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Streetwise Professor

November 12, 2014

Gruber Gone Wild!, or, Gruber Pyle, PhD

Filed under: Economics,Politics — The Professor @ 2:34 pm

For someone who has, at times, shot off his mouth (“you don’t say!” I can hear you saying), I am agape in amazement at MIT’s Jonathan Gruber’s lack of a filter between his brain and his trap. But this is a good thing, for we learn a lot when he unburdens himself.

He first came to the attention of most of us when he was caught on video saying that Obamacare had been deliberately written to limit subsidies to those buying insurance through a state-run exchange. This became an issue because few states set up exchanges, and people have been receiving subsidies through Federal exchanges. This is the reason for a legal challenge to Obamacare that has reached the Supreme Court.

The legal embarrassment this caused led Gruber to claim, subsequently, that the letter of the law regarding state exchanges was a typo, and that his statement had been a “speak-o.”

The latest episode in the Gruber Gone Wild video collection is his performance at a conference at U Penn, where he said that key elements of the ACA had been written in a misleading way to conceal deliberately their true intent and effect. Gruber said that the law was written in a “tortured” way to ensure that CBO would not score it as taxes, and to hide the fact that the healthy would be subsidizing the sick. If these things had been transparent, the bill never would have passed. But fortunately, sayeth Gruber, American voters are too stupid to see through this.

How Leninist of him. The ends justify the means. Who-whom (the Smart People giving it to the Great Unwashed, but only for their own good).

Gruber again sends his regrets for his incautious language. No apology needed. His ex post honesty is welcome, if his (and the drafters’) contemporaneous dishonesty is not.

And there’s apparently a third video, in which Gruber again insults American voters.

Quite the franchise he’s got here.

Gruber’s revelations makes it clear that Obamacare was a fraud, passed (by the thinnest of margins) using utterly dishonest means.

Hopefully, SCOTUS is paying attention and will consign the whole thing to the ash heap of history.

But of course the New York Times fawned over Gruber for his role in driving forward Obamacare. Another revealing thing, that. The NYT uses unethical and shoddy journalistic practices to heap outrageous slurs on academics who dare take positions that contravene its agenda, but gives journalistic tongue baths (I cleaned that way up-way up) to those who say anything-anything-that advances the progressive cause.

Update. The videos are from the collection of one Rich Weinstein, an investment advisor infuriated at paying higher premiums under Obamacare, who decided to investigate what happened. The good Mr. Weinstein says that there are many more videos in his collection. Great! Drip. Drip. Drip.

 

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November 10, 2014

The Saudis: Crazy Like a (Desert) Fox?

Filed under: Commodities,Economics,Energy,Politics — The Professor @ 11:53 am

The recent decline in oil prices, and the failure of Saudi Arabia to cut output has led to many to conclude that the Saudis are trying to drive down prices in order to drive out shale production. I am extremely skeptical, because this would be crazy. It would only make sense if the Saudis are trying to convince shale producers that they are in fact crazy.

The alleged Saudi strategy is a variety of predatory pricing, and such strategies have major problems. Most notably, in the case of shale, driving down prices today would not eliminate any oil that’s in the ground. It would not eliminate drillers’ knowledge about the oil and how to get it out. Perhaps low prices will induce shale producers to delay drilling, and idle some rigs. But as soon as the Saudis cut output in order to cause prices to rise, the shale producers can restart their drilling programs, and under the theory that shale production is keeping prices lower than the Saudis like, this restart will keep prices rising to the level that the Saudis are targeting.

If the Saudis keep prices low for a considerable period of time, some resources (notably labor) may exit the US shale sector, and it may take some time to ramp up production again. But even so, the period of time during which the Saudis can suppress US shale production is limited. The oil ain’t going anywhere, and US producers will bring it out of the ground when the price is right. The Saudis can’t do anything about the fact that the right price for US shale producers is lower than the price they would like.

In brief, predatory pricing requires the predator (KSA in this instance) to suffer losses during the period when it is waging a price war: price wars are costly. But since the price war does not destroy competitive capacity, but just idles it (if that), there is only a very limited period-and perhaps no period at all-during which the predator can sell at higher prices to recoup these costs. This is why predation is usually a losing strategy.

