Streetwise Professor

June 20, 2013

Mullet Man Works Fast-At Destroying Value

Filed under: Energy,Military,Politics,Russia — The Professor @ 3:03 pm

The man with the mullet, Igor Sechin, works fast.  Only months after taking over TNK-BP, Sechin’s Rosneft has seen $19 billion of market cap vanish, or about 17 percent.  Most of the TNK-BP management has left, and Sechin gratuitously hosed minority shareholders, confirming to even those who are very slow learners that your money isn’t save with Igor.  Here are a couple of pithy analyses:

“They have taken over the most productive, efficient set of energy assets in Russia and many in the market fear Rosneft are already starting to impact them negatively,” said Michael O’Flynn, managing director of UFG Asset Management, which has $1.5 billion under management in Russia and doesn’t hold Rosneft shares.

. . . .

“Depriving the minority investors of their rightful dividend is penny-wise but extremely pound-foolish,” said Kraus, who doesn’t hold any Rosneft shares. “If this is how they treat minorities when they are trying to drum up interest in a privatization, how will they treat them once they have their cash?”

Rosneft named BP’s Bob Dudley to the board, where he can watch the value destruction up close and personal.   An important matter to BP, since it has a big stake in Rosneft as a result of the TNK-BP sale.  Well played again, BP.

There’s no doubt a silver lining in all this for Sechin.  The Russian government has proposed privatizing 20 percent of the company, something that Sechin has always opposed.  He’s always argued that the company’s stock price is too low, and that it is necessary to wait until it gains in value.  The price decline has given him more ammunition to fire in that battle.

And speaking of ammunition, another stockpile of artillery shells caught fire, igniting a series of explosions that have gone on for several days, this time in Saratov.

Sechin blowing up value, ammunition dumps blowing up.  Some things never change.

Crisis=Danger+Opportunity? The PBOC Seems to Think So

Filed under: China,Economics,Financial crisis,Financial Crisis II,Politics,Regulation — The Professor @ 8:30 am

I have written for some time about my doubts about the sustainability of Chinese growth (driven by massive credit expansion that is delivering progressively less and less bang for the renminbi), and my concerns about the stability of the Chinese financial system, especially the shadow banking system.  So far these prognostications have not been realized, but events over the last few days relate directly to these doubts and concerns.

Specifically, China is in the grips of a full-blown liquidity crisis, with overnight repo rates approaching 30 percent, and one week rates well over 10 percent.  The Chinese yield curve has become steeply inverted, which is never a good sign.  The word “panic” is being bandied about quite freely.

News accounts make it seem that the liquidity shortage is the deliberate  policy of the People’s Bank of China.  Indeed, these accounts suggest that the PBOC is withholding liquidity from the market precisely because it too believes that credit-fueled growth is unsustainable, and that the banking and shadow banking sectors have over expanded and need to be cut down to size:

China’s interbank funding costs surged again on Thursday, with the two shortest-term rates hitting record highs, as the central bank again ignored market pressure to inject funds into the market, despite fresh evidence that the economy is slowing.

The People’s Bank of China (PBOC) told the market that it would not conduct repo business in its regular open market operations on Thursday, frustrating widespread expectations that it would use reverse repos to inject cash to ease an acute market squeeze over the last two weeks.

. . . .

“The central bank appears to be determined to force banks and other financial institutions, such as funds, brokerages and asset managers, to de-leverage,” said a trader at a major Chinese state-owned bank in Shanghai.

“That hardline stance suits the recent government policy of clamping down on non-essential businesses by financial institutions, such as shadow banking, wealth management, trust operations and even arbitrage.”

Yes, deleveraging is probably a good idea: the economy had become over leveraged as the result of previous stimulus policies that fed a credit boom. The question is: how to deleverage?  Quite often system-wide deleveraging is a chaotic process, beset with externalities.  Companies that can’t fund dump assets in fire sales, which puts pressure on other institutions holding the same or similar assets: they often join the fire sale stampede.  Institutions start hoarding credit and liquidity, which drives up rates and puts yet further pressure on financial institutions.

In other words, system-wide deleveraging often occurs through a financial panic that causes massive economic damage.  Usually central banks try to stem this process by flooding the system with liquidity.  Bizarrely, China, it appears, seems to be trying to start the process by starving the system of liquidity.  Central banking with Chinese characteristics, as it were.

One interpretation is that the PBOC has found that jawboning and other less drastic policies have failed to stem the growth in credit and shadow banking, so it feels obliged to take stern measures to curb these activities.  But this is a dangerous way to do it, and I am not sure that it is the optimal strategy in the game between the PBOC and other market participants.

Let’s say the PBOC relents and says “You’ve been warned: don’t let it happen again.”  Many market participants will infer that the PBOC’s threats are not credible, and that it will supply liquidity if the system appears on the verge of failure.  The will therefore have little incentive to curb their activities, viewing the PBOC as a paper tiger.  The economy will continue to be over leveraged.

