Takeaway: What do you think? Cast your vote. Let us know.
Editor's Note: Below is a complimentary research note written over the weekend by Hedgeye Potomac National Security analyst LTG Dan Christman USA Ret. To access our institutional research email email@example.com.
With Russian foreign minister Sergei Lavrov at his side, Secretary John Kerry a week ago announced a Syrian cease-fire deal that could lead to coordinated U.S.-Russian air operations against Syria-based jihadists; Kerry also posited that the deal could provide an eventual path to a negotiated political settlement to replace the Assad regime in Damascus.
- Unfortunately, based on previous efforts to secure a pause in the fighting alongside Moscow, this will likely prove to be a classic triumph of hope over experience.
- Syria is already on a long path to repeat Europe's 17th Century 30 Years War - one that laid waste to much of what is today's Germany. Syria will never again be the pre-2011 unified state it was before the onset of the current anti-Assad fighting. Sadly, this latest Kerry deal will probably do nothing to alleviate the horrific suffering of the Syrian population or even begin the process of putting the Syrian "Humpty-Dumpty" back together.
Consider the deal itself:
- In its essence, it requires a cease fire, effective last Monday, in which all parties - the Assad government as well as the opposition - stop air and ground attacks; humanitarian corridors would be opened to relieve suffering in the city of Aleppo in particular; and IF the cease fire is effective for seven continuous days, then and only then would the US and Russia work to establish a Joint Implementation Center (JIC) to coordinate air attacks against ISIS and the principal al Qaeda affiliate in the area, "Syria Conquest" (formerly al Nusra).
- But who seriously believes that the dozens of opposition groups battling Assad (many closely intertwined with Syria Conquest) or the Damascus regime will adhere to this? The "support" for the deal from Russia, Iran, Damascus, and Hezbollah is beyond cynical. Because of "facts on the ground," each now holds the military advantage; there's no incentive for them to change anything.
- Numerous cease fire violations of the accord this week have confirmed the worst; yet, so far, the deal has gotten off the ground – but barely; sadly, like the “cessation of hostilities” accord from last February, an agonizing death for this deal probably awaits.
Many have talked about what might be needed to change the "facts on the ground" in Syria. Here's one answer:
- First, because nearly all of the civilian casualties in major population centers like Aleppo, Homs, and Hama - and the refugees flows from these areas - are caused by barrel bombs, cluster bombs, and chlorine gas dropped from Syrian aircraft and helicopters, Washington needs to bluntly warn Assad, in simplest terms: "NO More!"
- Then, if Assad uses those systems, after a one hour notice to the Russians (the notice they gave us before they launched their first air combat sorties in Syria), the U.S. should send cruise missiles, drones, rockets, and stealth aircraft to target every Syrian fixed wing asset, every helicopter, and all of Assad's personal aircraft. If a restrike is necessary after a bomb damage assessment (BDA), we should execute it immediately.
- The U.S. should then say to Assad, "Don't do this again." This becomes a “no-fly” zone, but vigorously enforced from the outset.
- The Russians would howl; but Washington would have their attention, and in the end, their cooperation.
The U.S. is currently not a country that believes in changing "facts on the ground" in the Middle East, even "facts" that have produced over 400,000, largely civilian, deaths. But an action like the one outlined above may be about the only way to get the attention - and the respect - of Vladimir Putin. And it can also help move us to the ultimate goal: a political solution in this fractured country - one that is the only way to end the Syrian version of Europe's 30 Years War.
Takeaway: In the past year, JGB 10yr yields are down 38bps on the most causal factor in all of macro right now, #GrowthSlowing.
Plenty of clever questions in the @Hedgeye inbox on why “JGB yields might rip” (higher)… and they just went lower (again) instead, back down to -0.07% on the JGB 10yr this morning w/ no support to -0.27-0.28%.
As Hedgeye Senior Macro analyst Darius Dale wrote earlier this morning:
"Investor consensus is far too focused on the risk of policy action (or inaction) out of the BoJ perpetuating a potentially violent backup in bond yields globally and not nearly enough on the underlying drivers of “lower-for-longer” and negative-yielding debt securities – drivers that are set to remain in place for quite some time."
In the past year, JGB 10yr yields are down 38bps on the most causal factor in all of macro right now, #GrowthSlowing.
So why in God’s good name would you “invest” at this stage of the #GrowthSlowing cycle as the #BeliefSystem that the Fed, ECB, BOJ, PBOC, BOE, etc. breaks down?
Editor's Note: The snippet above is from a note written by Hedgeye CEO Keith McCullough and sent to subscribers this morning. Click here to learn more.
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Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.
"... In my own 7 game series, this is game 6… and I’m down by a goal going into the 3rd period. As you can see in the Chart of the Day, since this is the 6th “rates are gonna rip” scare in the last 16 months, my team has already won 5 games in a row and now we’re just playing for fun."
In today's Early Look, Hedgeye CEO Keith McCullough took the Fed to task for it's use of the word "transitory" in describing anything that doesn't fit its narrative, namely deflation. He writes, "Why are crashing inflation expectations (Oil prices for example from $105/barrel) “transitory”, but bear market bounces not equally transient?"
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