This isn’t a new story, either the predatory pricing argument or the economic retort. Standard Oil was widely believed (based on the tendentious writings of Ida Tarbell, in particular) to have engaged in predation. But John McGee showed more than 50 years ago that this was a fairy tale that did not correspond with the facts.

The analysis above is based on the assumption that everyone is rational and everyone knows everyone is rational. In the 80s, game theorists altered these assumptions and showed that when there is a positive probability that a large firm (e.g., KSA) is irrational and likes to engage in price wars for the fun of it, predation can become a rational strategy by a non-crazy firm. A rational firm can get a reputation for being crazy by preying on competitors. Not wanting to fight crazy, competitors exit or don’t enter.

This theory, like a lot of game theory is quite elegant. And like a lot of game theory, it doesn’t appear to describe anything in that actually happens in reality. Price predators have been very rarely observed in the wild, and arguably they are like the monsters at the edge of pre-Columbian maps.

I am therefore very skeptical that the Saudis are crazy, or acting crazy. This is particularly true given that there is a rational explanation. Given the Saudi market share, and the elasticity of demand for oil, the demand for Saudi oil is elastic. Given that marginal cost is likely very inelastic, it may not reduce output much at all even in the face of a demand decline. Indeed, US shale supply has likely increased the elasticity of the Saudi net demand curve.

I’d also note that there have been stories recently about how some countries, including India and Indonesia, are using the current low prices as an opportunity to cut subsidies. Subsidies have made demand more inelastic (because subsidized consumers get the price signal): reducing or eliminating these subsidies will make demand more elastic.

Greater net demand elasticity, due to greater elasticity of US supply, reduced subsidies, or both, reduces the Saudi incentive to cut output.

Recall that during the financial crisis, even though prices fell about 70 percent from peak to trough, world oil output fell only about 3 percent from its high in July, 2008 to its low in March, 2009. Saudi output fell somewhat more, about 12 percent, but given that the current demand decline is far smaller than observed at the depths of the crisis, and that (as just noted) fundamental conditions have changed so as to reduce Saudi incentive to cut output, the lack of output cuts in the current weak market doesn’t require an explanation based on predatory pricing strategies.

In sum, it is highly likely that the Saudis are not crazy, and aren’t acting crazy, but are instead responding rationally to existing market conditions. Predatory pricing stories should always be viewed with suspicion, because they are seldom ever true. That’s almost certainly the case here too.

 

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November 5, 2014

Will Commodity Traders Replace Banks as Swap Dealers? I Think Not

Filed under: Commodities,Derivatives,Economics,Energy,Regulation — The Professor @ 9:09 pm

As many (but not all) banks reduce their paper and physical commodity market activities, it is often suggested that commodity trading firms like Glencore, Vitol, Trafigura and Mercuria will step into the breach, and become swap dealers offering customized risk management structures to clients (and loans to customers to boot). Mercuria CEO Marco Dunand says his company is exploring that:

Last month Swiss trading house Mercuria completed the purchase of U.S. bank JPMorgan’s physical commodities unit. It now wants to expand its provision of hedging services to external customers.

“There’s the desire for the company to enter a bit more into the space of customer service – trying to see whether we can offer some solutions to clients, primarily in Europe,” Dunand told the annual Reuters Commodities Summit.

Others, including Trafigura’s Pierre Lorinet, expressed skepticism.

When asked about this over the past several months, I have been firmly in the skeptic camp. It all comes down to balance sheet.

Yes, commodity traders utilize paper markets extensively, but as hedgers to reduce risks. This allows them to deploy their capital, and leverage it, so that they can carry out their core transformation activities: logistics, storage, processing, and blending. They are really buy-side firms, with relatively thin capital bases.

Derivatives market making, particularly in long tenor deals, or structured ones, is a very capital intensive activity. Indeed, one of the reasons that some banks are cutting back  is that particularly in the existing regulatory environment, the capital commitments for this business make it difficult to operate profitably. If Barclays can’t make money, how can Mercuria?

I can see joint efforts between banks and commodity traders in offering such products, in the same way that banks and traders collaborate to provide commodity prepays. But in those deals, the risk participation of the traders is usually 10 percent or less. Maybe something similar will evolve with commodity derivatives, where the trader faces the customer but most of the risk-and the capital to bear it-resides on bank balance sheets. Perhaps clever bankers will be able to find ways to engage in capital arbitrage in these kinds of deals, but I doubt it.

