Streetwise Professor

Gazprom claims that the Ukrainian proposal to import gas from Europe “smack[s] of corrupt schemes”:

Plans by Ukraine to import natural gas from the European Union “smack of fraudulent schemes,” said the chief executive of Gazprom, Russia’s largest gas producer.

“Now as regards the reverse supplies of gas from the territory of the European Union to Ukraine – we know about these plans very well, but we have suspicion that it isn’t about any reverse supplies. De facto, there would physically be no gas involved – the plan is to use Gazprom gas in a kind of virtual reverse direction,” Alexei Miller said in the “News on Saturday with Sergei Brilyov” television program.

“In other words, Gazprom gas moves into Europe and immediately turns back and goes to Ukraine,” Miller said. “It doesn’t just get pumped across,” he said, claiming that Ukraine would transmit gas provided by Gazprom to the border, where a measuring station would show that a certain amount of gas had gone to Europe, but then the gas would return to Ukraine.

“These schemes smack of fraudulent schemes of some kind,” Miller said.

On matters of fraudulent gas schemes, I defer to Gazprom.  Indeed, since Ukraine is as Sovok as Gazprom, on matters of fraud, it’s hard to choose between either on a priori grounds.

In other news, the Russian government is hardly trusting of Russian energy firms, and natural resource firms generally.  Case in point.  The Finance Ministry is opposing replacement of extraction taxes and export taxes on energy with a profits (income) tax:

Industry experts say profits-based taxation would allow companies to cut their tax base by artificially reducing their profits.

The tax authorities calculate MET based on Reuters pricing, and export duties from the Argus agency’s average price for Russian Urals blend.

“The Finance Ministry does not trust oil companies; it would not believe them should the tax be based on their profits. Mineral extraction tax based on a certain oil price, which is impossible to change,” said one industry expert.

Quantities and revenues are harder to manipulate than profits.  This is a testament to the limitations of the Russian tax system, especially  when the energy/oil industry is involved.

This story also speaks to the fiscal stresses on Russia, especially in light of the many promises that he made to get reelected:

The Finance Ministry cited guidelines set by Russian President Vladimir Putin, who before his return to the Kremlin last year promised to increase state salaries and other social spending.

“Our task is to increase the tax burden on the commodity sector,” Trunin said.

Brent and Urals Blend are currently hovering at the levels at which the Russian budget balances.  Putin cannot afford any slippage in tax collection on oil sales.

Finally, if you need further convincing that the prospects for making Russia a major financial center are delusional, consider how Rosneft is totally hosing the minority shareholders in TNK-BP.  Why? Because they can:

Prosperity Capital Management is looking to team up with fellow investors in the TNK’s traded unit, OAO TNK-BP Holding (TNBP), and seek redress after Rosneft’s plan to borrow money from the company rather than paying dividends sent the shares to a record low this week. Rosneft said its move was standard practice.

The biggest takeover in Russian history strengthens the state’s hold over oil and gas production, the source of half its budget revenue. The government is trying to turn Moscow into a global financial hub to attract investors and shift the economy away from resource dependence.

“The whole country’s reputation will suffer if a big company like Rosneft can behave like this,” Prosperity CEO Mattias Westman, who helps oversee about $4 billion in Russian assets, said by phone from Texas. “We will be talking to other investors and communicating directly with Rosneft on this.”

TNK-BP Holding fell the most since trading began on the Micex, retreating 26 percent to a record low on March 26. The biggest previous one-day decline came in October when Igor Sechin, Rosneft’s chief executive officer, warned that the company may end TNK-BP’s dividend policy and had no plans to buy them out.

This is classic short-termism.  Although legally permissible, the refusal to buy out the minority interests in TNK-BP, and the draining of its cash makes it abundantly clear to foreign investors that they can expect the worst.  Hardly calculated to make Russia a serious contender as an international financial center, even if its climate were indistinguishable from Cyprus’s or the BVI.

This also illustrates Rosneft’s limitations.  It is the biggest publicly traded oil company in the world by production, but is straining every nerve to finance its acquisition of TNK-BP.  A real supermajor would not face such difficulties, or find it necessary to engage in prepay transactions with oil trading firms or China to raise the funds for the acquisition.  Which is why the long-term consequences of hammering minority shareholders are rather irrelevant to Rosneft, and to Russia.  The financial pressures of the present are all important.  The future will just have to take care of itself.  Whether it will is highly uncertain, and outside of Russia’s control.  It depends on many contingencies, which likely accounts for the obvious nervousness at Gazprom, Rosneft, and the MiFi.

