Streetwise Professor

January 6, 2016

Ten Years After

Filed under: Uncategorized — The Professor @ 3:38 pm

Today is the 10th anniversary of Streetwise Professor. Hard to believe. What a long, strange trip it’s been.

I started the blog with the intent of focusing on topics directly related to my academic research on derivatives, commodities, and exchanges. I’ve done quite a bit of that, and indeed, blog posts were often the first draft of material that turned up in research papers, or at least, were a way of thinking out loud that shaped what later appeared in more formal work. But, of course, the range of topics I’ve written about has metastasized over the years. I never would have predicted when I first envisioned the blog that Russia would have consumed so much time and attention. And probably a good thing too, because that probably brought more traffic to SWP than any other single topic, and people who came here for my Russia rants stayed for other topics. But it’s not just Russia. I’ve written about politics (Thanks, Obama!), China, broader economic issues, history, military matters, climate change, sports and even punk rock. It’s my blog, and I’ll write what I want to.

2006 was a propitious time to start a blog, because the subsequent decade has been chock-full of history, especially in financial and commodity markets. The biggest financial crisis in recent history spawned a huge onslaught of regulation, which provided a lot of grist for my mill. (Thanks, Frankendodd!) Furthermore, the End of History that some forecast at the beginning of the 2000s definitely did not occur in the 2006-2016 decade. Indeed, the world has been as unsettled as in any decade since the 1930s. In 2009 or so, I wondered whether these times were more like the 30s or the 70s, and sadly, the former answer wins. But that has provided considerable material to work with.

In areas related to things I actually know something about–commodity prices, energy, speculation, manipulation, HFT, derivatives market regulation, and clearing–I think it’s fair to say that SWP has had some impact on policy, or at least the way people think about policy. I know that there are more than a few followers in the financial and legal community, and among regulators around the world.

Along the way I’ve made quite a few friends, for which I’m grateful. It has been gratifying over the years to have people approach me and mention this post or that. I have to confess that some people have remembered posts that I forgot writing 😉

I’ve also made a few enemies, for which I’m also grateful. It’s part of the way I know I’ve made an impact, but more importantly, I’ve made enemies mainly by calling out rather forcefully the frauds, follies, fecklessness–and fuck-ups–of those who presume to rule us. (I have it on very good authority, for instance, that I was banned from the CFTC building by Gensler.) Their anger is a sign that I’ve hit the mark.

I would like to extend my sincere appreciation to those who have read the blog, particularly those who have read it regularly over the years, and especially those hardy souls who have ventured into the comment section.

What will then next ten years bring? Since I was so mistaken in my expectations about SWP when I started, I will forego a prediction now, other than to say that I will go where the spirit leads me (recognizing that sometimes the spirit is an evil one :-P). I think eclecticism has worked, and I’ll keep it up.

Thanks again for reading, and I hope you stick around. I hope I give you reason to stick around.

PS. Talk about some sort of fate. I remember distinctly sitting in front of my computer ten years ago, wondering what to call this damn thing. Then this song played, and I knew immediately that Streetwise Professor was the perfect name. And what should begin playing on Pandora when I started the third paragraph? Yup. Lars Frederiksen and the Bastards, playing Streetwise Professor. Too funny.

January 2, 2016

Fools Rush in Where Angels Fear to Tread: Avoiding the Islamic Civil War Is Prudence, Not Isolationism

Filed under: History,Politics,Russia — The Professor @ 7:43 pm

The combination dumpster fire, shit show, and clusterfuck AKA the Middle East got even more disastrous today when the Saudis beheaded a prominent Shia cleric (along with 46 Sunni radicals). The reaction from Iran was immediate: the Saudi embassy was sacked by outraged Shia.

And the reaction from certain quarters in the US was almost as swift: the usual (neocon) suspects in the US (e.g., Max Boot) immediately swung into action, shrieking loudly about the Iranian violation of the sanctity of the Saudi embassy (I wonder what really goes on there, besides, you know, slavery and stuff) but saying nary a word about the morals or justice or reasonableness of going medieval on Nimr al Nimr.

It is beyond bizarre that certain quarters of the right are so obsessed with Iran that they are willing to go all in with the Saudis and the other oil ticks of the GCC. How can they be blind to the facts that (a) the most direct terrorist threats that we face are all Sunni, and specifically Wahhabi-influenced, (b) these threats receive material and ideological support from Saudi Arabia, and (c) the Saudis have spent billions propagating their hateful creed, including supporting the very mosques in the US and Europe where terrorists are radicalized and recruit?

I stipulate that Iran under the Mullahs is dangerous. I further stipulate that Assad is evil. I further stipulate that Putin is a malign force.

It does not follow, however, that their enemies–the Wahhabi Sunni extremists–are good guys, or that following the enemy-of-my-enemy strategy is even remotely wise.

This is particularly true in the case of Syria, which is a proxy war between the Saudis and the other oil ticks (and the Sunni Turks) and the Iranians. Opposing Assad means throwing in on the side of the very same types of jihadis that are trying to kill us in Paris, Brussels, and San Bernardino. Empowering them today is a recipe for disaster tomorrow.

Just how far the anti-Iran cabal is willing to go is illustrated by their deification of Zarhan Alloush, whose extreme Sunni-sectarian background (he openly advocated a genocide of the Alawites in Syria) has been whitewashed in order to transform him into some martyred potential interlocutor of peace.