There is another big impediment: Frankendodd and its European equivalents. Under Dodd-Frank, becoming a swaps market maker brings with it a variety of burdens, including reporting requirements, and most notably capital and collateral requirements. Capital requirements are an anathema to trading firms, precisely because they are typically very capital light. They are also not keen in tying up working capital in margins. One of the factors that drove “futurization” in energy derivatives is that due to the swapaphobia of Congress, swaps were subject to more onerous treatment than swaps: to avoid becoming swap dealers energy market participants eagerly stopped using swaps and switched to economically equivalent futures instead.

The trading arms of two oil majors-BP and Shell-have become swap dealers and will offer risk management products to customers: they were so big, that it was likely infeasible to escape the swap dealer designation. Cargill has become a swap dealer as well, and will make markets. But these are large, asset-heavy firms with the balance sheets to carry these sorts of activities. Although I could see Glencore making a similar choice, I can’t see the rest of the big traders doing the same.

Banks and commodity trading firms are fundamentally different. They are both intermediaries that engage in various transformations, but the transformations that banks and traders perform are quite different. Banks are in the business of bearing credit risk and intermediating market price risks (e.g., by hedging in listed markets exposures they assume through OTC transactions). Traders are in the business of transforming physical commodities. Traders are natural customers of banks, not competitors in credit and risk intermediation. These different functions mean that banks and traders have different capital structures. This further means that it commodity traders cannot readily step into functions that banks exit or cut back.

So methinks banks will remain banks, and traders will remain traders.

 

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Finally: Letting Slip the Accountants of War. Target: Timchenko-and Gunvor.

Filed under: Commodities,Energy,Politics,Russia — The Professor @ 8:13 pm

At the time of the Russian invasion of Georgia in 2008, I advocated that the US government “cry havoc! and let slip the accountants of war.” I specifically identified Gunvor as one of the targets.

Well, more than six years and another invasion later, that’s exactly what’s happening. Federal prosecutors from the Eastern District of New York-the go to guys and gals for big time financial cases-are going after ex(?)-Gunvor owner Gennady Timchenko for potentially corrupt transactions between Gunvor and Rosneft:

U.S. prosecutors have launched a money-laundering investigation of a member of Vladimir Putin ’s inner circle, several people familiar with the efforts said, in a politically sensitive escalation of pressure on the Russian president’s cadre of billionaire supporters.

The U.S. Attorney’s Office for the Eastern District of New York, aided by the Justice Department, is investigating whether Gennady Timchenko transferred funds linked to allegedly corrupt deals in Russia through the U.S. financial system, the people said.

The prosecutors are probing transactions in which the Geneva-based commodities firm Mr. Timchenko founded, Gunvor Group, purchased oil from Russia’s OAO Rosneft and later sold it to third parties, one of the people familiar with the matter said. Investigators have in recent months requested information about the prices Gunvor charged, the person said.

A State Department cable released by Wikileaks suggests at least part of which prosecutors are looking at:

Cables from the U.S. Department of State in 2008, later released by WikiLeaks, relayed allegations that Gunvor is the mandatory trader for certain oil exports, and that the firm adds $1 to each barrel. “In a competitive market, by contrast, an oil trader might add anywhere from five to 20 cents ‘maximum’ to the price,” they said. One cable relayed allegations that Gunvor “is just a front for ’massive corruption.’ ”

Buying Russian oil at prices discounted from world prices and then selling it at world prices has been a ticket to riches in Russia since before the collapse of the USSR, and a proven way of getting money out of the country.

And it gets better! The prosecutors are specifically investigating whether any illicit funds went into Putin’s personal pocket, after a few trips through the laundry.

If indicted, Timchenko would likely be put on an Interpol Red Notice list, which would result in his arrest in most jurisdictions in the world. Even though he has been Red Noticed yet, the US’s FUD campaign has already put a major crimp in Gennady’s get along:

Mr. Timchenko told Russian news agency Itar-Tass in August that he’s afraid to travel to much of Europe.

“Alas, there are reasons to be seriously afraid of provocations from the U.S. special services,” he said in the interview. “Believe me, this isn’t speculation, but concrete information, whose details I cannot share with you yet for obvious reasons. But we are working on this issue.”

