Streetwise Professor

An email from a legal academic in response to yesterday’s post spurred a few additional thoughts re spoofing.

One of my theories of spoofing is that is a way to improve one’s position in the queue at the best bid or offer.  Why does one stand in a queue?  Why does one want to be closer to the front?

Simple: because there is a rent there to capture.  Where does the rent come from?  When what you are queuing for is underpriced, likely due to some price control.  Think of gas lines, or queues for sausage in the USSR.

In market making, the rent exists because the benefit from executing at the bid or offer exceeds the cost.  The cost arises from (a) adverse selection costs, and (b) inventory cost/risk and other costs of participation.  What is the source of the price control?: the tick size.

Exchanges set a minimum price increment–the “tick.”  When the tick size exceeds the costs of making a market, there is a rent.  This makes it beneficial to increase the probability of execution of an at-the-market limit order, i.e., if the tick size exceeds the cost of executing a passive order, it pays to game to move up in the queue.  Spoofing is one way of gaming.

This has a variety of implications.

One implication is in the cross section: spoofing should be more prevalent, when the non-adverse selection component of the spread (which is measured by temporary price movements in response to trades) is large.  Relatedly, this implies that spoofing should be more likely, the more negatively autocorrelated are transaction prices, i.e., the bigger the bid-ask bounce.

Another implication is in the time series.  Adverse selection costs can vary over time.  Spoofing should be more prevalent during periods when adverse selection costs are low.  These should also be periods of unusually large negative autocorrelations in transaction prices.

Another implication is that if you want to reduce spoofing  . . .  reduce the tick size.  Given what I just discussed, tick size reductions should be focused on instruments with a bigger bid/ask bounce/larger non-adverse selection driven spread component.

That is, why police the markets and throw people in jail?  Mitigate the problem by reducing the incentive to commit the offense.

This story also has implications for the political economy of spoofing prosecution (which was the main thrust of the email I received).  HFT/algo traders who desire to capture the rent created by a tick>adverse selection cost should complain the loudest about spoofing–and are most likely to drop the dime on spoofers.  Casual empiricism supports at least the first of these predictions.

That is, as my correspondent suggested to me, not only are spoofing prosecutions driven by ambitious prosecutors looking for easy and unsympathetic targets, they generate political support from potentially politically influential firms.

One way to test this theory would be to cut tick sizes–and see who squeals the loudest.  Three guesses as to whom this might be, and the first two don’t count.

The Khashoggi affair reminds me of what was said about Napoleon’s murder of the Duc d’Enghien: “It was worse than a crime.  It was a blunder.”  As with the d’Enghien murder, the (likely) murder of Khashoggi has made the perpetrator a monster in the eyes of the world.

That said, some things should be kept in mind.

First, the sole source of reports on what happened is Turkey–and mostly via leaks, rather than official announcements.  There are lurid tales, allegedly based on recordings–but no recordings have been produced.

And Turkey is hardly a disinterested party here.  Instead, it is a major player in the Game of Thrones that is Middle Eastern politics.  In this game, Turkey is allied with Qatar.  Further, Turkey owes Qatar major favors: in August, at the height of the panic in the Turkish Lira, Qatar announced it would invest $15 billion in Turkey.  Qatar, of course, is involved in a death match with Saudi Arabia, and has been for some years: KSA and other Arab states are currently blockading Qatar.  Turkey’s president Erdogan is a supporter of the Muslim Brotherhood (having at times flashed the Brotherhood’s hand signal, like some gangbanger), and Qatar is the Brotherhood’s biggest supporter: the current regime in KSA is a sworn enemy of the Brotherhood, and the Brotherhood is bent on the regime’s overthrow.

Also remember that Turkey is at odds with the US; is a notorious persecutor of journalists (a fact that has gone strangely unremarked); and exceedingly duplicitous.

Second, ignore all of the portrayals of Khashoggi as some sort of crusading reformer, and brave journalist.  To say his past is sordid and discreditable is an understatement.  He is a longtime Islamist who cavorted with Bin Laden.  He was press secretary for Turki al Faisal, former head of intelligence in the KSA (before resigning 10 days prior to 9/11), and one of the most sinister figures in a very sinister regime.

Third, it is wrong to think of Saudi Arabia as being ruled by a monolithic regime.  The sprawling royal family is split into at least four major factions (each with its own sub-factions) that are fighting beneath the carpets.  The crown prince has been waging a war against those factions that are opposed to him.  Khashoggi was almost certainly a participant in that war, and given his background, he was likely associated with the factions that were connected to (and maybe more than just connected to) the elements in the Kingdom that have supported jihadis in their war against the US, including those who carried out 9/11.  I have no doubt that his private actions are starkly at odds with his recent public persona.

Fourth, everyone in power in the Middle East sucks.  Every. Single. One.  There are no angels.  Only demons.  The Khashoggi affair is the result of the wars between these demons.  Some of the conflicts are international: Iran v. KSA; Qatar vs. KSA. Some are internal to KSA.  And these external and internal conflicts feed on one another.

Alas, the US has to pick its way through this snake pit, and determine which vipers best advance American interests.  For years, the viper of choice has been the KSA, and it’s hard to see how that can change now.  Put differently, there is no regime in the ME that does NOT torture and murder opponents.  None.  The purported details of the Khashoggi murder are lurid indeed, but they are likely the exception only in that we’ve heard about them.  Given that there are no non-murderous, non-torturing regimes on offer, the US has to make strategic decisions based on ruthless calculations of interest.

