Iraq

From Berlin to Ankara and even Damascus, the questions seem to be the same: Has the world order as we know it in the post-war era come to an end? What will the world look like without the United States in the role of superpower and ‘boss’?

While Obama and Kerry were both backpedalling furiously even as they were taking full credit for pulling Syria from the brink of war where they took it, it was Syria who was rejoicing: Syria's Minister for National Reconciliation said on Sunday that the chemical weapons agreement between Russia and the United States was a "victory" for Damascus, won by its Russian allies, and had taken away the pretext for war. U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov called on Saturday in Geneva on Syrian President Bashar al-Assad to account for his chemical weapons within a week. The deal may avert U.S. military strikes.

With major (red)deadlines now pushed off until next year and Assad appearing to come out smelling of (slightly tarnished) roses with his 'compromise' agreement with Russia (and the US) to join the chemical weapons treaty, not only is Israel now a major focus but the Syrian rebels - as one might expect - are not happy. As Reuters reports, the head of the opposition Syrian Supreme Military Council said on Saturday a U.S.-Russian agreement to eliminate Syria's chemical weapons was a blow to the two-and-a-half-year uprising to remove President Bashar al-Assad from power. Crucially, General Salim Idris notes that this allows Assad "to escape being held accountable," and, while unverified for now, Idris added, "we have told our friends that the regime has begun moving a part of its chemical weapons arsenal to Lebanon and Iraq. We told them do not be fooled." But another military council official, Qassim Saadeddine, was a little more aggressive: "Let the Kerry-Lavrov plan go to hell. We reject it and we will not protect the inspectors or let them enter Syria."

Following two days of negotiations in Geneva, this morning John Kerry and his Russian counterpart Sergey Lavrov announced they have reached an agreement for a framework on how Syria would destroy its chemical weapons, and would also seek a UN Security Council resolution that would authorize sanctions, but not military action as per Russia's demand, if Assad failed to comply. The diplomats announced on the third day of intense negotiations in Geneva that some elements of the deal include a timetable and how Syria must comply. At a news conference at the Intercontinental Hotel in Geneva, Kerry said the inspectors must be on the ground by November and destruction or removal of the chemical weapons must be completed by mid-2014.

Why Are We Supporting Guys Who Want to Blow Us Up?

Equity markets have to explaining to do, regardless of where you think they are heading.  As ConvesrgEx's Nick Colas notes, if bullish, riddle me this: are stocks just going to hop-skip-jump over Fed tapering, U.S. budget battles, a new Federal Reserve Chair, Syria, Greek bailout 3.0, German Elections, and other near term speedbumps?  Last time we checked "hope" still isn’t a strategy.  And for the bears: Colas asks, how has that been working out for you over the last week of boa constrictor-like squeezes higher?  Not so good. In the following note, Colas takes an out-of-the-box approach to explaining the recent rally by looking at some new academic work on the subject of stress.  As it turns out, stress is only harmful if you believe it is.  Maybe markets have 'learned' that lesson and view all these potential stomach-churning headlines as annoyances, rather than existential crises-in-waiting.

Don't be a slave

Political analysts over the next year or so, and historians well into the future, are likely to point to the fall of 2013 as a fundamental inflection point in American politics. That period, they will say, is when the American people forced a major new direction in American foreign policy. Before the events of this fall, the country’s electorate largely delegated foreign policy to its political elite—and largely supported that elite as it projected American military power with more abandon than the country had ever before seen. Even as the government steadfastly expanded the range of international problems that it said required U.S. military action, the electorate accepted that expanded international role and that increasingly promiscuous use of force. Those days are gone now.