So I guess it’s not too big a deal that sanctions have grounded Timchenko’s Gulfstream G650. Not like he’s going anywhere.

The most amusing part of the article was the response of Putin’s Jay Carney, Dmitry Peskov:

Mr. Putin’s spokesman, Dmitry Peskov, said: “We’re not aware of any investigation, and we’re not following such things.”

Not following. Riiiggghhht.

Although the article suggests that Timchenko personally is the target of the probe, Gunvor is inextricably entangled in such an investigation. So speaking of probe, Gunvor can expect months if not years of the financial and legal equivalent of a proctological exam. Thus, the company’s recent frantic efforts to de-Russify may come to naught. The existential crisis that the firm apparently escaped in March and April is likely to re-appear, with a vengeance. Since this investigation strikes at the company directly, and since it involves actions and events that have occurred (or not), there is no ready expedient like severing ties with Timchenko that can defuse this threat. Its fate now largely hinges on what investigators turn up. And believe me, they will leave no stone unturned.

It will be interesting to see what the company’s bond will do tomorrow. Its yield spiked when Timchenko was sanctioned. I’d expect the same tomorrow. It will also be quite interesting to see what the banks do. The company put on a full court press with the banks (and on Capitol Hill too) to keep the loans flowing last time, and succeeded. But this investigation represents a threat that is orders of magnitude greater. Thoughts of BNP are no doubt going through many banker brains right now. The company’s fate therefore truly hangs in the balance.

Ironically, I’m in Atlanta for an Atlanta Fed conference to present a paper about the systemic risks posed (or not) by commodity trading firms. Are they too big to fail? Would the financial distress of a big commodity trading firm pose threats to the broader financial system? I think not, but I believe there are pretty good odds that I will soon be able to add a new case study to the paper.

 

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Election 2014: Emotionally Satisfying, But Practically Fraught

Filed under: Politics,Russia — The Professor @ 11:40 am

I of course take some satisfaction from last night’s election results, though I think their practical consequences will be limited, and perhaps fraught. This was an immense repudiation of Obama. The loss was a humiliation of the president, even compared to the 1994, 2006, and 2010 routs of the president’s party. Democrats were crushed at every level of government, from the Senate, to governorships, to the House, to state legislatures. Hell, the Republicans even won governor’s races in Maryland and Massachusetts. Races that had been rated as close (Georgia, Kansas, Kentucky) turned into absolute routs. (Pollsters rank a close second to Obama in The Biggest Loser results from last night.)

It will be amusing to watch Obamabots attempt to ‘splain things in the next few days. After he claimed that his policies were on the ballot-all of his policies-the Dems will no doubt turn themselves into Dervishes in spinning the results to show that they had nothing to do with The One. I was particularly amused that Jay Carney said that Democratic senate candidates would have done better if they had not run away from Obama. Oh, Jay. You still have the ability to say the most outlandish things with a straight face! In truth, if Gardiner or Braley had run as proud supporters of the Obama agenda and leadership, their margins of loss would have doubled.

Practically, however, I think the results will be fairly barren, and may in fact set the stage for a Constitutional crisis, or crises. Obama is still president, and can block any substantive legislation emerging from the solidly Republican Congress. More ominously, given Obama’s personality, ideological rigidity, and hatred of Republicans (and I do think he viscerally hates them), confrontations are inevitable. Obama will not take his whipping and emerge more conciliatory and willing to compromise. To the contrary, to someone of his narcissistic temperament, yesterday’s repudiation is an existential affront that he must confront. He will channel his inner Alinsky, and attempt to use every executive power to achieve results that he cannot implement through legislation. He will double down on the divisive rhetoric and policies that he has employed in the past couple of years. A Constitutional confrontation over immigration, or some other issue (climate?), could well result when Obama attempts to exert executive power unilaterally.

Perhaps most importantly, his obsession with completing a deal with Iran, which has warped virtually every aspect of American foreign policy (Syria most notably) lays the groundwork for confrontation as he will likely attempt to implement it without Congressional approval. The substantive ramifications of such a deal are also very frightening, because they could lead to an even greater crisis in the Middle East and an intensification of the Shia-Sunni/Arab-Persian conflict that is already the source of chaos and misery. It is beyond bizarre that a man who claims to strive for nuclear disarmament is pursuing, Ahab-like, a deal that would likely lead to the nuclearization of the most unstable and conflict-ridden part of the world.

