Everyone has been focused on Europe and the inability of the various countries to agree on much of anything. However, you have been looking at the wrong crisis. Although Europe is a major crisis, and there is still some question about whether the Euro can survive in its current form, the real place to watch and worry has been the mid east all along. Syria is in the last those of collapse into chaos. Israel is on the verge of attacking Iran. The US and Israel have stated they are ready to send in special forces to get control of the chemical weapons. Egypt is in a political and economic mess. Iraq continues to suffer from sectarian tensions about to boil over. With the US gone Iran will surely be directly involved. The Saudis and their allies are intent to get rid of Iran. And through it all the US is nowhere to be found other than to keep saying now let’s all sit and talk and make nice, while Putin continues to say nyet. That vacuum of American leadership is now about to play out into what is very likely an all out war between Iran, Israel and very quickly the US.
Just look at the headlines of just this week. Panetta warns Syria is spiraling out of control. Susan Rice, the US ambassador to the UN said if Syria comes apart the whole mid east will get drawn in. Iran murdered Israelis in Bulgaria and Israel has vowed revenge-that means they will kill several Iranians and Hezboullah leaders. The pentagon stated that Iran intends to close the straits as sanctions cut oil shipments. They will be attacking oil terminals, tankers and the like. The US has sent an extra carrier battle group to the gulf. We have also been building more missile defenses and adding a number of our most advanced fighter aircraft in addition to that carrier group. Twenty countries will undertake a mine sweeping exercise in September in the straits. That is an exercise of twenty countries preparing for working together in case of war against Iran in case you missed the real goal of this exercise.
The list goes on of things happening in that area, and the risks are ramping up by the day. It is very clear Assad has little time left, and Syria is about to collapse in a chaotic mess with massive sectarian civil war beyond what is already happening. That is bad for Iran and their terrorist proxies and Russia who will see this as a survival issue. Iran will be even more unstable and will likely lash out thinking it needs to show the world it will fight. Iran is next to go. It seems also clear that someone is now organizing and directing the battle in Syria. The rebels did not plan and execute that assassination of the leadership on its own. The attacks are now well coordinated across the country. Someone is in control and directing the battle. The end game is now.
The result is oil will go way up. Markets will be chaotic until things sort out, which could take months or weeks. The end result of who is in charge in the mid east is completely unclear. And all of this will play out right in the midst of the US election in October and November. The last thing the European economies need is a war and oil at $150.
The good news is US real estate looks better and better as a place to hide for a few years. The US banks are in strong condition now. There is loads of liquidity all over the place and as things get worse in the mid east and Europe more capital will flow to the US looking for a place to hide. This is a time to be careful and not over lever. Keep liquidity available. There will be many new opportunities to buy as the combination of maturing CMBS 5 year loans continues and more properties come to market seeking capital to cover those maturities. The next few years will be good for US real estate as the rest of the world remains chaotic and markets in Europe continue to flounder. You can be sure the Arabs will be moving more and more capital here and to London. The Chinese are getting more concerned and will step up capital flows to the US. The advice is hunker down, stay ready for anything including more attempted terror attacks in the US, be ready to take advantage of the fear and crisis and be ready to be a buyer over the next two years. It is going down in the next six months and the war will be really ugly this time. We are looking at the end game for Iran and the terrorists and for Russian influence in that part of the world.
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