I am really at a loss this morning. The market has arrived at a place I write about all the time – “unless some bad geopolitical event occurs” – and it worries me. All the good setup that has happened this summer could evaporate if Syria explodes.
- U.S. stock futures and European shares were lower at the time of writing while most Asian equities also fell on the increasing prospects that the U.S. will take military action against Syria after John Kerry accused the Assad regime of using chemical weapons on its citizens.
- Dorothee Schmid, researcher at IFRI, tells CNBC that global conflict is currently in the making and the next world war could start in Syria.
I am not an alarmist. I don’t expect another world war, given that we have not had one in almost 70 years, the world has changed politically, so the path to war is much clearer and easier to avoid, and, finally, the world powers (the ones needed for a world war) cannot afford (literally) a traditional land war because they are so economically entangled.
I live in California, the land of the summer wild fire. Every year, a number of small fires start. They burn a bit here and there and sometimes homes and lives are lost. Occasionally, we have a rather big fire, like the fire burning now – the Rim Fire.
- Nearly 3,700 firefighters battled the roughly 252-square-mile fire, the biggest wildfire on record in California’s Sierra Nevada.”
California is analogous to the geopolitical situation. On our own, we can fight the small fires, but occasionally, we need help from other firefighters and they arrive from all over the country, particularly our bordering states. The other states send their firefighters because 1) helping your neighbors is the right thing to do and 2) many states, especially the western states, are entangled economically with California.
Syria is the Rim Fire and the whole world wants to see it contained because if it gets out of control, it could engulf the Middle East, and that would be disastrous for the economic health of the world. Simply, it is about the oil and the whole world cares about oil. Thus, there will not be a world war, but we could have an expanded and protracted conflict in the Middle East that sends the price of oil through the roof. If that happens, all the good economic work, the rebuilding since 2009 could come undone.
- Libya’s oil output is stuck at less than half of pre-war levels due to idle eastern oil ports, its oil minister said on Tuesday. Oil production has fallen to 665,000 barrels per day (bpd) due to a month long disruption by armed security guards who shut down main export ports.
The above is an example of how this “fire” could spread and spread quickly. The Middle East is a haven for heavily-armed ideologues seeking power toimplement their particular brand of religion and politics. So, keep your eye on this fire and let’s hope the world works hard to snuff it out before it gets out of control.
Trade in the day; Invest in your life …