Moreover, the major challenges that the nation faces are still primarily an executive responsibility, as they relate mainly to foreign policy. ISIS is still in Iraq and Syria. Ebola is still in Western Africa. The Mullahs are still in Tehran. Putin is still in Ukraine. And Obama is still in the White House. Given that reality, as emotionally satisfying as yesterday’s verdict is, and as much as it represents a verdict on Obama’s foreign policy failures specifically, it will not fundamentally affect the crises that beset us, and given Obama’s personality, any effect may be for the worse.

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November 4, 2014

This Cuts No ICE With Me

Filed under: Commodities,Derivatives,Economics,Energy,Exchanges,Regulation — The Professor @ 9:24 pm

I admire  Jeffrey Sprecher. ICE has been an amazing success story, and a lot of that has to do with his rather unique combination of vision and ability to execute.

But he is not above talking his book, and he delivered some self-serving, and in fact anti-competition, remarks in ICE’s earnings call held earlier today:

The head of Intercontinental Exchange, the world’s second-largest exchange group by market value, launched an unusually explicit criticism of its bigger competitor’s business strategy as he touted growth in his flagship oil contract.

Commercial customers such as refineries and airlines propelled this growth “as we see our competitors adopting incentives that attract the type of algorithm . . . trading that typically drives commercial users away,” Mr Sprecher said.

Mr Sprecher said “payment for order flow schemes” such as CME’s expanded the market by “attracting traders that really don’t want to hold the risk of your products but just want . . . to get paid to be there.”

If Mr. Sprecher actually believes that, he should be glad that CME (to speak of competitors plural is rather amusing) is implementing a program that per his telling drives away the paying customers, the commercial users.  That’s doubly true since those commercial users would presumably go to ICE. How is CME supposed to make money giving away trading incentives to traders whose presence those who repel those who pay full fare? If that’s what CME is doing, Mr. Sprecher should remember the old adage about not intervening when your enemy is intent on committing a blunder.

Sprecher was touting the fact that ICE’s Brent contract had now surpassed the older CME WTI contract in open interest. Well, this is good for ICE, certainly, but Sprecher and his exchange really have had very little to do with it: this is further proof that it’s usually better to be lucky, than good. Brent’s relative rise is the result of structural factors, most notably the prolonged logistical bottleneck that isolated WTI from waterborne crudes: that bottleneck is largely gone, replaced instead by a regulatory bottleneck, the US export ban.

ICE should not gloat for too long, though, because it is quite likely that the export ban will go, one way or another. What’s more, the resource base supporting the Brent contract is dwindling, and rapidly, whereas the Midcontinent of the US is experiencing a crisis of abundance, if it is experiencing a crisis at all. Logistical bottlenecks created by such crises tend to be transitory, and even regulatory bottlenecks can be overcome. In a few years, WTI will be deeply connected with the waterborne market, albeit in a non-traditional direction. And Brent will be at the mercy of inexorably declining production, and the ability of Platts and an often fractious community of producers and traders to figure out a contractual fix. (Adding Urals to the Brent basket? Really?) So Brent is riding high now, but over the medium to long term, CME will be one breaking out the shades, because WTI will have the brighter future.

As for incentives offered by upstart markets to unseat incumbents, as CME is attempting to do to ICE in Brent, this is a classic competitive tactic, and almost necessary in futures markets. The network effect of order flow means that (as I say in Gregory Meyer’s FT piece) bigger incumbent contracts have a big competitive advantage. The only way that  a competing contract can possibly build order flow and liquidity is to offer incentives, both to market makers (including HFT and algo traders!) who supply liquidity and to the hedgers and speculators that consume liquidity. (I wrote about this last year. Amusingly, I had forgotten about that post until Greg reminded me of it:-P)

Even that is a dicey proposition. Many have tried, and most have failed. But sometimes the upstart the succeeds, and at other times has forced the incumbent to meet the incentives to keep market share, and that can be expensive for the incumbent. That’s probably what Sprecher really doesn’t like. It’s not that incentives don’t work (as the criticism quoted above suggests): it’s that they just might. And if CME’s incentives work it could be an costly proposition for ICE to respond in kind.

