America is poised to strike at the Assad regime in good part because Obama could not resist the urge, last year, to declare publicly the existence of a chemical weapons red line that the Assad regime should not cross. Obama could not resist because the urge was morally irresistible. Like any decent human being, and like anyone with respect for international law and international norms of behavior, Obama was repulsed by the idea that the Assad regime would deploy poison gas against his own people, and he said so.

Obama, by demarcating a red line, placed American credibility on the line. If the world is to maintain the taboo against the use of chemical weapons, then the world's superpower, which does so much to ensure global stability, must act, particularly when its leader has previously threatened to act.

But how to act? The Obama Administration appears to have an answer: Missile strikes of limited duration, meant to reinforce the taboo against the deployment of poison gas, but not to threaten the existence of Syrian regime, because "regime change," of course, is one of those terrible, entangling, Bush-era ideas.

But the only way to ensure that Assad does not again use chemical weapons is to remove him from power. The only way to make the point that, in the post-Holocaust world, it is profoundly unacceptable to use poison gas on human beings, is to help remove the regime that violated the taboo.

If Obama strikes at Syria in a limited fashion, he will still be violating his own core doctrine, but for limited payout. He will simply be signaling to Assad that it is permissible to kill civilians with guns and bombs, but not with gas. If Assad survives an American onslaught, he might very well judge the U.S. a spent force, and continue using gas anyway.

This is why the Obama plan for Syria, as we currently understand it, is inadequate to the challenge. It is better to risk full-scale entanglement, and devise a long-term plan to help the Syrian opposition overthrow the regime, than to fire missiles at a handful of regime targets while leaving the regime itself intact.

This may be one of the toughest moments President Obama has faced in five years: the moment when the behavior of evil men finally forces him to truly engage with the catastrophic Middle East.

David Fuller's view Do not draw red lines - a dated, macho tactic which can be viewed as an invitation - unless you are certain that you wish to engage militarily when they are crossed.

Also, we know that Assad is a butcher but are the families of his victims any more traumatised and angry because they were killed by chemical weapons rather than by other means? I doubt it.

As a superpower, the USA has a responsibility to lead, and also to enforce where necessary, ideally as part of a willing majority among nations which are not obviously pariah states. The world will become more dangerous, not least because weapons are infinitely more powerful, if the United Nations cannot be developed into a more effective forum and global moderator.

August 2013 is the worst performing month for stock markets since May 2012, but from higher levels and valuations, while obviously in a later stage of this cyclical bull market. Yesterday's relief rally was short-lived but a number of markets are oversold. Moreover, Eoin's review of some household name corporate Autonomies yesterday showed that many have pulled back to their trend mean, approximated by the 200-day moving averages.


The possibility of a US-led missile strike against Syria's military aircraft and perhaps other targets is an obvious short-term deterrent for investors. However, we will know more about this, possibility over the weekend, because the UN's chemical weapons inspectors are scheduled to deliver an assessment report to their Secretary-General, Ban Ki-moon on Saturday.

If evidence of a chemical attack by Syria's government has been degraded by the one-week delay in permitting access to the site, as Syria would hope, then the political case for an attack will be harder to justify. That could lead to a short-term relief rally next week.

Additionally, the decidedly mixed economic evidence reconfirmed today by slower consumer spending in July could delay Fed tapering, assuming the decision is based on Mr Bernanke's criteria rather than political pressures from those who are opposed to extending QE.


In conclusion, expect the choppy market conditions to persist, possibly for the lengthy medium term as Fullermoney has been saying for several months. Nevertheless, Wall Street and therefore most other stock markets should avoid bear markets, at least of significant proportions rather than the 20% definition, provided that Middle Eastern problems do not cause the price of Brent crude oil (weekly & daily) to spike higher.

Monetary conditions remain the most important medium-term factor for stock markets and they are still generally accommodative in most countries, albeit somewhat less so where currencies are weak. Moreover, bond yields have risen from their exceptionally low levels, although not to the point where they are a serious headwind for equities. Short-term interest rates are likely to remain very low in the US and most other developed economies, well into 2014 and possibly beyond. After all, we are only in the fifth year since the 2008 financial crisis. It takes at least five to seven years for economic growth to return to normal after those crises, and often longer. Fortunately, corporate profits have been considerably stronger, led by the Autonomies, and on average should continue to outperform global GDP growth.