DAVID KOTOK: 'What is clear now is this change in US policy'

Thomson Reuters

A history lesson may be helpful for those who are younger. Google “Hama.” It is a town (actually was a small city). The existing Syrian president’s father killed 20,000 of his own citizens there in 1982. What makes anyone think the present regime is any different? We must remember that the Assad regime in Syria is multigenerational just like the Kim clan in North Korea. Both are ruthless.

The Syrian government has misrepresented the destruction of its chemical weapons and been caught. The US has now declared a clear policy. Poison gas used to suffocate innocents is not permitted. Period!

Will the US see its policy through to completion?

We shall see.

Meanwhile, there is a classic tendency in the Middle East for oil prices to firm up in advance of a shooting war. This is a nuance but is historically confirmed. I personally saw it happen in the 1960s and again in the 1970s and since. Middle Eastern insiders actually trade the oil market anonymously and through masked trading companies for their personal gain at the expense of lives in their country’s military. And we know enough agents had early warning time to make the trade.

The Middle East is always a dangerous place. It has been that way for 2500 years. It is that way now. My personal experience entails over 20 visits to the region.

Markets.

We took our cash reserve up as a risk management tool.  Why? One cannot know the extent of a shooting war or a military action until it happens, and then one cannot know the outcome until it becomes clear. One can act on early signs or discernible trends.

What is clear now is this change in US policy.

Under President Trump, the policy is more intense than just economic sanctions. Lines are drawn; and if they are crossed, America responds. The use of poison gas crosses those lines.

There is a time when policy needs to be clear and direct. Poison gassing of children is one of those times. It means that the regime (Assad’s) that sanctioned it must change.

That this incident has occurred just as the leaders of the two largest economic forces in the world are meeting in Mar-a-Lago is an incredible coincidence of timing. But it is also a reality check on the world situation, which we believe is at a high-risk point. Yesterday we wrote about North Korea. Today it is Syria.
 
More will be revealed as we observe this history unfold in real time.  For this asset manager, some cash reserve seems correct. 

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