Fifth, and relatedly, it is annoying beyond belief to see the repeated reenactments of Claude Rains’/Captain Renault’s “Shocked! Shocked!” routine played out in response to these events.  Where have these people been since, oh, I don’t know, forever?  It should also be noted that many of the latter day Captain Renaults are just as disingenuous as he was in Casablanca: many are ex-Obama officials, or supporters of the Iran deal, who view this as an opportunity to undermine Trump administration policy.  Indeed, one of the blunders that KSA has committed is to make this possible.

To sum up, although what allegedly transpired in Istanbul could change everything, it in fact represents a grim continuity and the perverse “normality” of the Middle East.  It would be nice if that wasn’t the case, but it is.  Which is why the region is a perpetual running sore on the global body politic.

One last note.  Napoleon survived the international reaction to the judicial murder of d’Enghien.  Of course, militarily he was stronger than Mohammed bin Salman, but the historical analogy shows that international outrage does not necessarily translate into political or geopolitical defeat.  Indeed, the murder of d’Enghien arguably tamped down domestic opposition to Napoleon, and he used the assassination plots that allegedly involved d’Enghien to justify his becoming emperor.  Don’t be surprised if something similar happens within Saudi Arabia.

My eyes popped out when I read this statement regarding the DOJ’s recent criminal indictment (which resulted in some guilty pleas) for spoofing in the S&P 500 futures market:

Market participants that traded futures contracts in these three markets while the spoof orders distorted market prices incurred market losses of over $60 million.

$60 million in market losses–big number! For spoofing! How did they come up with that?

The answer is embarrassing, and actually rather disgusting.

The DOJ simply calculated the notional value of the contracts that were traded pursuant to the alleged spoofing scheme.  They took the S&P 500 futures price (e.g., 1804.50), multiplied that by the dollar value of a price point ($50), and multiplied that by the “approximate number of fraudulent orders placed” (e.g., 400).

So the defendants traded futures contracts with a notional value of approximately $60+ million.  For the DOJ to say that anyone “incurred market losses of over $60 million” based on this calculation is complete and utter bollocks.  Indeed, if someone touted that their trading system earned market profits of $60 million based on such a calculation in order to get business from the gullible, I daresay the DOJ and SEC would prosecute them for fraud.

This exaggeration is of a piece with the Sarao indictment, which claimed that his spoofing caused the Flash Crash.

And of course the financial press credulously regurgitated the number the DOJ put out.

I know why DOJ does this–it makes the crime look big and important, and likely matters in sentencing.  But quite frankly, it is a lie to claim that this number accurately represents in any way, shape, or form the economic harm caused by spoofing.

This gets to the entire issue of who is damaged by spoofing, and how.  Does spoofing induce someone to cross the spread and incur the bid/ask, who would otherwise not have entered an aggressive order?  Does it cause someone to cancel a limit order, and therefore lose the opportunity to trade against an aggressive order and thereby earn the spread (the realized spread, not the quoted spread, in order to account for losses to better-informed traders)?

Those are realistic theories of harm, and they imply that the economic harm per contract is on the order of a tick in a liquid market like the ES.  That is, per contract executed as a result of the spoof, the damage is .25 (the tick size) times $50 (the value of an S&P point).  That is, a whopping $12.50.  So, pace the DOJ, the ~800 “fraudulent orders placed caused economic harm of about 10,000 bucks, not 60 mil.  Maybe $20,000, under the theory that in a particular spoof, someone lost from crossing the spread, and someone else lost out on the opportunity to earn the spread.  (Though interestingly, from a social perspective, that is a transfer not a true loss.)

But $10,000 or $20,000 looks rather pathetic, compared to say $60 million, doesn’t it?  What’s three orders of magnitude between friends, eh?

Yes, maybe the DOJ just included a few episodes in the indictment, because that is sufficient for a criminal prosecution and conviction.  But even a lot more of such episodes does not add up to a lot of money.

This is precisely why I find the expenditure of substantial resources to prosecute spoofing to be so dubious.  There is other financial market wrongdoing that is far more harmful, which often escapes prosecution.  Furthermore, efficient punishment should be sized to the harm.  People pay huge fines, and go to jail–for years–for spoofing.  That punishment is hugely disproportionate to the loss, under the theory of harm that I advance here.  So spoofing is over-deterred.

Perhaps there are other theories of harm that justify the severe punishments for spoofing.  If so, I’d like to hear them–I haven’t yet.

These spoofing prosecutions appear to be a case of the drunk looking for his wallet (or a scalp) under the lamppost, because the light is better there.  In the electronic trading era, spoofing is possible–and relatively cheap to detect ex post.  So just trawl through the trading data for evidence of spoofing, and voila!–a criminal prosecution is likely to appear.  A lot easier than prosecuting market power manipulations that can cause nine and ten figure market losses.  (For an example of the DOJ’s haplessness in a prosecution of that kind of case, see US v. Radley.)

Spoofing is the kind of activity that is well within the competence of exchanges to detect and punish using their ordinary disciplinary procedures.  There’s no need to make a federal case out of it–literally.