There is a civil war in Islam. Indeed, there are multiple civil wars. Sunni vs. Shia. But even within the Islamist Sunni “community” there are deep divisions and vicious, brutal fights.

Intervening in a civil war, especially one between extreme sectarians with mindsets completely alien to our own–and indeed, actively hostile to our own–is a recipe for disaster.

But those who counsel staying out–such as Ted Cruz–are pilloried as “isolationists.” Rushing in where angels fear to tread is not isolationism. It’s prudence.

Cruz in fact was-and is-an ardent foe of the Iran deal. So he’s not dew-eyed about the mullahs, or an isolationist. But he’s smart enough to realize that you have to pick your battles, and even if you don’t like Iran (which he doesn’t), that doesn’t mean you have to fight their proxy in Syria.

Indeed, one of the reasons that the Iran deal was a disaster was precisely that it stoked the conflict between Iran and the Saudis. This was predictable, and predicted: well over a year ago I argued that one of the reasons the deal was a bad idea is that it would intensify the conflict in the Gulf specifically, and the Muslim civil war generally, because the Saudis would feel the need to take matters into their own hands and fight Iran before Iran became too strong. We are seeing that happen right before our eyes.

What’s particularly maddening about the interventionist crowd is that they have no specific strategy. This is epitomized by this Garry Kasparov article. Kasparov waxes eloquent about American exceptionalism, and our need to do something:

But the Iraq War was a rebuke to bad planning and lousy implementation, not a refutation of the idea that America can be an essential force for good in the world. America must do better, not do nothing.

OK. I’ll stipulate that doing nothing is not good. But it’s a long way from saying “do something!” to specifying just what that something is, and showing that it will make things better, not worse. After all, in this very paragraph Kasparov admits that we are capable of “bad planning and lousy implementation”: what’s to say we won’t have a repeat? Vacuous generalities about spreading democracy and freedom are exactly what gets us into trouble.

It is particularly irritating that Kasparov invokes Reagan’s name (as many neocons do, though he didn’t care for them, and the feeling was quite mutual). Reagan indeed engaged in soaring rhetoric about freedom and democracy. But he had a concrete strategy that he developed over years and implemented methodically when in office. The new interventionists have the rhetoric. The strategy, not so much.

Further, the situation Reagan faced–a Cold War with a military peer and ideological rival–is completely different than the one we currently face in the Middle East. There are no one size fits all solutions, and anyone who claims to know how Reagan would respond to these completely different circumstances is just full of it. That’s unknown and unknowable.

Perhaps as a chess player, Kasparov is used to there being  black pieces, and white pieces. But in the Middle East, there is no such clean divide. It is just different shades of anti-western and anti-modern sectarians looking to extirpate their enemies–who include us, by the way. Democracy and freedom are on no one’s agenda there, and we shouldn’t pretend otherwise. We made that mistake in Iraq: why repeat it again.

I am not a huge fan of Kissinger, James Baker, and Brent Scowcroft, but on these issues they have a more measured understanding of the realities. They recognize the importance of idealistic goals, but temper that with a recognition that realistic means are needed to achieve them.


Scowcroft does not believe that the promotion of American-style democracy abroad is a sufficiently good reason to use force. “I thought we ought to make it our duty to help make the world friendlier for the growth of liberal regimes,” he said. “You encourage democracy over time, with assistance, and aid, the traditional way. Not how the neocons do it.”

(The whole piece is worth reading.)

Kissinger and Baker:

Like most Americans, we believe that the United States should always support democracy and human rights politically, economically and diplomatically, just as we championed freedom for the captive peoples of the Soviet empire during the Cold War. Our values impel us to alleviate human suffering. But as a general principle, our country should do so militarily only when a national interest is also at stake. Such an approach could properly be labeled “pragmatic idealism.”

. . .

Sixth, and most important, the United States must develop a firm and differentiated understanding of its vital national interests. Not every upheaval in the region has the same origin or remedy. The Arab Spring has the potential to become a great opportunity for the people of the region and the world. Over time, fostering democracy may provide an alternative to Islamic extremism; it may also, in the short term, empower some of its supporters. We need to develop a realistic concept of what is achievable and in what time frame.

The last point is a jab at the End of History strain of neoconservatism, which is universalist and believes that everyone wants to be like us, and that the world is inevitably destined to be like us, as the result of some progressive, Hegelian process.

No and no.

Insofar as Syria in particular is concerned. Our national interest there is limited, and the cost of doing anything is prohibitive. Putin’s intervention there is not a bug, but a feature: if he is a fool who rushes in, we should take grim satisfaction, not engage in hysterical reactions like Kasparov (and Max Boot and Michael Weiss). (Relatedly, Boot slandered Cruz, tweeting that he has affection for Assad. This is scurrilous: not wanting to fight him does not imply affection, especially since those whom Assad is fighting are Islamic extremists.)

In sum, the isolationism charge is a canard when hurled at people who don’t want to get deeper into Syria, and who don’t want to take sides between medieval combatants in a sectarian civil war. Saying that the Iranians are bad is not sufficient to justify intervening on the side of their Wahhabi foes–who are just as bad, and are in fact more directly involved in attacking the US and the West than are the Iranians.

To paraphrase Kissinger again (specifically, his remarks about the Iran-Iraq War): we should hope that they both lose. In the meantime, we should look for ways of shielding ourself from the fallout. Jumping into the fray is not the way to do that.


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