Friday, August 30, 2013 - The War Hasn't Started Yet

The War Hasn't Started Yet

by Sinclair Noe

DOW – 30 = 14,810
SPX – 5 = 1632
NAS – 30 = 3589
10 YR YLD – .02 = 2.74%
OIL – 1.15 = 107.65
GOLD – 10.70 = 1397.50
SILV - .34 = 23.63

The S&P 500 fell 3.1 percent in August and lost 1.8 percent for the week in a third decline in the past four weeks. The Nasdaq fell 1.9 percent for the week while the Dow slid 1.3 percent in its fourth straight weekly loss. For the month, the Dow fell 4.4 percent and the Nasdaq lost 1 percent. Only one of the 30 Dow components, Microsoft Corp , ended higher for the month. Very quietly, silver is up 22% since July 1^st. The price of gold touched $1,420 an ounce this week, a three-and-a-half month high.

The war has not started, yet.

Secretary of State John Kerry says the Syrian government forces killed 1429 people last week in a chemical weapons attack. UN chemical weapons inspectors are investigating the attacks and will present preliminary findings to the UN after they leave Damascus tomorrow. Mr Kerry said the US already had the facts, and nothing that the UN weapons inspectors found could tell the world anything new.

The US government has published an intelligence report which basically says the Syrian forces gassed Syrian civilians, killing 1429, and the intelligence is backed by medical personnell, witnesses, journalists, videos, and thousands of various things including social media. They are convinced the rockets came from areas controlled by the Assad regime and landed only in opposition held areas.

Over the past week, a series of intelligence community leaks have indicated that the evidence behind the chemical attack remains relatively weak, and specifically the question of what role Assad himself played in ordering the attacks. The intelligence report published today sought to address those intelligence gaps, although it did not offer specific data on the link between Assad and the attack. Instead, it focused on circumstantial indications: the fact that the chemical-laden rockets were all fired from regime-held areas into rebel-held ones, and an intercepted communication from a senior regime official that apparently confirmed the use of the weapons.

Last night, top administration officials held a 90-minute conference call with congressional leaders and the chairs and ranking members of national security committees. There has not yet been a move to seek Congressional approval for military intervention.

Kerry says that any response would not involve the US in a protracted conflict like Iraq or Afghanistan.

The UN Security Council is unlikely to approve any military intervention because permanent member Russia is a close ally of the Syrian government, and has vetoed two previous draft resolutions. The British parliament rejected a motion supporting the principle of military intervention.

Shortly after Kerry spoke today, President Barack Obama said the attack threatened US national security interests, and the US was considering a “Limited narrow act” in response. Mr Obama said he has not yet made the decision about what actions the US will take against Syria, but that it would not be an open ended commitment and there would not be boots on the ground.

In an NBC news poll, 50 percent said the U.S. should not take action against Syria in response to the use of chemical weapons, while 42 percent supported intervention. Just 21 percent said military action was in America's national interest, and 27 percent that it would improve the situation for Syrian civilians, with nearly a third or more saying they didn't know enough to answer either question. Seventy-nine percent said President Obama should be required to get approval from Congress.

Yesterday, Mr Obama was interviewed by PBS reporters and he said there was imminent danger to the US, and if we don't attack the Assad regime now, then the Assad government will use chemical weapons, maybe even work with terrorist groups to deploy chemical weapons at targets in the US.

If all this talk about imminent danger sounds sickly familiar, it's because you remember Iraq, and the lead up that invasion, or maybe you remember Iraq, the time before, or maybe because you forgot all the other times chemical weapons were used around the world and we did nothing. But now, the drums of war are beating; they are beating without the Brits; they are beating without Congressional approval; they are beating without popular support; they are beating without the case being ironclad and concrete; they are beating without the case being made; and they are beating without a good shot at peace first. Maybe peace is not possible, but it seems to me that we should try it, give it our best effort before sending in the cruise missiles. Give it a chance.

What does this mean from an economic sense? Well, Syria is a small economy with limited international trade and almost no cross-border financial links. If you are interested in evaluating where markets are on Syria, your first stop should always be oil prices. This is not because Syria is a major oil producer. It is not. With an estimated daily production of just 50,000 bpd, the standalone impact on global oil markets is a rounding error at best. Rather, Syria influences how markets perceive the security of supplies from other (major producers) in the Middle East.

I'm not sure how, but I'm pretty sure that oil is a major determinant in how sides are being taken in the conflict. There is an old saying: follow the money. I'm not yet sure how where that trail leads, but keep it in mind.

Bloomberg has recently completed a ranking of the most efficient countries for healthcare, looking at the gap between the cost of treatment and its quality and effectiveness. The US did not fare well.

It's remarkable how low America places in healthcare efficiency: among the 48 countries included in the Bloomberg study, the U.S. ranks 46th, outpacing just Serbia and Brazil. Once that sinks in, try this one on for size: the U.S. ranks worse than China, Algeria, and Iran.

But the sheer numbers are really what's humbling about this list: the U.S. ranks second in healthcare cost per capita ($8,608), only to be outspent by Switzerland ($9,121) -- which, for the record, boasts a top-10 healthcare system in terms of efficiency. Furthermore, the US is tops in terms of healthcare cost relative to GDP, with 17.2 percent of the country's wealth spent on medical care for every American. The US spends more of its money on healthcare while getting less than almost every other nation in return.

It's important to note that this data doesn't necessarily reflect the best healthcare in the world; it is simply a measure of overall quality as a function of cost. Each country was ranked on three criteria: life expectancy (weighted 60%), relative per capita cost of health care (30%); and absolute per capita cost of health care (10%). Countries were scored on each criterion and the scores were weighted and summed to obtain their efficiency scores. Relative cost is health cost per capita as a percentage of GDP per capita. 

So what can the U.S. learn from the many countries that get more bang for their healthcare buck? Unsurprisingly, there is no one formula for success when it comes to efficient medical care. The systems that rank highly on Bloomberg's list are as diverse as the nations to which they belong. The unifying factor seems to be tight government control over a universal system, which may take many shapes and forms -- a fact evident in the top-three most efficient healthcare systems in the world: Hong Kong, Singapore, and Japan.

Japan's system involves universal healthcare with mandatory participation funded by payroll taxes paid by both employer and employee, or income-based premiums by the self-employed. Long-term care insurance is also required for those older than 40. 

Singapore's system  requires individuals to contribute a percentage of their monthly salary based on age to a personal fund to pay for treatments and hospital expenditures. In addition, the government provides a safety net to cover expenses for which these personal savings are inadequate. Private healthcare still plays a role in Singapore's system, but takes a backseat to public offerings, which boast the majority of doctors, nurses, and procedures performed.

Hong Kong's universal health care system involves heavy government participation, despite the idea of Hong Kong as a bastion for free markets. All this government care isn't taking much of a bite out of the state's bustling economy: According to Bloomberg, Hong Kong spends just 3.8 percent of GDP on healthcare per capita, tied for the third-lowest among nations surveyed and good for the most efficient healthcare system in the world.