The time should fit the crime.  The Department of Justice wildly exaggerates the crime of spoofing in order to rationalize the time.  This is inefficient, and well, just plain unjust.

Elizabeth Warren’s DNA test showing that she is infinitesimally Indian has supposedly put her in the pole position for the Democratic presidential nomination.  Well, that might be true, actually, for the whole episode shows that she’s a raving loon, which is a prerequisite for an aspiring Democrat these days.

The test results allegedly show “strong evidence” of Amerind heritage.  What they actually show is strong evidence of a trivial connection: that is, she provided strong evidence of how farcical and exaggerated her previous claims were.

The Cherokee Nation’s response brings to mind the punchline to the old joke about the Lone Ranger and Tonto: “what you mean ‘we’, paleface?”:

“Using a DNA test to lay claim to any connection to the Cherokee Nation or any tribal nation, even vaguely, is inappropriate and wrong,” said Chuck Hoskin Jr., the tribe’s secretary of state.

“It makes a mockery out of DNA tests and its legitimate uses while also dishonoring legitimate tribal governments and their citizens, whose ancestors are well documented and whose heritage is proven.”

. . . .

“A DNA test is useless to determine tribal citizenship,” Hoskin said in the statement Monday, which was released by the tribe. “Current DNA tests do not even distinguish whether a person’s ancestors were indigenous to North or South America.

“Sovereign tribal nations set their own legal requirements for citizenship, and while DNA tests can be used to determine lineage, such as paternity to an individual, it is not evidence for tribal affiliation.”

This is particularly important because Warren did not just claim some non-specific Native American heritage: she expressly identified herself as Cherokee.  On multiple occasions.  Actual Cherokees say “don’t bring that mess in here.”

Warren clearly believes this test provides vindication.  In fact, it makes her a laughingstock.  The test itself is dubious, on multiple grounds.  The connection is six to ten generations in the past: to put in context, my ancestor a mere seven generations back, incidentally the last white man killed by an Indian in Washington County, Ohio, was tomahawked in . . . 1794.  (Perhaps I should sue for a hate crime violation. Has the statute of limitations elapsed?) Further, as alluded to in the Cherokee Nation statement, the genetic test inferred Warren’s ancestry, such as it is, from South American genes (Peruvian, Columbian) because North American Indian DNA samples are lacking (precisely because they are adamantly opposed to people–like, say, Elizabeth Warren?–using DNA test results to claim Indian heritage).  Moreover, the average American of European ancestry has as much or more Indian DNA as Warren.  Meaning that Liz is pretty much your average white person.  Only whiter.

Beyond the levity, there are serious issues here.  Warren used her claimed Native American heritage to advance her academic career.  She did so repeatedly, and with specificity–for instance, the story (ludicrous in light of the “strong evidence” Liz trumpeted today) that her mother’s appearance was so Indian that she had to elope due to the racism of her husband’s parents.  (But hey, Liz’s mom was twice as much Indian as Liz!)  At whose expense did she advance?

Further her story about her mother, she specifically claimed that mom was part Cherokee and Delaware.  Which would require two Indian ancestors–which her DNA test has ruled out.  The DNA test gives a “fail” to this story on another ground.  A Delaware-Cherokee union would have been possible, say, post-1860s, when the Delawares were moved to the Indian Territory from points east, and settled within Cherokee territories.  But Liz’s own DNA evidence puts her Indian ancestor no less than six generations back–roughly the end of the 18th century or early-19th century–and perhaps as far as 10 generations back–sometime early in the 18th century.  But at the later date the Delawares were in Ohio (fighting my ancestors!) and the Cherokees were in the Carolinas–not much of a chance of a tryst there.  At the later date, the Delawares were along, well, the Delaware River in New Jersey and New York, with some on Long Island, and the Cherokees were in the Carolinas.  Even less of a chance of a coupling.

But bah to such pesky details! Two prestigious universities–Penn and Harvard–touted her as a “person of color” to establish their diversity bona fides.   It is clear that both she and they did so shamelessly and self-interestedly in the complete absence of evidence.  Then there was an absence of evidence: now there is evidence of absence.

In other words, Elizabeth Warren is an opportunistic fraud, and Ivy League universities were accessories.

Which perhaps means that indeed, she is well-suited to be the Democratic front runner.

Run, Liz! Run! In your desperate search for validation, you just provided Trump with even more ammunition to ridicule you until the cows come home–if they ever do.* Meaning that you could be ridiculed for-evah.

*If you read the link regarding my ancestor Abel Sherman, you’ll learn that he was waylaid and scalped while searching for a wayward cow who had wandered off while Abel and his family were hunkered down in a fort at Olive Green (near the junction of the Ohio and Muskingum Rivers) to defend themselves against Indian raids. So sometimes the cows don’t come home.

To extend the riff, TV’s Tonto was portrayed by Jay Silverheels.  Abel Sherman was killed by a Shawnee named . . . Silverheels.  Whom I’m sure would have been far more likely to scalp Warren, then embrace her as a compatriot.

The latest media Trump freakout derives from his statement during a campaign rally in Ohio last week that Robert E. Lee was “a great general.”  Since every Confederate is beyond the pale 153 years after the end of the Civil War, any praise of any Confederate is deemed evidence of racism.