In other words, Sprecher is really criticizing a reasonable competitive tactic, because like any dominant incumbent, he doesn’t like competition. That’s his job, but that kind of criticism cuts no ice with me. Or ICE, either, as much as I admire its achievement.

 

 

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November 1, 2014

When They Say Science! They Mean Politics.

Filed under: Climate Change,Politics — The Professor @ 4:46 pm

I avoid the immigration issue like the plague-or Ebola, to update the meme-because (a) I can’t say that I can bring any special knowledge to the subject, and (b) it’s one that inevitably generates more fury than thought, reaction rather than reflection. I make an exception now because of an article that speaks to the Science! debate.

Neil Munro in the Daily Caller has a long article that claims that the currently ongoing EV-D68 enterovirus epidemic was created by, or at least exacerbated by, the influx of children from Mexico and Central America this summer. The evidence is not definitive, but Munro presents enough to show at least that it’s a reasonable hypothesis. And what is science about? Testing hypotheses. And what should scientists do? Test hypotheses.

But if you read Munro’s piece, you will find a shocking lack of interest among scientists to test this particular hypothesis. Indeed, the scientists interviewed recoil in fear at the very thought. What’s more, he shows pretty convincingly that this unscientific lack of curiosity is due to the fact that this subject is politically radioactive, and if the hypothesis were not rejected, it would be very, very politically damaging to Señor Obama. So scientists, who exist in a state of abject dependency on Federal funding, would probably rather inject EV-D68 into their eyeballs with a square needle than investigate seriously such a politically explosive hypothesis.

The correlation between Science! and politics demonstrates that the invocation of Science! by politicians and the politically active is inherently untrustworthy. And of course, this is not limited to Ebola and EV-D68. Global warming or climate change or whatever the label de jour is a particularly prominent example.

I find it sickly ironic that the administration and its defenders invoke Science! as a magic incantation to ward off rational debate. The translation of Science!, when used by an administration hack or flack is “Shut up, you bloody peasant! Defer to your betters, regardless of how asinine they are. Do not question the Great and Powerful Oz.” It has come to the point that an invocation of Science! immediately discredits the sincerity of the invoker. It is especially ironic when the bearer of this message is a liberal arts or J-school grad (or both!) who probably exerted considerable effort to avoid taking a serious science class during their entire education.

Another institution corroded by the acid of politics, especially in recent years.  (Another is civilian-military relations: I will address that dreary story in a future post.)

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Laying the Groundwork for the Next Phase of Putin’s Novorossiya Campaign: The Price of Pusillanimity

Filed under: History,Military,Politics,Russia — The Professor @ 12:04 pm

Ukraine held successful, and remarkably pro-Western, elections last Sunday. The result was a rebuke to Putin, and provided further proof of the adage that you catch more flies with sugar than with gall. Tomorrow, the rump/puppet statelets of Donetsk and Luhansk will hold Soviet-style sham elections, which the Kremlin will duly recognize in violation of the Minsk Protocol signed in September.

Ominously, there are numerous reports of an escalation in the intensity of combat throughout eastern Ukraine (the cease-fire being something of a joke, of course). Further, there are reports of movements of large quantities of new Russian equipment, including SAMs (e.g., S-300s) and MLRS systems considerably more advanced than the scattershot Grads that have been used indiscriminately. There are also indications that the fractious and thuggish rebels are being replaced at key points by Russian regulars.

Something is building here. The timing likely reflects the conscription cycle that led to the faux withdrawal some weeks ago that gave faux hope to those in the west who saw what they desperately wanted to see. Moreover, the passivity of the West, and the distraction of Obama by ISIS (not that he was ever really engaged with Ukraine anyways) give Putin every confidence that another strike would be met with indignant blasts of hot wind from the west, and little else. His prize of Crimea (My precious! My precious! to Gollum-Putin: it’s basically all he has to show for his Herculean labors this year)  is also barely supportable now without access to supplies from the mainland, but will be all but isolated when the slender thread of waterborne transport is frozen shut in a few weeks. Putin needs to open the land routes through the Ukrainian mainland. This requires taking Mariupol, and then continuing to advance west to Kherson.