Conversely, let’s say to demonstrate its credibility the PBOC sticks to its guns and refuses to supply liquidity: then there is a risk of a full-blown panic and crisis-and right now.

China is having an episode not unlike the one that hit world markets in August, 2007, when funding markets signaled the onset of the crisis, with the difference being-and it is a big difference-that this appears to be a crisis of choice, and one that could morph from onset to a Lehman moment in days or weeks, not months.

Perhaps the PBOC believes that the situation is so dire that a purgative crisis now is preferable to a worse one that chooses its own time to appear.  If so, it has no one else to blame.  If China’s financial system was hurtling down the road too rapidly, it was because the PBOC (and the Chinese government) had jammed down the accelerator with its credit-driven stimulus measures.  Now it is responding by jamming on the brakes.  A policy of alternating extremes seldom works out well.

There is an apocryphal belief that in Chinese the word “crisis” is represented by the characters for “danger” and “opportunity”.  (JFK is responsible for popularizing this belief.) The most charitable interpretation of the PBOC’s starving the market of liquidity is that it doesn’t view that belief as apocryphal, but as gospel.  That it is running a great danger to seize an opportunity to put the Chinese financial system on a firmer foundation.

Maybe.  But that suggests a conceit on the behalf of policymakers: it presumes that once a panic is sparked, they can control it, and the panic will make financiers more prudent in the future by putting the fear of God into them today.

That’s a very, very risky bet that has a very, very high probability of turning out very, very badly.

June 17, 2013

Snow(den) job

Filed under: Military,Politics,Russia — The Professor @ 7:44 pm

Snowden pulled a couple of stunts in the last couple of days.  The first was to release a document describing British and US successes in hacking into the communications of other nations-including Russia’s Medvedev-during a G20 Summit in London in 2009.

A couple of things stand out about this.

First, the timing.  The Guardian released the information just when Cameron and Putin were meeting.  Meaning that Snowden is either willingly or witlessly participating in political games to discredit Cameron.  (BTW: why didn’t Greenwald have a byline in the article disclosing this information?)  (And it also undercut Obama, who met with Putin on Monday, a day after the Guardian story.  A meeting which gave the world this priceless photo of two people who would rather be anywhere than with one another.  Like getting a root canal or colonoscopy.  Anything.) (Note too: undermining Cameron and Obama, and boosting Putin and Russia enables slaughter in Syria.  Just saying.)

Second, this has nothing-zero, zip, nada-to do with alleged invasions of the privacy of ordinary individuals, let alone the violation of the Constitutional rights of American citizens.  This is about as shocking as gambling at Rick’s Cafe Americain.

So much for Snowden’s high-minded principles and delicate conscience about the violations of privacy and Constitutional rights.  Political manipulator or political tool of the likes of Greenwald and the Guardian?  Does it mattter?

His second stunt was a webchat from Hong Kong.  Most of it was additional unsubstantiated and lurid accusations for which he claims he will provide confirming evidence “later”.  The rest of it was more grandiose statements about his impending martyrdom, e.g., his claims that the US government was going to murder him, and his justification for taking flight, stating that the US government was “openly declaring me guilty of treason.”  Um, the “government” can’t “declare guilt” on anything, least of all treason, a crime that is unique in that the Constitution specifically sets out requirements for conviction (which is different than “declaration of guilt”).  You’d think that someone who pontificates on the intricacies of FISA and the 4th amendment rights of Americans would be aware of the black letter Constitutional language on treason.

In other news related to Snowden’s credibility, or lack thereof, the President of Switzerland expressed doubts on Snowden’s account of an alleged CIA operation in Geneva, and said that the Swiss government would support his prosecution:

“It does not seem to me that it is likely that this incident played out as it has been described by Snowden and by the media,” Maurer was quoted as saying in the Der Sonntag and SonntagsBlick newspapers.

“This would mean that the CIA successfully bribed the Geneva police and judiciary. With all due respect, I just can’t imagine it,” SonntagsBlick quoted him as saying.

He added that Snowden was just 23 at the time, and unlikely to have had knowledge of such an operation, and that the CIA usually dealt with terrorism rather than financial espionage.

Most of Maurer’s argument is circumstantial, but that’s to be expected.  No doubt he’s been briefed by American officials (recall that Switzerland demanded an explanation), and more importantly, by the very excellent Swiss intelligence and law enforcement services.  He would not be pulling a statement like this on such a highly charged issue out of his . . .ear.  (And don’t tell me that the Americans have coerced him into covering up.  That would just mean you don’t have a refutable hypothesis, and it’s no point engaging you.)

