Which inconsiderate person would order a series of missile strikes in the Middle East amidst a stock market rally? The first reported strike took place around 4.30 ET, let's see what the fallout from the damage is.
How many militia groups in Iraq are backed by Iran?
The IRGC has been likened to the SoftBank of Middle East militia startups, where every headbanger with an idea receives funding and weapons. It appears there are ‘only' two Iran-backed groups in Iraq: Kataib Hezbollah (unrelated to Hezbollah in Lebanon) and Harakat al Nujaba. Kataib Hezbollah is the primary group within the so-called Axis of Resistance in Iraq, previously led by Abu Mahdi al-Muhandis, who was killed by a US drone strike alongside Qasem Soleimani in January 2020 near Baghdad airport. Harak al Nujaba is considered less politically active but is thought to be behind most of the recent attacks on US targets in Iraq and Syria.
Who has been launching the strikes against US troops in Iraq/Syria?
Military analysts we've spoken to suggest that Kataib Hezbollah has conducted its operations with more restraint and proportionality since the escalation of tensions in the Middle East. It will be interesting to see which groups are targeted.
Politico reported earlier today that US intelligence officials believe Tehran does not fully control its proxy groups.
Allies not proxies
Iran describes these groups as autonomous partners and allies rather than proxies. Both parties are trying to push a leash on in the midst of a dog fight to prevent serious injuries. Pairing back support for Israel may cost the Biden administration some votes, but higher gas prices is guaranteed to do so.
Keeping the Middle East balance of powers
The risk of escalation from ongoing US strikes in Syria and Iraq should, hopefully, be contained, as both groups have halted their actions against US interests in the region. The Iran-backed groups also play a role in containing ISIS and its affiliates which adds a further constrain on the scope for US retaliation.
Leaked story of US withdrawn from Syria
It was recently leaked that the Pentagon is planning to withdraw from northwestern Syria, where around 50,000 ISIS sympathizers/prisoners are detained at the al-Hol camp, managed by SDF Kurds. There is a similar presence of US troops in Iraq, requested by the government.
For the US to orderly depart from Syria, an agreement must be reached among the local factions to prevent the release of thousands of ISIS fighters. Keeping ISIS under wraps is the lowest common denominator for all involved parties.
The Houthis keep getting closer
The Houthi attacks on US naval vessels in the Red Sea is more concerning where there is a greater risk of escalating out of control. Reports indicate that Houthi attacks are getting increasingly closer to US battleships before interception. It seems inevitable that the Houthis might eventually succeed, prompting the US to escalate its response.
The May incident of drone warfare
Some open reports, such as the mix-up between hostile and friendly drones by US military personnel, might have inadvertently disclosed sensitive information to adversaries. Here's some historical context:
The (Senator Andrew) May Incident involved the disclosure of highly confidential military information during World War II. U.S. submarines had effectively avoided Japanese anti-submarine depth charge attacks due to Japanese tactics' inadequacies. In a press conference in June 1943, May disclosed that American submarines were surviving because Japanese depth charges detonated at too shallow a depth. This information was widely published, including in Honolulu, Hawaii.
After the news became public, Japanese naval antisubmarine forces began adjusting their depth charges to explode at a greater depth. Vice Admiral Charles A. Lockwood, commander of the U.S. submarine fleet in the Pacific, estimated that May's security breach cost the United States Navy as many as 10 submarines and 800 crewmen killed in action.
That might explain the origin of the saying: loose lips sink ships.
Mike Wilson steps down from CIO role
Mike Wilson has stepped down as Morgan Stanley's Chief Investment Officer (CIO) but will continue as the chief equity strategist, but will remain as chief equity strategist.
We owe an apology to Mr. Wilson for previously stating that he managed a ‘paper portfolio' without realizing he served dual roles at Morgan Stanley, which could lead to conflicts of interest. What were the compliance people at Morgan Stanley thinking here? This revelation sheds light on his steadfast market views, as more than just pride was at stake.
We have been critical of Mr. Wilson, akin to Dennis the Menace, but our opinions are solely based on our appraisal of his work, without any personal history. We strive to maintain integrity and accountability to our members.
Wilson's recent bullish call on US equities, and that large caps would outperform small caps, has proven accurate. Fortunately, we changed our stance on Wilson from SHORT to NEUTRAL at the year's start.
We wish him the best in his new role, free from the additional burden associated with risk management. Beers on Bryant park?
SURVEY Matrix | Upgrading Wilson to NEUTRAL from Underweight
January 2, 2024
Macro & bootstrapping, market rules of grammar
