Syria and northern Iraq have all that and more — and today, it came to a head when Turkish forces shot a Russian Sukhoi Su-24 fighter jet out of the sky. Turkey said two of its F-16 fighters downed the plane, while Russian president Vladimir Putin called it a “stab in the back that will have serious consequences.”
Turkey and Russia also vehemently disagreed about the circumstances of the event. Turkey said it warned the two Russian pilots on board 10 separate times to get out of its airspace before attacking. Russian military officials said the jet was flying on the Syrian side of the border. There were conflicting reports about the fate of the two pilots and whether one or both were killed or captured.
This is big news for several reasons …
First, the two countries have been edging close to confrontation for months. Turkey supports ethnic Turkmen living just over the border in Syria; Russia backs Syrian President Bashar al-Assad and is supporting his attacks on rebels in the region. Turkey already shot down an unmanned drone several days ago, one that was suspected to be a Russian Orlan 10 model.
|The Turkish military released a graphic showing that the Russian jet (the red line) passed over the Turkish border (blue line).|
Second, Turkey is a member of the 28-nation NATO military alliance. With Russia conducting more than 4,000 airstrikes just over the border in Syria, the worry has been that conditions could rapidly spiral out of control — and drag the U.S. or other NATO members in.
Several dozen Russian fighters and helicopters are operating in the region, as are scores of jets and drones from the U.S., France, Gulf states and more. NATO officials held an emergency meeting in Brussels after the attack to discuss how to move forward.
Third, this incident follows ISIS-inspired or ISIS-led attacks in France and against a Russian airliner, as well as a hotel strike in Mali that may have been conducted by other radical, non-ISIS terrorists. That shows how the terrorism scourge is spreading far beyond the Middle East, and how the attack/counterattack cycle is rapidly intensifying.
From an investment perspective, we could see some flight-to-safety buying in assets like Treasury bonds or gold if the tensions continue to escalate. The broad averages could also come under increasing pressure. That’s the last thing stocks need, considering the festering credit market issues that are hurting many names behind the scenes.
|“We could see some flight-to-safety buying in assets like Treasury bonds or gold if the tensions continue to escalate.”|
On the flip side, defense contractors are an obvious beneficiary. Many have been on an absolute tear in recent months, with stocks like Raytheon (RTN) and Lockheed Martin (LMT) setting all-time highs. I wrote in April about how these kinds of companies could benefit from the significant re-arming in the region, regardless of what we all think about the social or political consequences of what’s going on there.
Bottom line: Watch developments in Syria and Turkey closely. They could have a significant impact on the geopolitical scene and investment markets in the weeks ahead.
Pfizer’s (PFE) move to shift its tax jurisdiction overseas sparked several comments at the website — all focused on why the drugmaker is doing the transaction and whether it’s justified in doing so.
Reader Tom said: “Money flows to where it gets the best treatment. A corporation’s sole duty is to its stockholders. The U.S. should change laws to tax only income earned in the U.S., not world income for both individuals and companies, as do all other countries.”
Reader R.J.F. picked up on the reform theme, saying: “Both corporate and individual tax laws need major reform. I hope that the Pfizer deal and any future ones go through. Perhaps that will provide the necessary kick in the butt for Congress to act. The idea that corporations have a ‘patriotic duty’ to pay more taxes is absurd.”
Reader Bruce piled on even more with these comments: “The Left-wing people who run our government just don’t want to get it. These deals are increasing because we have the highest tax rates in the world. So why not lower them, stimulate the economy and simply remove the incentive for these international mega-deals. Duh!”
But Reader D countered by saying: “Every tax dollar saved by Pfizer is a tax dollar that must be paid by the American people. The exorbitant prices of their drugs shows just what they think about Americans. The battle of ‘Corporate profits vs. Nationalism’ has been started again.”
Finally, Reader Vic said: “I am tired of companies making all their money in the U.S. and not wanting to pay taxes. The corporate tax rate seems high. But corporations don’t pay those rates thanks to all kinds of credits and other tax dodges given to them by a Congress that has been bought.”
Thanks for weighing in, everyone. The Pfizer deal is so massive compared to earlier transactions that it’s sure to spark more debate in Washington about current tax rules and policy. Whether anything will (or can, legally) be done to torpedo the deal remains to be seen. But there is sure to be plenty of pressure on legislators, the Obama administration, and presidential candidates to do something about this trend.
Didn’t take the chance to comment yet? Then make sure you add your thoughts below.
Thanks to the ongoing turmoil in the credit markets that I’ve been harping on, investors in distressed debt are getting hammered. Many hedge funds invest in the bonds and loans of companies with credit problems on the cheap, hoping to rack up big profits when and if their businesses turn around.
But this is the worst year for that strategy since 2008. Distressed debt funds lost 5% through October, and the month of November has been even worse. One debt index has dropped almost 8% this month alone.
You know things are getting bad in retail when even the company behind those iconic light blue boxes misses targets. Tiffany & Co. (TIF) missed earnings estimates for the third quarter by five cents per share, and also warned that profit could drop by as much as 10% for the full year. It blamed the strong dollar and “volatile, uncertain economic and market conditions in the U.S. and other regions.”
Three suicide bombers — two on foot and one in a car — attempted to attack the Suez Inn hotel in Egypt’s troubled Sinai Peninsula. They managed to kill three people and wound 12 before being gunned down by security forces and police. ISIS has a presence in the region, and are believed to be behind the downing of a Russian jetliner a month ago.
Any thoughts on the ongoing terrorism threat in Europe? Let me hear about it online.
Until next time,
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