Another interesting aspect of Snowden’s webchat.  He explained the discrepancy between the Guardian report that he earned $200K at Booz Allen Hamilton with BAH’s statement that he earned only $122K thus:

I was debriefed by Glenn and his peers over a number of days, and not all of those conversations were recorded. The statement I made about earnings was that $200,000 was my “career high” salary. I had to take pay cuts in the course of pursuing specific work. Booz was not the most I’ve been paid.

Pursuing specific work.  Very, very interesting.  Like, maybe, taking a  job at a big pay cut for the specific work of getting access to classified information with the intent of releasing it?  Note well: he was in touch with Poitras (and perhaps Gellman) and Greenwald before he took the BAH job.  Hatching a little plot were they, perhaps?  If not, what was so appealing about the “specific work” he took (and left after a little more than a month) that made him willing to take a 40 percent pay cut?

One last thing.  For Beck and various libertarians who are grabbing the Snowden-Greenwald banner, perhaps you might want to take a close look at whom you’re bedding down with.  Greenwald spoke at a meeting of the International Socialist Organization (a hardcore Marxist group), and defended Al-Awaki, and said that the damage from 9-11 attacks was “minimal in scope.”  He also endorsed the view that the US is the “most brutal, sprawling prison state on earth” (though perhaps he’ll take the “retweets are not an endorsement weasel”, though the “Yep” in his RT kind of forecloses that option).  Greenwald is virulently anti-American (as is the other pusher of this story, Poitras).  That’s material in assessing the credibility of Greenwald and Snowden.  Again, fools rush in where angels fear to tread.  Beware snow jobs.  Or Snowden jobs, as the case may be.

One last last thing 🙂  Scroll to about the last 20 minutes of this podcast with Richard Epstein (and John Yoo).  Epstein rightly excoriates the foolish-consistency-is-the-hobgoblin-of-little-minds libertarians, and advances a very persuasive classical liberal position on NSA surveillance that is predicated on the fundamental libertarian/liberal position that protection of human life and property from violence is the primary principle that should guide policy.  For his labors (notably his Chicago Tribune oped on this issue with Roger Pilon of Cato, for crissakes) Epstein has been subjected to shrieks of outrage.  Libertarian stridency on this issue also brings to mind my post from a couple years ago: “What’s My Name Again?” (Warning! Hyperbolic comparisons of Ron Paul-esque libertarians to the Khmer Rouge! Make sure you take these totally literally! Totally!)

June 15, 2013

Putin Grabs the Ring. Literally.

Filed under: Politics,Russia,Sports — The Professor @ 7:50 pm

Vladimir Putin has done some outlandish things, but I think this takes the trophy.  Or the ring.  The Super Bowl Ring.

You might recall that Kraft in 2005 joined a cadre of businessmen to meet with Russian President Vladimir Putin in St. Petersburg. The Patriots owner walked into that meeting with a jewel-laced Super Bowl XXXIX ring on his finger, but left empty-handed.

“I showed the president my most recent Super Bowl ring,” Kraft said at the time, per The Boston Globe. Putin “was clearly taken with its uniqueness … at that point, I decided to give him the ring as a symbol of the respect and admiration that I have for the Russian people and the leadership of President Putin.”

Not so fast. Kraft now admits Putin nabbed the ring — worth upwards of $25,000 — without his consent.

“I took out the ring and showed it to (Putin),” Kraft said this week, per the New York Post. “And he put it on and he goes, ‘I can kill someone with this ring,’ I put my hand out and he put it in his pocket, and three KGB guys got around him and walked out.”

That’s the head of the Party (and State) of Crooks and Thieves: leading by example!

The only thing that is worse than Putin’s in-your-face thievery is the Bush administration’s craven response:

Kraft kept his wits about him and complied with a call from the White House, in which a George W. Bush handler told him: ” ‘It would really be in the best interest of U.S.-Soviet relations if you meant to give the ring as a present.’ “

FFS. No wonder Putin thinks he can get away with about anything when dealing with the US.  Because he can. I think he tries this stuff to see what he can get away with.  He gets away with it . . . so he pushes it even more.  He’ll keep pushing until someone pushes back.

Here’s my idea.  Have Ray Lewis let Putin hold his Super Bowl ring, and pray that Putin tries to pocket it. And we can make money off this by putting it all on pay-per-view.

June 14, 2013

Vladimir Putin: Revisionism for Me, Not For Thee

Filed under: History,Military,Politics,Russia — The Professor @ 10:46 pm

At a reception on the occasion of Russia Day, Putin held court, and talked about . . . the United States. After awarding the State Prize to Sergei Nikulin, head of the bureau that designed a new nuclear missile designed specifically to defeat US missile defenses, Putin launched into a disquisition on American history:

Pooling together traditional Soviet-time propaganda clichés, Putin recalled the US “genocide” of Native Americans, slavery and racial segregation that is still, according to Putin, very much evident in the United States today. Putin deplored the US nuclear bombing of Japanese cities in 1945 and expressed doubt that Soviet dictator Josef Stalin would have dropped an atom bomb on Nazi Germany if the USSR obtained nuclear weapons in 1945, when an overall victory was already assured. After expressing his “personal opinion” that Americans and their leaders are worse than Stalin, Putin acknowledged that the US is basically a democratic country, built on the principle of individual rights and freedoms, whereas Russian society is built on “collectivism,” which makes it fundamentally different. The Russian national soul, according to Putin, is eternal and directly connected to God, unlike, apparently, the pragmatic American one—“so it is very hard for us to understand each other, but it is possible sometimes”.