As we’ll see, that spare characterization of Trump’s remarks was grotesquely misleading.  But hit pause on that for a moment, and just consider the objective truth of the part of the statement that was reported.  (Does truth even matter any more?)  There is little doubt that Lee displayed excellent generalship and leadership at the operational level.  Some of his campaigns–Second Manassas and Chancellorsville in particular–are justifiably renowned as examples of a smaller force defeating a larger one through maneuver.  His defense during the Overland Campaign was also laudable. Other campaigns–notably Gettysburg–were less creditable: but no modern general (not even Napoleon pre-Waterloo) was uniformly successful in campaign or battle.  The main objections to his generalship were that his operational success was not achieved pursuant to a broader strategic vision, and relatedly, that his tactical methods produced casualties that the Confederacy could not afford.  (Indeed, the casualties at his greatest victory–Chancellorsville–cast some shade on the achievement.)

Further note that acknowledging that someone was a great general does not imply an endorsement of the cause for which he fought.  Were Manstein and Rommel great generals?  Yes–much to the world’s cost.  Similarly, Zhukov.  The greatest generals in world history–Alexander, Caesar, Genghis Khan, Tamerlane, Napoleon–drowned their worlds in blood in their pursuit of grandeur.  Alas, one of the tragedies of history is that generalship exhibits some correlation with the depravity of the cause in which it is employed.  (This raises interesting questions regarding causation.)

So even if Trump said only what was widely reported, the facts were on his side.  But what was reported was not all he said.  Here are his remarks in full:

But maybe someday he will. It also gave you a general, who was incredible. He drank a little bit too much. You know who I’m talking about, right? So Robert E. Lee was a great general. And Abraham Lincoln developed a phobia. He couldn’t beat Robert E. Lee. He was going crazy. I don’t know if you know this story. But Robert E. Lee was winning battle after battle after battle. And Abraham Lincoln came home, he said, “I can’t beat Robert E. Lee.”  And he had all of his generals, they looked great, they were the top of their class at West Point. They were the greatest people. There’s only one problem — they didn’t know how the hell to win. They didn’t know how to fight. They didn’t know how. And one day, it was looking really bad. And Lincoln just said, you — hardly knew his name — and they said, don’t take him. He’s got a drinking problem. And Lincoln said, I don’t care what problem he has, you guys aren’t winning. And his name was Grant. General Grant. And he went in and he knocked the hell out of everyone. And you know the story. They said to Lincoln, you can’t use him anymore. He’s an alcoholic. And Lincoln said, I don’t care if he’s an alcoholic. Frankly, give me six or seven more just like him. He started to win. Grant really did. He had a serious problem. Serious drinking problem. But, man, was he a good general. And he’s finally being recognized as a great general. But Lincoln had almost developed a phobia, because he was having a hard time with a true great fighter and a great general, Robert E. Lee. But Grant figured it out, and Grant is a great general, and Grant came from right here.

So in a campaign rally in Ohio, Trump was praising Ohioans–a staple of stump rhetoric.  One Ohioan he praised was Ulysses S. Grant.  In the process of praising Grant, he touted the generalship of Grant’s most famous foe–Robert E. Lee.  This wasn’t about Lee, except indirectly.

Trump employed a standard rhetorical technique: he enhanced the achievements of the person he was praising by emphasizing the personal obstacles he had overcome (in Grant’s case, alcohol) and the brilliance and strength of the enemies that he vanquished (here, Lee).  Would David have become a legendary figure had he felled Irving, the Philistine Dwarf, instead of Goliath, the Philistine Giant?  Er, obviously not.  Nor would Grant have been as famous if he had vanquished Benjamin Huger or Leonidas Polk or any of the many non-entities that achieved general rank in the Confederacy.  (Indeed, one reason to question Lee’s brilliance is that his victories were won against a parade of incompetents.)  But beating Lee is a true accomplishment.

But the media ignored this in its haste to find another charge to add to the Trump indictment, and to further the narrative that he makes racist appeals to the Confederacy.   Indeed, some media couldn’t satisfy its frenzy by stopping merely at ripping a sentence fragment out of context: NBC falsely enhanced the narrative by claiming that Trump had said that Lee was “incredible.”   Actually, that is a classic case of projection: It is NBC, and the rest of the media that ran with the “Lee is great” meme that lacks credibility.

Yet they whine when he blasts them for spreading “fake news.”  Here’s a thought: if you don’t want Trump to accuse you of spreading false news, don’t spread false news!

If there’s anything objectionable in Trump’s remark, it is the first part of that rhetorical technique: Trump arguably exaggerated seriously Grant’s alcohol problem, at least as of the time of the Civil War.  There is still much debate over whether and when and how much Grant consumed alcohol.  Many of the reports of his abuse of liquor were insinuations by nasty backbiters (e.g., Henry Hallack) that exploited the reputation Grant developed in the 1850s while marooned at Fort Humboldt in California.  There is no credible report that he was impaired at any time in the conduct of his duties 1861-1865.

And as Lincoln said when those backbiters criticized Grant: “I wish some of you would tell me the brand of whiskey that Grant drinks. I would like to send a barrel of it to my other generals.”  For Grant carried out one, and arguably two, of the greatest campaigns of maneuver in the Civil War.  The Vicksburg campaign, in fact, is one of the most brilliant campaigns in modern military history anywhere.  The crossing of the James in June, 1864 was also operationally brilliant, though barren of results due to the blundering of the generals in charge of carrying the attacks at Petersburg home–and arguably due as well to the exhaustion and casualties and loss of aggressiveness brought on by the relentless grinding of the Overland Campaign of the prior 5 weeks.