"If we can avoid force against Syria, this will improve the atmosphere in international affairs and strengthen mutual trust. It will be our shared success and open the door to cooperation on other critical issues.... No one doubts that poison gas was used in Syria. But there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons, who would be siding with the fundamentalists. Reports that militants are preparing another attack — this time against Israel — cannot be ignored... The potential strike by the United States against Syria, despite strong  opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation, potentially spreading the conflict far beyond Syria’s borders.... It is alarming that military intervention in internal conflicts in foreign countries has become commonplace for the United States. Is it in America’s long-term interest? I doubt it. Millions around the world increasingly see America not as a model of democracy but as relying solely on brute force, cobbling coalitions together under the slogan “you’re either with us or against us.”

The definition of what makes an “enemy” may vary from person to person. But we would say that, generally, an enemy is one who has an active ability to do irreparable harm to you or your essential values. He is motivated by destruction, the destruction of all that you hold dear. He is capable and unrelenting. He is a legitimate threat. He will not compromise. He will not waver. He will do anything to wound you. He will not stop. He is possessed. Americans have spent the better part of a century being told who their enemies are with very little explanation or substantiation. We have blindly rallied around our patriotic prerogative without knowing the root cause of the conflict or the nature of the target we are told to annihilate. We have been suckered into war after war, conjured by international interests in order to lure us into accepting greater centralization and concentrated globalism. As a culture, we're sorry to say, we have been used. We are a tool of unmitigated doom. We are the loaded gun in the hand of the devil. When one applies the above definition of “the enemy” to Syria, one comes away with very little satisfaction. So, the question arises: If Syria is not the real enemy, who is?

While the Syria conflict appears headed into the sunset, the state department reminds once again that it wants more:

• U.S., RUSSIA AGREE END GOAL FOR SYRIA IS POLITICAL ACCORD:PSAKI
• RUSSIA PLAN FOR SYRIA MORE 'IDEAS' THAN 'LENGTHY PACKET': PSAKI
• U.S. HAS LARGER SYRIA STRATGY BEYOND CHEMICAL ARMS: PSAKI

And the punchline:

• WE STILL FEEL ASSAD NEEDS TO BE REMOVED FROM POWER: PSAKI

What is offsetting the drop in crude prices following Obama's latest embarrassing backtracking from his "blow things up first, ask Congress later" peace track? According to some, it is this note from Goldman which suggests oil price pressure from an improving geopolitical picture will be offset by rising backwardation.

Despite earlier comments from Obama on Tuesday night, who called for a pause in authorizing military strikes on Syria, which led to another drop in crude prices overnight, the drop has since reversed and both WTI and Brent Crude contracts are trading in the green. Whether this is the result of a note by Goldman analysts who noted that the Brent crude sell-off was overdone and that they see no improvement regarding the conflict in Libya which is constraining oil production, or because Russia is once again throwing hurdles in the international process to force Syrian disarmament, is unknown.  The lack of any key catalysts and no USDJPY levitation, led to most global markets unchanged, and futures currently trading sideways. What is not trading sideways is Apple which is down over 2% to just over $480 as all hopes of a China Mobile deal fall apart, coupled with pervasive critical panning of the new iPhones which, aside for the commodity version, is just the old iPhone with an extension that allows the NSA's new fingerprint database to be filled in record time.

What Do YOU Believe?

UPDATE 2: French draft UN security council resolution would give Syria 15 days to make complete declaration of entire chemical arms program

UPDATE 1: NASDAQ Futures are fading the Obama "Pause" spike after AAPL is not announcing a China Mobile deal

Starting just 1 minute late, the President begab by unapologetically conjuring images of WWI and WWII and stuck to the line that "we know" Assad was responsible for killing his own people with Sarin. Then moved to fear-mongery over what Iran might do, adding that he was very much for strikes. But, in giving Congress the hot potato he knew decision would be difficult. The US military does not do 'pin pricks' and a "targeted" strike will send a message to Assad. While recognizing the need for a diplomatic solution, Obama made it clear that those efforts would follow a military strike. But then, after all the angry banter, he then backed down and said, will work for peaceful solution by putting the strike on hold and will bring a resolution to UN. Ending on a more aggressive note, he warned Republican and Democrat lawmakers to rethink their opposition to the strikes should they be needed.