Russian soul, blah blah blah.  Interesting, that, during a week when a survey was released showing that Russians were among the least religiously observant people in the world. And as Felgenhauer notes, rather than being a narod united in collective solidarity, Russian society is atomized: the Russian social capital account is heavily overdrawn.  In other words, Putin’s characterization of Russia is a crock.

We are so in Putin’s head.  He is obsessed with the US.  Can you imagine any US president discussing, say, Russian conquests in the Caucasus, or Central Asia?

There is one part of Putin’s remarks that is particularly outrageous:  “Putin deplored the US nuclear bombing of Japanese cities in 1945 and expressed doubt that Soviet dictator Josef Stalin would have dropped an atom bomb on Nazi Germany if the USSR obtained nuclear weapons in 1945, when an overall victory was already assured.”

That is more than a crock: it is an ahistorical outrage.  Allied victory over Japan might have been assured, but the cost would have been horrific.  It took almost 3 months for the US 10th Army to take Okinawa.  It cost about 12,500 American lives (5,000 on Navy ships, killed in Kamikaze attacks).

But it cost over 200,000 Japanese lives, about 107,000 Japanese soldiers and over 100,000 Japanese civilians.

Okinawa followed the appalling battle at Iwo Jima.

American B-29s were firebombing city after city, night after night.

Yet Japan’s military steadfastly refused even to contemplate surrender, and was preparing for a defense of the home islands to the last ditch and the last man.  And the last woman and child.

Contrary to Putin’s insinuation, the war against Japan was not in its denouement.  It was approaching a gruesome climax that would have cost hundreds of thousands of lives.  Most of them Japanese.

Truman weighed the facts, and made a decision.  The fates of millions of American and Allied soldiers rested on his shoulders.  I cannot imagine any American president reaching a different decision.  The only reason Stalin would have chosen invasion over the use of atomic weapons is that the lives of Soviet soldiers meant little to him.

Note that even after the US dropped atomic weapons on Hiroshima and Nagasaki, the Japanese military resisted surrender.  Hirohito made the decision, and even then, the military attempted a coup to prevent the broadcast of the Emperor’s surrender statement.  Achieving the “assured” victory against Japan would have been a humanitarian catastrophe, won against a fanatical enemy at a cost against which the toll of Hiroshima and Nagasaki, as horrific as it was, would have paled in comparison.

Putin’s slur is particularly disgusting coming from a man who has attacked WWII revisionism, and supported laws criminalizing criticizing the Soviet role in the war:

“We must keep and defend the truth about the war,” he said after attending the opening ceremony of a Red Army World War II memorial in the Israeli city of Netanya.

The rewriting of history is a crime to the millions of people who gave their lives for the victory in WWII and future generations who should know the true heroes of the war and be able “to distinguish the truth from blatant and cynical lies,” Putin stressed.

Yeah.  Take your own advice: distinguish the truth from blatant and cynical lies.

And remember, Russia has criminalized criticism of its role or tactics in WWII.

Sergei Shoigu, the respected emergency situations minister, has called for a law, based on Holocaust denial legislation in Germany, that would make it a criminal offence to suggest that the Soviet Union did not win the War.

Mr Shoigu indicated that the legislation would also seek to punish eastern European or former Soviet states which deny they were liberated by the Red Army. The leaders of those countries could be banned from Russian soil, he said.

The minister’s comments appeared particularly aimed at Estonia, which relocated a statue a Red Army soldier from a central square in the capital city Tallinn two years ago to a nearby war cemetery, prompting outrage in Russia.

“Our parliament should pass a law that would envisage liability for the denial of the Soviet victory in the Great patriotic War,” Mr Shoigu said. “Then the presidents of certain countries denying this would not be able to visit our country and remain unpunished.”

I suggest reading that whole article.  Shoigu, by the way, is currently Russian Defense Minister.

Putin’s obsession with the US would actually be pathetic, if it weren’t so destructive.  The catastrophe in Syria, for instance, is a direct consequence of this obsession, and the zero sum attitude Felgenhauer mentions (and which I’ve written about repeatedly in the past). Russia is “led” by a warped, cynical, twisted man.  The destination to which he is leading it is frightening to contemplate.