Further, Grant excelled Lee in that his operational successes all advanced broader strategic goals.  By March, 1864 Grant had responsibility for Northern grand strategy, and seized the opportunity with a relish, whereas Lee invariably avoided this responsibility.  Although the frictions of war–notably the incompetence of Franz Sigel, Benjamin Butler, and Nathaniel Banks–prevented the immediate consummation of Grant’s strategic vision, its breadth and flexibility eventually led to its success.  (There is some similarity between the fate of Grant’s strategic plan and his grand tactical scheme at Chattanooga in November, 1863.  Neither scheme worked according to plan, but since neither was dependent on the success of any single element, the failure of one or two aspects of the plans did not preclude their ultimate success.)

This sorry episode illustrates yet again what should by now be obvious.  If the media reports anything about Trump, modify Reagan’s famous remark about the USSR: don’t trust, but verify.

If you want evidence of the malignancy that has invaded the body politic, look no further than this appalling NYT oped, in which one Alexis Grennell accuses any woman who supported the Kavanaugh nomination, or who doubted his accusers–no matter how absurd–as traitors to their sex:

After a confirmation process where women all but slit their wrists, letting their stories of sexual trauma run like rivers of blood through the Capitol, the Senate still voted to confirm Judge Brett M. Kavanaugh to the Supreme Court. With the exception of Senator Lisa Murkowski of Alaska, all the women in the Republican conference caved, including Senator Susan Collins of Maine, who held out until the bitter end.

These women are gender traitors, to borrow a term from the dystopian TV series “The Handmaid’s Tale.” They’ve made standing by the patriarchy a full-time job. The women who support them show up at the Capitol wearing “Women for Kavanaugh” T-shirts, but also probably tell their daughters to put on less revealing clothes when they go out.

To start with: “stories of sexual trauma.”  They were, at most, stories, a word that is frequently used to describe works of fiction, with nothing in the way of corroboration, let alone anything approaching what could be called evidence.  Indeed, some of the stories were palpable falsehoods.

But let us continue:

But the people who scare me the most are the mothers, sisters and wives of those young men, because my stupid uterus still holds out some insane hope of solidarity.

We’re talking about white women. The same 53 percent who put their racial privilege ahead of their second-class gender status in 2016 by voting to uphold a system that values only their whiteness, just as they have for decades. Since 1952, white women have broken for Democratic presidential candidates only twice: in the 1964 and 1996 elections, according to an analysis by Jane Junn, a political scientist at the University of Southern California.

Note to Alexis: Uteruses have no neurons, so yes, they are pretty stupid.  And for you to suggest that is the body part that should exclusively drive your decisions (and those of others so endowed) is as ridiculous as suggesting any man should follow the lead of his johnson, and will probably work out just about as well. (Aside: where do transgenders sans uterus fit into this? Transgenders with a uterus? I’m genuinely curious.)  (Further note to Ms. Grennell: if you advocate thinking with your uterus, men will naturally and inevitably respond by thinking with their johnsons.  How do you think that will work out, for women in particular?)

Insofar as being handmaids to the patriarchy simply because of their race is concerned, just who is the stereotyping bigot here?  Just who is damning and demeaning vast swathes of women, merely because they have the temerity to vote differently or have different political opinions that the oh-so-superior Ms. Grennell.  (Is “Ms.” still OK?  Or have it transgressed again?!? It’s so hard to keep up–which is kind of the point, because a la 1984 acceptable terminology changes arbitrarily as a test to see who is hewing slavishly to the party line.)  This is not about respecting women, or honoring women: it is about enforcing a smelly orthodoxy and demonizing anyone who dares dissent.

Ms. [or whatever] Grennell is so over such trivialities as due process:

Meanwhile, Senator Collins subjected us to a slow funeral dirge about due process and some other nonsense I couldn’t even hear through my rage headache as she announced on Friday she would vote to confirm Judge Kavanaugh. Her mostly male colleagues applauded her.

Due process?  We don’t need to show you no stinkin’ due process.  Cultural revolutions don’t need no due process.  Or freedom of speech, or presumptions of innocence, or any other procedural obstacles that slow the path to the gulag for those who have committed thought crimes.

I don’t want to belabor the Kavanaugh hearings, because most of what needs to be said has been said.  I will close with one thing that strikes me whenever these sorts of melodramas are played out–which is all too frequently, of late.

That thing is cognitive dissonance brought on by clashing narratives.  The one narrative is that women are physically capable of handling any task that men can.  They can be firefighters, or Army Rangers, or Marine squad leaders, or SEALs for that matter.  They are physically tough and emotionally strong.  The alternative narrative is that women are constantly brutalized by men, which implies (that since someone has poor odds of brutalizing an equal) that women are not the physical equals of men.  Well, both of these things cannot be true simultaneously: yet the same people routinely argue both with intense vehemence, and in particular claim that those who deny the first narrative are hopeless sexists, and those who deny the latter are rape enablers.

Damned if you do, damned if you don’t.

