiles by then, there's NO WAY we'll see a taper – in fact we could see increased accommodation.  Just this week the Federal Reserve Bank of Minneapolis President Narayana Kocherlakota (who has backed the Fed's $85 billion in monthly bond buying) said: “The central bank's outlook for inflation and unemployment calls for more accommodation not less.” 

So if they do ‘taper’ – I don’t think that it’s baked into the price – and I think tapering will rattle the market.  If they don’t taper – I think the market soars on all the bogus printing.  It is a very difficult time out there right now and there's no shame in leaning into the cautious camp.  We have been doing some short-term trades, but it isn't easy trading.    Sure I've heard that the market climbs a wall of worry, what they don't tell you is that sometimes the market falls off that wall and crashes.  Until some form of normality creeps in, just keep your wits about you.

Tips:

I attended a very interesting seminar this weekend on ‘weekly options’ and will make that information available next week in the Market section.

My current short-term holds are:

-       FB – in at 25.61 (currently 43.90) - stop at 41.00,

-       SIL – in at 24.51 (currently 15.29) – no stop

-       GLD (ETF for Gold) – in at 158.28, (currently 134.06) – no stop ($1,386.70 per physical ounce), AND

-       SLV (ETF for Silver) – in at 28.3 (currently 22.97) – no stop ($23.84 per physical ounce).

To follow me on Twitter and get my daily thoughts and trades – my handle is: taylorpamm. 

Please be safe out there! a

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