Addendum: Victory over Nazi Germany was assured in April, 1945, yet Stalin ordered a relentless assault on Berlin, pitting Zhukov against Konev to goad them to getting to Berlin quickly.  The casualties were appalling.  Official estimates of Soviet dead are around 81K, but it is widely believed that actual deaths were far in excess of that. Probably 100,000 Germans were killed.  Do you doubt Stalin would have used everything at his disposal to hasten the conquest of Berlin, despite the fact that victory was assured?  And what about Stalin’s launching war against Japan in August, 1945 . . . again when the ultimate outcome was assured.

June 12, 2013

Two SWP Themes Going Mainstream

As changes in financial market regulation like Frankendodd lurch into effect (with phase two of the clearing mandate becoming effective a couple of days ago), it’s interesting to see the dawning realization about some of the implications.  Implications that I’ve discussed for several years here, or in my academic work.

One of these is the tension between the micro-prudential and macro-prudential roles of collateral.  Micro-prudentially, collateral makes sense for a lender: it increases recoveries in the event the borrower goes bust.  But collateral is much more problematic macro-prudentially, for a variety of reasons.  It can be a highly pro cyclical mechanism that intensifies the effects of financial shocks.  It can be a crisis accelerator.

Andrew Hauser of the Bank of England focuses on this tension in this speech.  Unfortunately, despite this and other evidence of growing attention to this issue, I still think it’s under appreciated and that will lead to problems down the road.

Another issue is one that I raised in my more cynical moments.  Scary thought, I know.  Specifically, I mused that one reason for the broad political support for clearing and collateral mandates, especially among government treasuries (e.g., Timmy!), is that these were a form of financial repression.  That is, a means of increasing the demand for government securities, in order to reduce interest rates and borrowing costs.  The mandates effectively require market participants to hold more government debt in their portfolios.

Bloomberg just noticed this:

New collateral rules for hedge funds, insurers and others in the $633 trillion over-the-counter derivatives market are poised to boost demand for U.S. Treasuries, potentially slowing rising yields as the Federal Reserve considers scaling back unprecedented stimulus.

Swaps traders will need to come up with $800 billion to $4.6 trillion to meet Dodd-Frank Act regulations requiring that the derivatives be backed by clearinghouses that collect upfront collateral such as cash or Treasuries, according to estimates from the Treasury Borrowing Advisory Committee. The regulations take effect today for the second group of firms designated by the Commodity Futures Trading Commission in the market for interest-rate and credit-default swaps.

“This is going to be a new, very powerful engine that drives demand for Treasuries, so you have to expect it will impact yields,” said Ted Leveroni, executive director of derivatives strategy at New York-based trade-processer Omgeo LLC. “There are a lot of firms out there — I know because they’ve told me — that are concerned about having the available collateral.”

The rush for collateral may be an unintended benefit from swaps rules designed to protect against a cascade of bank failures

Um, unintended benefit for whom?  And who says its unintended?  I think it might have been quite intentional-just not acknowledged.

Now that the regulatory changes are being put into place, we’ll see how good my forecasting performance is.  Since I’ve predicted many unintended consequences, most of which are not good, y’all should hope that it’s not very good at all.  But it appears that others are making similar predictions now, at least on these two issues.

Creative Destruction and Vanishing Profit, HFT Edition

Filed under: Economics,Exchanges,Regulation — The Professor @ 8:15 pm

And now for something completely different.

HFT has been a bugbear for several years now.  The monster that would eat the equity markets, and then move onto derivatives for dessert. But HFT has apparently fallen on (relatively hard times).  HFT volumes are down.  HFT market shares are down.  And most interestingly, HFT profits are down, by about 50 percent on a per share basis, more on a gross basis because volumes are down.

This should not really be a surprise.  Basic economics predicts when profits in a particular activity are high that entry, the expansion of existing firms, and the development of competing technologies will dissipate those profits.

It’s interesting in this context to think about Schumpeter’s argument in Capitalism, Socialism, and Democracy.  One motivation for the book was to examine whether there was, as Marx and earlier classical economists predicted, a tendency for profit to diminish to zero (where costs of capital are included in determining economic profit).  That may be true in a totally static setting, but as Schumpeter noted the development of new, disruptive technologies overturns these results.  The process of creative destruction can result in the introduction of a sequence of new technologies or products that displace the old, earn large profits for a while, but are then either displaced by new disruptive technologies, or see profits vanish due to classical/neoclassical competitive forces.

Whether it is by the entry of a new destructively creative technology, or the inexorable forces of entry and expansion in a technologically static setting, one expects profits earned by firms in one wave of creative destruction to decline.  That’s what we’re seeing in HFT.  It was definitely a disruptive technology that reaped substantial profits at the time of its introduction, but those profits are eroding.

That shouldn’t be a surprise.  But it no doubt is to many of those who have made apocalyptic predictions about the machines taking over the earth.  Or the markets, anyways.

Attention Idiots!