In the immediate aftermath of the abortive deposit levy in Cyprus, I confessed being unsure as to why Russian stocks took a bigger hit than about stocks in any other country, including those in the EU where the precedent of expropriating insured depositors would seem to be most salient.

Upon reflection, the most likely explanation is that Cyprus’s financial straits would impede the utility of the country as a tax haven for Russian companies.

Although European and US stocks have rebounded, Russian stocks haven’t.  This got me thinking about the implications of the recent deal for Russian companies.

Capital controls appear to be the key.  If Russian corporates can get their money into Cyprus, receive the favorable tax treatment, and then get it out again, boomerang-like, they are OK.  Conversely, if Cyprus becomes a roach motel, where money goes in but can’t get out, that would really put a tax crimp on Russian corporates.

There have been wildly conflicting claims about the prospects for capital controls in Cyprus.  This seemingly official announcement only adds to my puzzlement:

Capital controls imposed to avert a run on banks in Cyprus after a painful EU rescue plan will be “loose” but will apply to all banks on the island, the Central Bank governor said on Tuesday.

“We aim for some restrictions which, in the words of the president, will be loose,” Cyprus Central Bank governor Panicos Demetriades said. He said the measure would apply to all banks based on the island.

Demetriades said the restrictions would be “temporary” but would not say how long they would last.

“Temporary” I sort of get.  Though I think of the withholding tax, which was a “temporary” wartime measure adopted in 1942.  Better yet, the “temporary” tax on telephone services, adopted to fund . . . the SpanAm War in 1898.  Still on your bill today, folks.

The “loose” part is a mystery.  WTF does that mean, exactly?

My interpretation: Cyprus wants to ensure that Russian companies can continue to boomerang money through the country.  If capital controls are “tight”, Cyprus becomes a roach motel, and Russian money will not check in knowing it wouldn’t be able to check out.

My question: what say the Germans about this?  I sense that the back-and-forth over capital controls is just part of the battle between the Germans and the Russians, in which the Cypriots want to support the Russian side.  I suspect the Germans will consider “loose” to be unacceptable. Meaning that there will be more conflict to come.

The anti-Russian implications of the German hard line on Cyprus are striking, and hard to understand completely, given the fact that Germany has taken a relatively pro-Russian line in Nato.  But perhaps there’s something deeper going on here.  Maybe something personal.  I wonder if Putin regrets setting his dog loose on Merkel-a notorious caninophobe.  Could caninophobia have led to Russophobia?

Although Medvedev fulminated at the injustice of the Badinov Bank solution, subsequent Russian reaction has been more accepting: the man who matters-Putin, not Medvedev-“has decided to support it.”

Perhaps Putin is just bowing to reality.  I’m more interested in whether the deal makes economic sense, especially as compared to the levy scheme that went down in flames.

The fundamental fact is that the two big Cypriot banks are insolvent.  Assets are less than liabilities.  The resulting loss must be borne by someone or someones, specifically:

1. Equity holders. (Ha!)
2. Bondholders.
3. Unsecured depositors.
4. Secured (guaranteed) depositors.
5. Taxpayers.
6. Extraterrestrials.

With all due deference to Krugman, let’s rule out (6).  With respect to (5): (a) Cypriot taxpayers-uhm, Cyprus is bankrupt (which is why it needs 10 billion euros in bailout funds), so Cypriot taxpayers aren’t a realistic alternative, and (b) bowing to political pressure and an impending election, Merkel has ruled out German taxpayers.

So that means that the loss must be borne by those with claims on the insolvent banks.  The proper way to do it is to work through those claimants in order of seniority from junior (equity) to senior (insured deposits).  That’s what has been done now.  That’s the right way to do it.  It’s what should have been done at the outset, given the economic and political realities.