The latter narrative relates to another n-th (I can’t keep up) wave feminist tactic (which is also employed by all identity politics grievance mongers): women are powerless victims of some vast social force (usually described using Grennell’s term “patriarchy”).  This is actually a rather canny judo move that uses an assertion of powerlessness to achieve power.  It exploits empathy, and effectively manipulates those who do not dare (either out of cowardice, or the fear of loss of job or social standing) risk obloquy for being so heartless as to trammel the weak.

Ironically, and perversely, this tactic is employed more frequently, more ruthlessly, and more effectively, as the objective evidence in support gets weaker and weaker.  In the United States, female educational attainment is outstripping men’s.  Moreover, controlling for relevant variables, including crucially endogenous educational, career, and life choices that just may reflect distinctly distaff preferences and attributes (including, notably, the possession of a uterus, which should be determinative, according to Ms. Grennell) female incomes are comparable to men.

Yes, women are less likely to be in right-tail jobs with right-tail incomes.  But they are also far less likely to be in the left-tail, without a job and socially marginalized, if not socially detached altogether.  But to suggest a possible explanation for this–that men are higher variance/more leptokurtotic than women–is to bring the furies down on your head, as discovered recently by a CERN researcher who lost his job for expressing this heresy.

An illustration of the clash between the victim narrative and reality came to mind the other day when I saw some UN agitprop that put great importance on the claim that women represent a majority of the poor in the world.

Well of course they do.  Because male mortality is greater, especially among the poor.  Indeed, one major contributor to the poverty of women, especially in developing nations, is that their poor husbands and fathers have snuffed it.

In other words, a factoid meant to emphasize the plight of women is in reality a testament to the rather dismal life prospects of poor men.

Social outcomes are complex. The reductionist explanations du jour–class, once upon a time, “patriarchy” today–are therefore always ridiculous when evaluated using facts and reason: which is precisely why facts and (especially) reason are under relentless assault from the left.   This would be a matter of little consequence were it restricted to the more idiotic corners of academia.  Alas, as Ms. Grennell’s jeremiad on the august pages of the NYT demonstrates, the views of the academic fever swamps infuse politics and drive the Democratic Party.  Meaning that the Battle of Brett (oh, for the innocent days of pine tar!) is merely just one struggle in a long, long war.

A white woman named Amy Barrett is supposedly the front-runner for Trump’s next Supreme Court pick (narrowly losing out this time).  Can you imagine the paroxysms of fury from Ms. Grennell and her like if that does come to pass, and the next candidate for associate justice is not just supported by female Quislings in thrall to the patriarchy, but is one?

The next few days are the centennial of some of the bloodiest fighting in the history of the American army.  The Lost Battalion underwent its horrific ordeal 2-8 October, 1918.  On 8 October, one of the 82nd Division soldiers who attacked in the desperate effort to rescue Major Whittlesey and his men–Corporal Alvin York–killed an estimated 25 Germans and captured 132 more.  On 7 October, John Barkley clambered into an abandoned tank and used its machine gun to beat back several German counterattacks.  On 12 October, Samuel Woodfill took out several German machine gun nests with expert marksmanship, and out of ammunition, dispatched two Germans with a pickaxe.

All of these men (two from the Lost Battalion) won the Medal of Honor.  I could go on.  Forty-three American soldiers won the MoH in action in the first two weeks of October, 1918.

If you read the medal citations, you will find that most of them were for single-handed attacks on German machine gun positions.  Yes, machine guns were major killers on the Western Front, but the Meuse-Argonne was different than say, the Somme, or the Chemin de Dames, where Allied armies attacked established trench lines in fairly open terrain.  Instead of extensive linear trench lines, the German positions in the Argonne Forest and the more open terrain to the east consisted of a dense thicket of machine gun nests.  The terrain was appalling.  Much of it was heavily wooded, cut by dense ravines.   The Americans had to crawl their way through it, yard-by-yard, taking out nest after nest, all the while subject not just to the fire from chattering Maxim guns, but to horrific shelling of high explosive, shrapnel, and gas from German guns posted on the high ground to the north and east.

Most of the American units in the initial waves had not been blooded before.  For instance, the 77th Division (in which the Lost Battalion served) and the 82nd Division (York’s) were rookies.  They had to learn the hard way, through bitter experience against an experienced foe fighting from prepared positions.

The inexperience showed initial phases of the  American assault.  Although the pivot that the 1st Army made from its attack on the St. Mihiel salient to the east to the Meuse-Argonne sector to the north and west was truly marvelous–and under-appreciated–the attack itself was beset by all of the problems of World War I offensive action, compounded by American greenness and a stubborn refusal to learn from bitter British and French experience.  American artillery support was inadequate.  The logistics–admittedly made difficult enough to start with by the wretched state of the roads–were botched.  American tactics, inspired by General Pershing’s belief in “open warfare” and the primacy of the offensive (heedless of the horrific fate of the French operating on the same beliefs in 1915 and 1917) were suicidal.

Yet the Americans learned quickly–by necessity.  It was adapt, or die.  Adaptation, combined with an almost preternatural self-confidence and aggressive spirit, ultimately prevailed.

Even as early at the battles of late-May/early-July 1918 (Chateau Thierry, Belleau Wood, Soissons) the Germans were taken aback by the aggressiveness of the Americans in the offense and their stubbornness in the defense.  “The Americans kill everything” wrote a shocked German grenadier.  “They showed a bestial brutality.”