Filed under: History,Military — The Professor @ 4:05 pm

It’s always unpleasant watching a dog chase an SUV, especially an armored presidential one, even if you’re not that fond of the dog.

Further my post of yesterday.  Today’s main revelation about Snowden is that he revealed confidential information about NSA hacking of China to a Chinese paper.  But I’m sure Glenn Beck and Fox News are totally cool with that. Because they are in solidarity with the PRC.

Um, how long do you think it would take me to find a Fox News story or Beck bit freaking out about Chinese hacking of the US?

The mere fact that Snowden decamped to Hong Kong-i.e., China-should raise alarm bells.  And spare me the BS about Hong Kong being a bellwether of free speech and civil liberties.  We aren’t partying like it’s 1999 anymore.  Hello.

Look.  Snowden and Greenwald obviously have an agenda.  Greenwald has been totally upfront about that agenda.  The agenda is that the US should not be collecting intelligence on anyone, anywhere, anytime.  Snowden has said as much.

Is that really the conservative position now? If not, why are many conservative outlets implicitly endorsing it, by continuing to flog the Snowden/Greenwald line? Are we now all Henry Stimsons, circa 1941 updated to the Internet age: “Gentlemen do not read other gentlemen’s emails”? If so, say so.

And if you’re a libertarian, a man with unimpeachable libertarian credentials and encyclopedic knowledge of the law and the Constitution says, categorically, that the collection of metadata is legal and Constitutional.  And bonus points: he’s joined in this opinion by a legal scholar at Cato.

Attention idiots: this will not harm Obama in the least, and you are being played by people with a deeply-held anti-American agenda.  You are playing into Greenwald’s hands, and are enabling the activities of people who are willing to betray highly confidential information to China.

Can you be more stupid?  Don’t answer that.  I think I know the answer.

Update. I’ve focused on Glenn Greenwald, but Laura Poitras deserves attention too.  She’s had an anti-NSA agenda for some time, as evidenced by this “Surveillance teach-in” that she put on last year.  Note the usual suspects involved-specifically, William Binney and Jacob Appelbaum.  I’m curious as to whether Appelbaum facilitated communications (e.g., help with encryption or the use of Tor) between Snowden, Greenwald, and Poitras.  She’s obviously had an agenda for quite a while. Then there’s this little tidbit about Poitras’s dalliance-and perhaps far worse-with insurgents in Iraq who ambushed an American patrol.  Lovely.   The WaPo gave her a byline, why, exactly, since it seems to be directly contrary to its policy not to give one in a news story to a political activist?

There is a little cabal here.  I further note that Poitras and Greenwald were in communication with Snowden before he removed classified items from NSA computers.  If they asked him to provide proof for his stories, I’m thinking accessories before the fact.

And oh look, Sean Hannity is giving a platform and a wet kiss to William Binney, who is also adored by OWS.  Bizarro World doesn’t come close to describing all of this.

June 11, 2013

Fools Rushing In, or, the Strangest of Bedfellows

Filed under: Military,Politics — The Professor @ 3:49 pm

The NSA story has dominated the news in the past couple of days.  The initial allegations were indeed explosive, and I was outraged, but upon further review, and considering the source, and who’s pushing the story, there is little that is truly news.  Indeed, it’s quite possible that this is anti-news: that is, that the claims are fundamentally wrong. Moreover, the political response has created the strangest of bedfellows, and reveals the fundamental cluelessness of far too much of the right.

The gravamen of the allegation is that the government is collecting vast amounts of information, including metadata from at least one phone company (Verizon), and pretty much every electronic communication that goes over the Internet.  The insinuation of the leaker, Edward Snowden, as pushed by the reporters who wrote the story, notably Glenn Greenwald, is that the government is routinely accessing this information, or can do so at will.  The response from the administration, and throughout most of the Congress, is to draw a distinction between what information was collected, and how the information is used.  Despite the initial mischaracterization by DNI Clapper, it  seems that it is widely acknowledged that yes, the NSA does collect this vast amount of information, but access to that data for any investigative purpose requires a warrant approved by a court, the FISA court for intelligence purposes, for instance.  This access is supposed to be limited to foreign targets, though here the “51 percent confidence” standard means that the government no more than guarantees coin flip odds that this is true.

There are obviously major civil liberties concerns here about the misuse of this data.  It cannot be misused if it isn’t collected in the first place, and the absolutist, no risk of civil liberties violation view that the government should not collect this data is predicated on that view.  If you believe that it is possible to design safeguards that permit use of this data for legitimate national security purposes (and note, under there is no legal way to use this data for domestic law enforcement purposes), the collection may be worrisome, but the issue becomes whether the safeguards in place strike the right balance.

Based on what I know now, I believe that a thoroughgoing re-evaluation of the process, and possible change in the law, is warranted.  The old expression is that the power to tax is the power to destroy: in the information age, information gives the power to destroy.  We need to be constantly vigilant to ensure that this power is securely fenced in, monitored, and controlled, and subject to popular oversight through the democratic process.