The problem with the solution that went down in flames is that it violated the priority of claims.  Apparently in an attempt to appease the Russians, Cyprus’s president Nicos Anastasiades decided to reduce the losses imposed on uninsured depositors-who include many Russians-by imposing losses on insured depositors, most of whom are the countrymen he was actually elected to represent. Moreover, the levy was imposed equally across claims on Cypriot banks, regardless of the severity of their insolvency.  This was also highly objectionable, because it meant that depositors at banks that were truly egregious in their risk taking were treated identically to those who were less egregious.  Under that rule, no depositor has any incentive to avoid especially risky and reckless banks, or to monitor bank riskiness.

The Badinov Bank alternative is therefore defensible on rule-of-law grounds, whereas the levy alternative was not: moreover, the Badinov bank alternative is economically more sensible, especially in terms of giving depositors better incentives.

The irony, of course, is that Russia would have been better under the Anastasiades alternative.  Russian depositors at the Popular Bank of Cyprus will be especially hammered under the Badinov bank alternative, because that was the baddest bank of them all.  Whereas they were looking at a 10 percent loss under the levy scheme, they are now looking at losses upwards of 30 percent.

Oh well.  That’s the way the seniority cookie crumbles.  And that’s how it should be.  Let the crumbs fall where they may.

The contours of the latest deal between the EU and Cyprus are becoming clear.  No “levy” on deposits.  Deposits under 100ks will not be touched.

In place of the levy, Cyprus will move to a good bank-bad bank structure.  All deposits less than 100k will go to the good bank.  All deposits over 100k will go to the bad bank.  Since the bad bank’s assets will be, well, really bad, its depositors will get cents on the euro.  Estimates are that the bad bank depositors will suffer losses of between 30 and 90 percent.

A large fraction (most?) of the bad bank deposits will be Russian.  Meaning that Russians will take a big hit.

This is pretty much what the IMF and the Germans wanted initially, but backed off from in the face of intense opposition from Cyprus-which didn’t want to shaft the Russians, in the hope of perpetuating its status as an offshore haven.

Imposing big losses on depositors, insured or not, makes runs in Spain and Italy more likely in the event that it appears that they will have to throw themselves on the tender mercies of the Europeans (read Germans).

The Russians will no doubt be furious, setting up potential confrontations going forward.  The Cyprus drama seems to be a proxy war between Russia and Germany, which is hard to explain given Germany’s previously benign approach to Russia: for instance, Germany scuppered US attempts to advance the progress of Georgia and Ukraine towards Nato membership.  So why is Germany so insistent on doing something that inflicts large losses on Russia-and elite Russians?  Can the impending German election explain it?  Or does Germany think that the fate of the Euro is on the line, and if saving the Euro p*sses off the Russians, so be it.  Or is it something else?  I wonder.

Regardless of the exact reason, Russians are now effectively the not so proud owners of a bad bank.  Bank Badinov, as it were:

I’ve been asked for my take on the Senate report/hearings on the London Whale.  I’m responding more out of a sense of duty, rather than any actual enthusiasm for the subject.

There are two issues that need to be distinguished, IMO: the operational aspects of JPM’s CIO, and the economic substance of the transactions that cost the bank billions.

The operational aspect is indeed appalling.  The reliance on a spreadsheet with manual inputs to quantify the risks of the CIO is truly appalling.  Division, multiplication-whatever!   The failure to take into account market liquidity, and the ability to get out of a huge position in the event that circumstances changed.

The battle over marks-hardly surprising.  It has always been so, and will continue to be so long after we have all shuffled off this mortal coil.

With respect to the economic substance, I don’t have much to add beyond what I said last summer, or beyond what the wickedly sardonic Rhymes With Cars and Girls has written over the past days.  I encourage you to read Crimson Reach’s posts.

In a nutshell, Crimson ridicules the presumption that banks can invest in ways that are immune to the risk of loss, and mocks the Shocked! Shocked! response when losses are actually realized.  Relatedly, he eviscerates the attempts to distinguish between “hedges” and “speculative” trades.

These distinctions are indeed Talmudic.  Any investor-including banks-makes risk-return trade-offs.  With respect to banks particularly, they are in the business of taking credit risk.   There are myriad ways of taking on credit risk.  Making loans.  Buying or shorting corporate debt.  Buying or selling CDS .  What really matters is the risk of the overall portfolio.  There are many ways to achieve the same risk profile.  And since banks inevitably take on risk, there are many ways to lose money.  And believe me, banks have found them all.  Sovereign debt (remember the LatAm debt crisis, anyone?), mortgages, corporate debt, consumer lending.