Yes, tens-of-thousands of Americans leaked to the rear during Meuse-Argonne, but hundreds of thousands stuck it out–often sticking their bayonets in German bellies, as if to confirm the grenadier’s assessment.

World War I was a ghastly combination of inept leadership (often overwhelmed by the mismatch between the defense and offense) and individual courage.  Though the US army came late to the war, its experience from 26 September-11 November 2018 re-enacted this same combination.   And in the end, the incredible bravery and tenacity of the American soldier–farm boys and cowboys and immigrant slum dwellers alike–prevailed, and dealt the Germans body blows from which they reeled, and in the end, from which they could not recover.

But today, the centennial is passing almost completely unnoticed.  Where else but here are you reading about it?

In the aftermath of the war, the federal government, and many state governments, erected large monuments commemorating American service in the war.  Although the remains of most of the tens-of-thousands slain in the Meuse-Argonne were brought home, many thousands more were interred in large cemeteries,  most notably the Aisne-Marne Cemetery to the west of Rheims, and the Romagne Cemetery to the east.  The monuments are truly epic in scale–the US erected nothing comparable in the aftermath of WWII.  The cemeteries are immense–Romagne is larger than the cemetery at Omaha Beach.

Yet these places are almost forgotten and unvisited today.*  Located in an isolated pocket of France, commemorating a war that is largely outside of the consciousness of modern Americans (for whom even WWII is a vague memory), few Americans see them, either on purpose or by accident.

The isolation and loneliness makes them truly haunting places.  I visited the Argonne battlefields with my dad in June, 2010.  We were alone everywhere.  We seldom saw even a car on the road as we wound our way across the Argonne, from the ravine to where the Lost Battalion bled to Chatel-Chéhéry where Alvin York started his advance to Montfaucon and Romagne where the Americans clawed for yards day after day, to the Heights of the Meuse from where German guns ruthlessly pounded the Americans.  The monuments and cemeteries were inhabited only by the ghosts.

In many ways, America came of age in the Meuse-Argonne, but today those who fought in that epic battle are not just forgotten–they have never even been known by most Americans.  So please, take a moment in these October days to remember, and pay tribute to, men who do not deserve the oblivion to which an easily distracted nation has consigned them.

*But fortunately, not abandoned.  The American Battle Monuments Commission has done a marvelous job  of maintaining and preserving these testaments to the bravery of American soldiers.

This piece by John Thornhill on net neutrality epitomizes why I despise pretty much any opinion piece in the FT: it oozes pompous stupidity:

In a world that corresponds to economists’ assumptions of perfect competition and rational actors, we would not need net neutrality rules. But until that happy day arrives and goodwill, peace, and free chocolate ice-cream descend upon the earth, then we should defend this necessary principle.

And a bit later:

It is better to enforce equal access with some exemptions, as in India, than to allow a handful of ISPs to discriminate between users in far-from-perfect markets. [Emphasis added.]

There’s a name for this particular foolishness–“the Nirvana fallacy”–coined by the great Harold Demsetz almost 50 years ago:

The view that now pervades much public policy economics implicitly presents the relevant choice as between an ideal norm and an existing “imperfect” institutional arrangement. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements.

Perhaps there was an excuse for falling for the fallacy in 1969.  But decades post-Demsetz, it is embarrassing to see someone proudly flaunting the fallacy on the pink pages of the FT.

Perfection is not an option in this fallen world.  One has to make choices between flawed alternatives–that’s what Harold meant by “a comparative institution approach.”  What is particular bizarre is that in the paragraph just preceding what I quoted, Thornhill seems to understand this:

In truth, the arguments over net neutrality involve complex trade-offs and are a matter of broader societal choice. But that public debate is often based on partial information, corrupted by corporate lobbying, and mangled by dysfunctional political systems.

But never mind that! This particular regulation–which is certainly based on “based on partial information, corrupted by corporate lobbying [e.g., by those paragons of virtue Facebook, Google, Twitter, Netflix] and mangled by dysfunctional political systems”–is preferred to alternatives, because the alternatives are imperfect.  To call this a non sequitur hardly does it justice.

It is also amusing to see India–which has a dismal history of regulatory failure–held up as some paragon.  Absent some assertion that this is the exception that proves the rule, India’s adoption of net neutrality should be taken as more of a warning than an exemplar.

This is all twaddle.  And supercilious twaddle at that.

And that, my friends, is the FT in a nutshell.

As most of you probably know by now, Elon Musk settled with the SEC.  Though, perhaps it would be more accurate to say that the SEC settled with Elon Musk.  The settlement over last weekend was apparently on the very same terms that he rejected at the end of the week.  Uhm, who leaves a rejected offer on the table, especially when that offer was a gift because the case against Musk was extremely strong.

Apparently it is because Elon is deemed the Indispensable Man.  SEC Chair Jay Clayton said that the settlement was best for Tesla shareholders.  Musk supposedly threatened to quit as CEO unless the board backed him to the hilt.  So apparently both caved to the legend of Elon.

The board’s action is somewhat expected–after all, they are Elon’s co-dependents and enablers.  The SEC’s actions are rather more disappointing.  My best explanation is that the SEC filed suit against Musk only because if they hadn’t they would have been a laughingstock given the outrageousness of Musk’s actions.  Their heart wasn’t in it, however, and they were willing to capitulate rather than bear responsibility for Tesla’s fate.  The fundamentals haven’t changed, and Tesla’s future is still fraught.