All that said, there are more than enough reasons to be highly skeptical about those who are pushing this story, and the ultimate source.  There is a serious danger that people with an agenda hostile to the US down to their last fiber will stampede us into an overreaction that will lead to an entirely unhealthy balance between privacy and national security.  And sadly, many who are taking up their call claim to be patriotic Americans.

The reporters, namely Greenwald and Poitras, are highly hostile to the US.  Indeed, it would not be overstating things to say that they are virulently anti-American: Greenwald believes the US is evil.  Greenwald does not believe there is such a thing as Islamic terrorism; to the contrary, he believes that the US is waging an aggressive war against Islam, and that the very word “terrorism” is racist.   Poitras is also  a “who is the real terrorist?” type. These people have an agenda.  An anti-American agenda that aligns quite nicely with the interests of Islamists.  Moreover, Jake Appelbaum, he of the perv protecting Tor, is lurking around this thing.

As for Snowden himself, despite all the fawning coverage, it is pretty clear that he is an exaggerator, not to say fabulist.  He is grandiose, bordering on the narcissistic: hell, he might even have crossed that border, with amnesty.  Many of the details he provided to Greenwald and Poitras are highly implausible.  A 23 year old IT geek under CIA diplomatic cover in Geneva?  Really?  Despite the well-known principles of compartmentalization and access to information on a need to know basis, this guy had a hunting license to access virtually any highly sensitive information held by the NSA?  Again-Really?  Experts are calling BS: note well the description in the article of the extensive monitoring anyone like Snowden would have been subjected to.

His timeline also raises questions.  He claims he received the Rosetta Stone Powerpoint while working at Booze Allen Hamilton, where he started to work in February.  But he contacted Poitras in January.

Even his biographical details are dubious.  Greenwald hypes his enlistment in a Special Forces training program, and claims that he had to leave before completing it due to two broken legs.  The Army confirms that Snowden did enlist in the 18X program, which provides a path to SF school without prior military service.  This enlistment option involves a 17 week program at the outset that combines Basic with Advanced Infantry Training; after completion of those programs, the enlistee goes to Special Forces training-where the washout rate is high, meaning that even many of those who get past Basic plus AIT never become Green Berets.  But Snowden didn’t complete even the first part of the program.  The Army says he did not complete “any training”, meaning he might not have even made it out of Basic (though since Basic and AIT are combined int he 18X program, it’s possible the Army means that he washed out during AIT).  He also received an administrative discharge-sometimes this can be routine, and characterized as Honorable, but often not.  Did Greenwald ask to see Snowden’s DD-214 (i.e., his discharge papers)?

The alleged broken legs may have-may have-occurred in parachute training.  (Why no certainty? Why no proof?)  But note that 18X recruits don’t go through Airborne training until after completing AIT.  Er. Glenn?

A lot rides on this guy’s credibility, and given the prominence Greenwald gives to Snowden’s military background, it would seem imperative to verify the basic facts of his service career, including the terms on which he left it.  Isn’t a guy willing to reveal national secrets willing to do the Full Monty on his personal background?

The high likelihood that Snowden is a grandiose serial exaggerator should make people very reluctant to take what he says at anything close to face value.  (He reminds me of the rogue traders at UBS and SocGen.) Every aspect of his account should be scrutinized skeptically and carefully, especially given the weightiness of the charges and the gravity of the information he purports to have revealed.  Moreover, one should be very alive to the inherent problems of letting someone-anyone-take the law into his own hands, as Snowden has done.  And particularly in the way he has done it.  He provided zero evidence that he attempted to find some other way to make proper authorities aware of his concerns.  Indeed, since it is unclear that anything he alleges is actually illegal, rather than just an affront to his conscience, it is hard to consider him a whistleblower in the true sense of the word.

Moreover, Snowden has provided little real evidence, beyond a rather cheesey Powerpoint of unknown provenance.  He claims to have a lot more.  Claims. Given the likely constraints on access to some of this information, if he does have it, he probably would have have to have hacked it.

And look who Snowden went to to air his grievances.

Now to the politics. Snowden and Greenwald have been lionized by certain loud elements of the right, notably Glenn Beck-but there are many others too-just check out Twitter if you have your doubts about that.  Yes, the same Glenn Beck who said Obama should resign for covering up the involvement of a Saudi student in the Boston bombing (or something).  The same Glenn Beck who thinks that Obama is basically a front man for the Muslim Brotherhood.  The same Beck who has gone off on Bradley Manning-who is one of Greenwald’s heroes.  The same Greenwald who savaged Margaret Thatcher on the occasion of her death.  Furthermore, Beck had another NSA whistleblower-William Binney-on his show the other day, and paid Binney fawning attention.  Um, does he know about Binney’s associations with Occupy? Talk about strange bedfellows. (Full disclosure: I did not listen to Beck voluntarily. It was the result of a spillover from my mother’s headphones:-P)

Uhm, do y’all know how to use Google? (And BTW, Google et al have all your data: NSA either gets it from there, or on its way there-more likely the latter.  The data is Google’s: they just let the NSA use it for far more limited purposes than Google does. Yes, they don’t have the coercive power of the state, but the Power to Abuse Information Is the Power to Destroy or Manipulate is there even if the information is in private hands too: or haven’t you noticed that Larry Page is funding a For Democrats Only political consulting/data mining operation?)