What JPM described as a “hedge” was really a trading strategy was not a mechanical offset of an existing position.  It was designed to perform (relatively) well in a particular state of the world, i.e., another financial crisis.  In that sense, it was taking a view on the potential damage associated with that state of the world, and the likelihood of that state.  That state didn’t occur, and the position performed badly.

Like I said, there are myriad ways to invest or trade based on that view, and there’s virtually no way to prevent banks from investing or trading based on their views on risk.  That’s what banks do.  Deal with it.

These views will often be wrong.  Which is why banks frequently lose a lot of money.  When they share the same views, and hence trade/invest the same way, they will lose money at the same time: that’s when we have a systemic risk problem.  Again: LatAm sovereign debt in the ’80s; mortgages in the ’00s.  The blessing of the JPM case was that it was pretty much alone in its strategy.

Insofar as the atmospherics are concerned, I am sure that any forensic examination of any of these loss-making episodes would reveal the same kinds of behavior documented in the Senate report.  The same duplicity.  The same attempts to avoid blame.  The same attempts to defer recognition of losses.  The same arguments and backbiting.

The biggest problem with JPM was that, well, it was big.  If you look at many major financial debacles, a common feature is that big institutions make bets that are so big that they become price makers rather than price takers.  When the bets go wrong, and they want to get out, or to reduce exposure, size becomes a liability, rather than an advantage.  Size creates positive feedbacks, and in financial markets, positive feedbacks have very negative effects.  The holder of a big position suffers losses, and tries to reduce exposure: they are so big that these attempts move prices against them, thereby exacerbating the losses.

That’s what happened to LTCM.  That’s what happened to JPM’s CIO.  The difference was that JPM had the capital to survive: LTCM didn’t.  Another good thing.

Carl Levin is using the Whale Trade to dragoon the regulators into implementing the Volcker Rule, which is intended to prevent banks from “trading”, and to limit their activities to “lending” instead.  Again color me unimpressed.  Banks have proved since time immemorial that they can lose vast sums lending, thank you very much.  One of the virtues of trading is that the discipline of mark-to-market forces realization of losses sooner: it’s harder to conceal losses on the trading book than the banking book.  (I understand the complexities here.  Especially when banks are subject to capital requirements, realizing losses can force banks to shrink balance sheets in ways that generate fire sales and positive feedbacks.)  Yeah, the traders at CIO tried to finesse/manipulate the marks to defer recognition of the losses.  But they wouldn’t have even had to resort to chicanery had these losses been on the banking book: in a (perhaps perverse) way, the frantic attempts to jigger the marks demonstrate the ruthless disciplinary effects of marking to market.

In brief, drawing distinctions between “hedging” and “speculating” or between “trading” and “lending” or “investing” or “market making” is typically futile.  Banks can f*ck up-or make lots of money-doing any of these things. And have.  Rather than attempting to micromanage the activities of banks, it’s better to focus on making sure they have the incentives to take risks prudently, and have the capital to absorb the inevitable losses.

Which is why, as far as I am concerned, the would-be Ahab Carl Levin set out to kill a great whale, and brought home a minnow.

SWP, 18 March 2013: “Cyprus: The Essence of FUBAR.”

Krugman, 21 March 2013: “Cyprus: The Sum of All FUBAR.”

It wouldn’t be the first time someone has lifted something from SWP, but Krugman?  The mere possibility forces me to re-evaluate my thinking on Cyprus.  But then again, you know what they say about blind hogs and acorns.

Around here, Russian Deputy PM Dmitri Rogozin goes by the sobriquet “Rogozin the Ridiculous” for his frequent buffoonery.  This has apparently elicited envy from his ostensible boss, Prime Minister Dmitri Medvedev.  Responding to the meltdown in Cyprus, the man best known for bopping to “American Boy” and forgetting to put an SUV in park in the midst of a crowd made the following suggestion:

Russia, involved in a global uproar around the Cyprus bail-out plan, should think of creating its own off-shore zones in the far-east region by the Pacific Ocean, Prime Minister Dmitry Medvedev said Thursday.

. . . .

“Maybe we should consider creating a [special] zone in the far east. We have many fine places — Sakhalin, Kuril Islands. Maybe as well a part of our money, which is in Cyprus and other zones…which are not being mentioned for obvious reasons, like BVI (British Virgin Islands), Bahamas etc. will come to us,” Mr. Medvedev told a government meeting.