Russia has markedly increased the intensity of its aerial aggression against Nato countries (including Turkey, which is interesting) and Japan. (Over the summer it carried out mock nuclear strikes on Denmark (!!!) , like those simulated against Sweden and Poland in previous years.) It has bullied Finnish research vessels. (For someone who fulminates about the expansion of Nato, Putin is its best recruiting sergeant.)  It recently tested two nuclear missiles, a Bulava SLBM (which is apparently finally over its serious teething problems) and a Topol ICBM. Putin’s recent rantings in Valdai included sort-of veiled nuclear threats and warnings that “the bear isn’t asking anyone for permission.”

These are all warnings to the west to stand back and not even think about interfering when Putin mounts the next phase of his Novorossiya campaign, likely in the next 10 days-two weeks. These are the wages of the west’s feckless dithering for the past 9 months. This is the price of pusillanimity.

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October 29, 2014

Did Putin Have the Hackers Insert Malware Popups Saying “Who’s Your Daddy?”

Filed under: Military,Politics,Russia — The Professor @ 6:54 pm

Although this has been rumored for weeks (due to the dogged reporting of Powerline), yesterday the White House admitted that hackers, likely Russian (I’m shocked! Shocked!), had compromised the (allegedly non-classified) computers of the Executive Office of the President.

Did Putin have the hackers insert malware that triggered a popup saying: “Who’s Your Daddy?”

But here’s the best part (and per usual, “best” means “worst”). We didn’t discover this ourselves. An “ally” informed us.

It would be so hilarious if the “ally” is Israel. (Germany would be a close second in hilarity.) It would also be so karmic.

But I guess this isn’t possible, because a confidential administration source said the information came from an ally, and we know what Obama, Kerry, etc. think of Israel, and “ally” isn’t the first word that trips off the tongue.

The hits just keep on coming, don’t they folks? But yes, by all means let’s hear some more lectures about how since “you didn’t build that” we need bigger government, delivered by the least competent administration ever.

 

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Who are you who are so wise in the ways of science?

Filed under: Military,Politics — The Professor @ 6:23 pm

In his latest disquisition on Ebola, Obama plumbed new depths of incoherence. Which for him is saying something. He  responded specifically to questions about how to rationalize the military’s policy of quarantining returning servicemen and women from West Africa (though they don’t say the q-word), while adamantly opposing quarantining of civilians. He offered two justifications (I won’t call them “reasons”). The first was that civilians and military personnel have different levels of exposure due to the nature of their work in West Africa:

Well, the military is in a different situation, obviously, because they are, first of all, not treating patients.

So let me get this straight. People with more exposure to infected patients require fewer precautions upon their return. Rrrriiiiiggghhhttt.

The second reason is that the military works for him, so they just have to suck it:

Second of all, they are not there voluntarily.

It’s part of their mission that’s been assigned to them by their commanders and ultimately by me, the commander in chief. So, we don’t expect to have similar rules for our military as we do for civilians. They are already, by definition, if they’re in the military, under more circumscribed conditions.

When we have volunteers who are taking time out from their families, from their loved ones and so forth to go over there because they have very particular expertise to tackle a very difficult job, we to want make sure that, when they come back, that we are prudent, that we are making sure that they are not at risk themselves or at risk of spreading the disease.

Last time I checked, military people were volunteers (and have been since 19-freaking-73), taking time out from their families and loved ones and so forth on extended deployments because they have very particular expertise to tackle difficult jobs. Oh, and in doing so, especially for the last 13 years, have done so in most of the earth’s hell holes at great personal risk.

But I guess they’re not doing God’s work, so they just need to embrace the suck.

If you ever wanted to understand Obama’s true feelings about the military in two paragraphs, now you have it. They start at scorn and go downhill from there.

Don’t think this won’t be noticed, all the way from E-1 to O-10. And there might be some O-11s spinning in their graves.

And of course, there was the obligatory condescending invocation of Science!, this from a guy who despite his resemblance to Urkel never struck me as a guy handy around the Bunsen Burner:

But we don’t want to do things that aren’t based on science and best practices, because, if we do, then we’re just putting another barrier on somebody who’s already doing really important work on our behalf. And that’s not something I think any of us should want to see happen.

And for a bonus Science! lecture, Jocylyn Elders emerged from obscurity to deliver it. (If you guessed “dead” in “dead or alive”, sorry: you lose).

These constant sneering references to Science!, clearly intended to intimidate the peasants into silence, are beyond insufferable. Because whenever Obama speaks about Science!, all I can think of is this:

 

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