I definitely agree that the government is vastly too large and intrusive, and this is evidently part of the motive for Beck et al to embrace Snowden-and hence Greenwald and all his fellow travelers.  But methinks that Beck et al really see this as another cudgel to take up against Obama.  As much as I dislike and disagree with Obama, I groan every time I see one of these campaigns, all of which have not just failed miserably, but have actually strengthened Obama by making it possible for him to discredit his most vocal critics as loons.  Word up: the mushy middle may have its doubts about Obama, but they have no doubts about you, especially when you go on fact-free diatribes.  And believe me, going all in with Greenwald and Snowden is likely to be a totally fact-free diet.

It’s not like this hasn’t happened before.  I was going to compare Beck et al to Charlie Brown and the football, but then I remembered that at least Charlie Brown hesitated and agonized before talking off towards the ball.  Beck et al, not so much.

And it’s even worse here, because in the search of short-term political gain they are vouching for the credibility of someone who hates them, and who is categorically and furiously opposed to most everything the US right believes in.  Beck may hate Obama, but Greenwald hates the US.  There’s a difference. And Greenwald would hate it all the more, if that’s possible, if Beck’s guy was elected president.  Moreover, not only would the advancement of Greenwald’s agenda empower Islamists, other beneficiaries would include countries like China and Iran: is that really what those on the right who have taken the bit in their teeth on this issue really want?  And once you’ve bedded down with Greenwald, don’t think for a moment that the world won’t be reminded of that the next time you attack him, or any cause he is associated with.  It’s like political VD.  It’s just one night, but the gift keeps on giving.

So on the substance, the magnitude of the surveillance state is disturbing, but not really surprising.  It needs a thorough review-as does the corporatist symbiosis between the big tech companies and the government, which is far more likely to involve an intrusion on the privacy of American citizens. The Augean Stable that is the IRS also needs a thorough cleaning.  Obamacare is another impending privacy disaster, especially given that Obamacare and the IRS are joined at the hip.  All of these programs are far more likely to result in a true invasion of your privacy than what the NSA is doing, and have nothing to do whatsoever with protecting national security.  The trade-offs are hard to evaluate on security issues.  On the IRS or Obamacare-not so much.

Crucially, moreover, the specifics of the Snowden revelations are dubious, and the specifics matter if you want to make a reasoned judgment about the trade-offs involved.  He is a very flawed and uncredible accuser who seems prone to wild exaggeration-both of his own importance, and of the programs he is allegedly unveiling.  Most worrisome, his message is being broadcast by those with a well-known antipathy to the US, especially on matters related to terrorism and national security.  So I’d step back, and wait for a more sober appraisal of the Snowden story, before drawing any new conclusions from it.  Fools rush in where angels fear to tread, and sadly, too much of the American right, and most notably its loudest voices, fit that bill all too well.

June 8, 2013

A Recurring Nightmare

Filed under: Music — The Professor @ 8:43 pm

I know you have all been waiting for my review of the Social D show in Asheville, NC on Wednesday.  Well, not all of you, maybe:  commenter Green as Grass wrote to say that the bands I like sound “bloody awful.” De gustibus non est disputandum, Green.

The show was good.  This was the seventh time I’ve seen Social D, and they lived up to their previous standards.  The set list was quite different, with several songs that I haven’t heard live before.  Mike Ness was basically all business, and didn’t engage in a lot of patter this time.

The funniest part of the evening relates to one of my experiences when I went to the Social D show in Asheville in November, 2010.  (The band has played in Asheville twice . . . I’ve made both shows.)  At the 2010 show, there was a girl next to me with “Nightmare” tattooed on the back of her neck, and “Goth Bitch” tattooed across the knuckles of her hands.  So who was standing in front of me in line to get into the show? A girl with “Nightmare” tattooed on the back of her neck, and “Goth Bitch” tattooed on the knuckles of her hands.  I wonder.  Could it have been the same person?  I surely remembered her, but I don’t think she recognized me: of course, I am totally lacking in any memorable tattoos.  But at a Social D show, that should make me memorable.

And in case you are wondering . . . I didn’t come across any motorcyclists sprawled in the middle of the street on the way back to my parents’ house.  Totally uneventful ride home.

Here are a couple of shots from the show.  I was pretty close to the front, right on the edge of the mosh.

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