Mr. Medvedev added that such initiative will contribute to development of the far-east region.

You know, I always get the BVI and the Kurils mixed up.  Ditto the Bahamas and Sakhalin.  Luxembourg, Jersey, Siberia.  Who can tell them apart, really?  They’re all such “fine places.”  TFF.

I’m dying here.  Seriously.  I can’t remember when I’ve heard anything so stone cold idiotic.  And I’ve been following Eurotard pronouncements on Cyprus quite closely.

So where should these “special zones” be?  Why do they have to be islands?  Siberia is vast, and there are many places that could use an economic boost.

I have an idea: what about Chita?  There’s already an (ex) billionaire there.

Better yet: what about some former Gulag establishments?  I’m sure they could use an economic boost.  Kolyma, for instance.  It’s synonymous with gold, after all.

Of course climate-and the lack of, you know, actual people-isn’t the only thing that makes Siberian locales unlikely sites for financial centers that cater to the rich.  Not even the most important thing. Global warming could turn Siberia into Miami and the place would still be a very hostile climate for foreign money, because of the lack of property rights and the rule of law in Russia.  Note that Cyprus was a financial player primarily because Russians wanted to get their money out of Russia: if the Russians want to get their money out, who in their right mind would want to put their money in?

Indeed, capital flows out of Russia continue apace, to the tune of $16 billion in the first two months of the year, an interesting contrast to the $10 billion for the entire year predicted by the Russian Central Bank.  I say again: if Russians are frantic to get their money out, who with two synapses to rub together wants to put their money in? Into freakin Siberia no less.

Utterly ridiculous.

But Rogozin is not going to take this lying down.  Apparently in anticipation of Medvedev’s challenge, Rogozin preemptively doubled down on ridiculousness, by appealing to Steven Seagal to lobby Congress to relent on restrictions on the importation of Russian sporting rifles.  Where to begin? Like Steven Seagal would matter even when there isn’t anti-gun hysteria in DC.  And how absurd that a Deputy PM of a country that demands to be taken seriously is reduced to appealing to a washed up actor  who was something of a joke even at his prime to help out a minor Russian industry.

As inane as Rogozin’s appeal is, it pales in comparison to Medvedev’s suggestion.  The Kurils as a financial center.  Such a fine place.  A fine place indeed.

I can’t stop chuckling.

Rosneft closed the TNK-BP deal today, and is crowing that it is now the world’s largest publicly traded oil company.  Measured by production and reserves that’s true.  By market capitalization-not even close.  And that disparity between size measured by production and size measured by market cap is very, very telling.

Per its press release announcing the original deal, Rosneft compares itself to ExxonMobil (XOM).  It notes that Rosneft’s production will be nearly double XOM’s, which is in turn substantially larger than the production of Chevron, Shell, Total, etc.  Its reserves will also outstrip XOM’s and all the other non-NOCs.

Market cap? Totally different story:

Rosneft market cap: $82 billion.

XOM Market cap: $397 billion.

Chevron Market cap: $233 billion.

Shell Market cap: $210 billion.

BP Market cap: $129 billion.

Total Market cap: $112 billion.

So Rosneft produces more than XOM, and has more reserves, and has about 1/5th of the market cap.  It has a smaller capitalization than other firms that it dwarfs in terms of production and reserves.

And that’s Russia in a nutshell.  It is grossly inefficient at creating value.  Think of what ExxonMobil or Chevron or ConocoPhillips could do with access to Rosneft’s reserves-in a world where property rights and the rule of law were respected.  Think of what their market caps would be if Rosneft’s reserves were in North America, rather than Russia.

In other words, the yawning gap between Rosneft’s standing in the production table, and its placement in the market cap table is a damning indictment of Russia.

And, believe it or not, as bad as Rosneft is, it’s not the worst Russian energy behemoth.  That dubious distinction goes to my fave, Gazprom.  Check out this article from the Economist that provides the gory details.  But this shouldn’t be news if you’ve been hanging out here at all over the past 7 years.

One Cyprus scenario that has received considerable hype is that Gazprom will bail out the country in exchange for rights to develop its offshore gas resources.  IMO, this reflects a fundamental misunderstanding of Gazprom’s interests.  If anything, Gazprom has an incentive to pay to ensure that Cyprus’s gas reserves are not developed.