And Elon hasn’t changed either.  Even a mild settlement spurred his narcissistic rage, which he expressed in a tweet scorning the SEC as the “Shortseller Enrichment Commission.”  Still obsessed with shorts, still unable to handle any criticism, still unable to count his blessings.

This is the man whom the SEC apparently deems indispensable, and believes is the best guardian of Tesla shareholders’ interests.

Perhaps the judge who must approve the settlement will find the SEC’s arguments unpersuasive.  She has asked for each side to file briefs defending the settlement.  This briefing is pro forma, but in past years–in dealing with big banks and brokers like BofA and Merrill, anyways–judges have rejected SEC settlements.   Perhaps that will happen here.  Tesla stock sank today on the news of the judge’s request, and sank more post-close after Elon’s tweeter tantrum.

Even if the judge blesses the settlement, Tesla still faces its chronic cash flow issues.  The settlement may make it somewhat easier to go to the capital market–although that would potentially–and should–trigger another investigation and perhaps suit given Elon’s adamant denials of the need to do so.  But even with a settlement, recent events have no doubt made it harder–and costlier–for the firm to sell more stocks and bonds.  Elon got off easy once.  Given that he clearly hasn’t changed–and what 47 year olds do, really?–there is a serious risk that (a) he won’t get off so easy next time, and (b) there will be a next time.  That will affect the receptiveness of the capital markets to Tesla’s voracious cash needs.

In sum, by the grace of the SEC, Nemesis has been stayed for now.  But Hubris remains.  Meaning that Nemesis may well return, more vengeful than before.

Watching the media in the past month or so, I’ve learned that the Truth Gene is on the X chromosome, and that the Lie Gene is on the Y chromosome.  I’ve also learned that the Lie Gene is dominant.  I’ve learned that his implies that XX should be believed without question, regardless of her interests or incentives; the internal consistency of her story; the consistency of her story between tellings; the lack of basic details, juxtaposed with lurid and detailed recollections; the lack of corroborating witnesses (indeed, the existence of contradictory witnesses); and the lack of physical evidence.  I’ve learned that it is beyond the pale even to raise questions about these things.

I’ve also learned that those of the XY persuasion are inherently untrustworthy, and do not deserve due process or the presumption of innocence–because they are probably guilty.  I’ve further learned that behavior of XYs as teenagers is determinative of their character as adults, but the behavior of XXs as teenagers is not only irrelevant, but cannot be questioned.

I’ve learned that I’m so old that I remember when the “politics of personal destruction” was a bad thing, rather than the highest form of patriotism.

Here are some things I’ve learned when I discarded the media filter.

I’ve learned that when people regularly use the phrase “your truth” without the slightest tinge of irony or sarcasm, that the idea of truth has been smothered in its sleep.

I’ve learned that the United States Senate is a broken institution, utterly degraded and depraved.  I’ve learned that this is so obvious that even the likes of Lindsey Graham has noticed.  I’ve learned that the rot is bipartisan, and that the body is inhabited by a full range of types, ranging from those utterly corrupted by power and a disrespect for the most rudimentary norms of personal and professional conduct, to the outrageously hypocritical, to the utterly craven (e.g., Jeff Flake, who should wear a pussy hat 24/7, and not because he’s a feminist).  Indeed, I’ve learned that many exhibit all of these traits, and some more to boot.

But the most important thing that I’ve learned is that this nation is at war to the knife, and that all that matters now is power and the will to power.  In the political sphere, norms, respect for the results of elections, institutional checks and balances, and even the most rudimentary notions of justice and fair play are quaint anachronisms.  The Al Davis ethos (just win, baby) rules.  If you stand in the way of the twisted freaks who infest the Capitol, and the political and media orcs that do their bidding, well, that’s just too bad for you.  You are expendable, as are truth and justice.

We now live by the rule of Beria: “Show me the man, and I will show you the crime.”  Or maybe that of Óscar Raymundo Benavides Larrea: “For my friends anything, for my enemies the law.” (In reality, some perverse pantomime of the law, observing some of its external forms, but violating its basic principles.)

The political atmosphere abroad in the land is only comparable to one era of American history: the 1850s.  The adversaries operate under completely different world-views, and largely view each other as evil.  There is no basis for debate, let alone compromise.

In the 1850s, the battle reached a fever pitch because of the potential shift in the balance in the Senate, which in the view of Southern Fire Eaters threatened slavery, which was precious to them.  Today, the battle has reached such a pitch because of a potential shift in the balance of the Supreme Court, which in the view of the Bi-Coastal Fire Eaters threatens the progressive project, including notably abortion (I mean–really?) but not only that.

In the 1850s, one side was willing to fight for a fundamentally depraved cause.  I think the same is true today: you may dispute that, or we may disagree on what side that is.  But the willingness of left to plumb the depths as exhibited in the oxymoronic Senate “Judiciary” Committee leaves no doubt in my mind.

Regardless of how you allocate blame, what is going on now bodes ill for the future:

Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

That’s from Yeats’ “The Second Coming.”  And it is not hyperbolic today to ponder the possibility of the second coming of a Civil War.