That is, Gazprom has every reason to want the gas to remain under the sea.  Eastern Med gas would compete with Gazprom’s Russian production: if Gazprom controlled Cyprus’s gas, sales from these fields would cannibalize sales of Russian gas.  Meaning that Gazprom has no real interest in developing Cypriot gas-to the contrary.

Obtaining exclusive development rights would give Gazprom the right to not develop, and to prevent anyone else from doing so.  This would suit it quite well, and it might be willing to pay something for that right.  But as desperate as Cyprus is, it has to realize that giving Gazprom control over its gas destiny would deprive it of the future revenue its resources could generate.  It is highly doubtful that Cyprus could negotiate a deal that would effectively compel Gazprom to develop the country’s gas.  Therefore, by dealing with Gazprom it would essentially be writing off any prospect of enjoying the benefits of future gas production.

This means that Gazprom’s interests and Cyprus’s are not aligned: the latter wants to maximize the commercial development of its gas fields, the former has no such interest.  Cyprus’s horizon might be very short, given its pressing financial needs, but it would have to discount the future extremely heavily to make a deal with Gazprom remotely rational.  I consequently deem it very unlikely that Cyprus and Gazprom could reach a mutually beneficial deal.

Development rights to Cyprus’s gas might be valuable collateral for loans that ease the country’s current financial straits.  But Cyprus should look energy firms whose interest is to maximize the commercial prospects of its gas resources, rather than Gazprom, which would like nothing better than to sabotage their development.

Just because I find the expropriation of Russian deposits in Cyprus wrong doesn’t mean that I’ve gone soft on Russia.  To the contrary, my criticism of Russia and my criticism of the Cypriot confiscation grow from the same roots: a belief in the rule of law, and a deep dislike for the natural state.

A couple of stories along those lines.  First, a Russian court permitted a Russian firm, Agroterminal, to walk away from an interest rate swap it had entered with the Italian bank Unicredit:

The court’s ruling was based on a clause in the swap documentation that says a party can unilaterally terminate if there are no outstanding obligations at that point. Agroterminal had made one of the swap’s quarterly payments to UniCredit Bank and terminated immediately afterwards, arguing that as the new quarterly payment had not been calculated, there was no outstanding obligation.

Put differently, per the Russian court’s interpretation, the party to a swap has the ability to walk away at any time between payment dates.  Yeah, the market will totally work under that interpretation.  It turns the swap into an option: each party has the choice to walk away when the swap is underwater immediately after each calculation date. Since the swap will be underwater to one of the parties, this means that the swap is a non-starter.  Not a forward starting swap: a non-starting swap.

The lawyers quoted in the Risk piece attribute the court’s decision to ignorance and naivete.  Actually, what is naive is that interpretation.  Maybe the court was playing dumb, but it is pretty clear that Agroterminal had the home court advantage-literally.  That is, the court was just favoring a Russian firm at the expense of a damn furrin’ bank.  The decision is transparently silly: if one would take it literally, any floating rate claim (e.g., a floating rate bond) would be unenforceable between payment dates.  The Russian court was looking for some fig leaf to justify stiffing the Italians, and it found it.  Go figure.

The second story: Putin’s judo buddy Arkady Rotenberg has made billions on contracts for the Sochi Olympics:

Those contracts, which number at least 21, include a share of an $8.3 billion transport link between Sochi and ski resorts in the neighboring Caucasus Mountains, a $2.1 billion highway along Sochi’s Black Sea coast, a $387 million media center, and a $133 million stretch of venue-linking tarmac that will double as Russia’s first Formula One track.

Wow.  I keep kicking myself  for not taking up judo (but wouldn’t kicking be Karate-related? Whatever).  Arkady is not just the best producer of steel pipe for gas pipelines, he’s also the best builder of transportation systems, highways, media centers, and Formula One tracks.  His personal connection with Putin is no doubt totally coincidental: can he help it if he  has such varied talents?

These two stories illustrate different aspects of the Russian natural state.  The elites get fed. Kormlenie lives.   Sometimes courts do the feeding.  Sometimes the government feeds its friends, through contracts or restrictions on competition.  But the natural state rewards the connected.

And this is Russia’s curse.  This is why it is on the hamster wheel from hell.