Streetwise Professor

A few years ago, presumably because of all the torture United has inflicted on me over the years, I was bumped to business class on an Amsterdam-Chicago flight. A friend was sitting in coach, and during boarding some very agitated woman sat next to her, talking loudly on the phone: “They put me in coach! COACH! I had to do the walk of shame!”

Turns out this woman was the ex-US ambassador to the Netherlands, appointed (natch) by Obama. Well, it also turns out that I was sitting next to Bill Daley, and my former boss from that brief interval where I had a real job, another prominent Chicagoan. They and the humiliated ex-diplo had been in Amsterdam for a wedding.

Since I would have preferred to sit in a jump seat having a root canal for 10 hours instead of sitting with that lot, I gladly swapped seats with the ex-ambassador so I could sit with my friend, and she could sit with hers

Oh–miss high and mighty didn’t even say thank you for sparing her 10 hours slumming with the hoi polloi. She didn’t even acknowledge me.

This all came to mind when reading about, and watching a few excerpts from, the testimony of the ex-US ambassador to Ukraine, Marie Yovanovitch.

Just as United had offended the amour propre of the ex-ambassador on the plane, the President of the United States had grievously damaged the ego of Ms. Yovanovitch by unceremoniously axing her–and dissing her on Twitter. (That’s Yovanovitch with two”v’s”, not a “v” and a “b”. I checked to make sure.). How dare he fire her! How dare he insult her! Doesn’t he know who she is??????

And get this–this pampered creature of the US permanent bureaucracy compared her fate to that of Christopher Stevens. You know, the US ambassador to Libya who was sodomized, murdered, and burned to a crisp by rampaging jihadis in Benghazi on 9/11/2012 When Hillary Clinton–for whom it is metaphysically certain that Yovanovitch voted–was in charge of the State Department, and who (at the very least) lied shamelessly about the events leading up to Stevens’ gruesome death.

Yeah. Marie’s experience was totes the same. Totes!

All I can say is: who the fuck does she think she is? Who the fuck do all these people think they are?

But apparently the making Her Royal Highness Marie “Antoinette” Yovanovitch butt-hurt is a high crime and misdemeanor, worthy of impeachment. At least in the mind (being generous here!) behind Adam Schiff’s bulging eyes.

You could not make up this shit. I knew things were going to be crazy starting 8 November, 2016. But in my wildest imaginings I could have never figured they would be this crazy.

But maybe it’s all for the good. Outing these jumped up apparatchiks, and the coterie of DC journalists who slobber over them–including, I emphasize, from Fox News–may be the greatest public service that Trump has performed, or will ever perform. We can see them in all their petty vanity, overweening pride–and serial incompetence. It is not a pretty sight, but it is a damned instructive one.

In 1947 and 1948, President Harry Truman vented his anger at the “striped-pants boys” in the State Department, who fought him at every turn, especially over Israel. They were Arabists, almost to a man, and they despised Truman’s pro-Zionist policy, and assiduously attempted to undermine it.

This came to mind when I saw a picture from today’s impeachment hearings, which have transitioned from the secret Star Chamber phase to the public Show Trial phase. (Quite an accomplishment, combing two of the two most outrageous judicious processes in a single proceedings.)

Specifically, I saw a picture of State Department apparatchik George Kent, complete with bow tie, waistcoat, striped suit jacket, and presumably, striped pants.

George Kent represents everything that is wrong with the U.S. State Dept, and the pontificating elitists within it, who construct U.S. foreign policy over white wine spritzers and crustless triangle sandwiches. pic.twitter.com/r7MlB06XZF

— TheLastRefuge (@TheLastRefuge2) November 13, 2019

Is he trying to play to caricature?

Kent told the assembled idiots that the Ukrainians were modern-day Minutemen, manning the front lines against Russian aggression. He followed fellow State Department apparatchik Bill Taylor, who echoed the party line: “Ukraine is important to the security of the United States…they are a young democracy struggling to join Europe and ally themselves with the United States.” Taylor also opined that Trump seemed more interested in pursuing investigations than supporting Ukraine.

What is gobsmacking about this is that these people were silent when the Obama administration adamantly refused to provide lethal military assistance to Ukraine. Hell, Obama was so concerned about upsetting Putin that he did not even permit American military planes to fly the pathetic non-lethal aid (blankets, and such) directly to Ukraine. Instead, it was flown to Poland and trucked in–and not on US military vehicles.

So, did the Ukrainians only become Minutemen on 20 January, 2017–more than two-and-a-half years after the Russians invaded Ukraine and seized Crimea?

As an aside, LTC Vindman, the National Security Commission’s Ukraine “expert,” testified that he was under the impression that Obama had provided weapons–Javelin anti-tank missiles, specifically–to Ukraine. Some expert. Yet we are supposed to believe that the oblivious Vindman and the rest of the “interagency [AKA Blob] consensus” considered it a vital US interest to arm Ukraine.

No, this is all bullshit. Ukraine only became vital in the eyes of these people the day it appeared that it could be used against their bête noire, l’homme mal orange.

These people are using Ukraine. Period. They really don’t give a shit about it. If they did they would have made a scene–and attempted their coup–in the Obama years.

Despite their many real differences, Trump and Truman share much more than the first four letters of their last names. Most importantly, they are outsiders who appeal to Jacksonians, and who are disdained by the Washington/East Coast “elites” (a term which can only be applied ironically, hence the quote marks). Truman came by his Jacksonianism naturally, coming up through the old Democratic Party from the heart of Jacksonian America: I have yet to figure out by what strange alchemy the New York mogul became a Jacksonian.

The main difference between what is happening today, and what happened nigh onto 70 years ago is that today’s administrative state feels far less constrained than its Truman-era predecessor. There were lines that they would not cross in 1948 that they breach today without a second thought.

Why? A complex phenomenon. Some factors that come to mind:

The bureaucracy has become so much bigger, so much more swollen today, that it is more difficult to control. That is a problem that any president would face.

Trump faces a much greater challenge because whereas even though Truman was not part of the governing elite, he was firmly embedded in a political support structure–the Democratic Party, which dominated American political life at the time–Trump is completely, utterly on his own. Truman was a party regular, the product of a Democratic machine, in fact (the Pendergast organization). He could rely on party loyalists–including many in the bureaucracy. Trump, conversely, can count on no such support. He is nominally a Republican, but the Republican establishment, especially in DC, dislikes him–when they don’t hate him. One of his major problems is his difficulty in finding loyal subordinates who have influence in the bureaucracy. The loyal have no influence: the influential have no loyalty.

These farcical proceedings, like the Mueller farce before it, is a the establishment vs. Trump. He is Trump agonistes. Trump the struggler, from the Greek ἀγωνιστής–“a contestant in the public games.”

Very appropriate. Very literal. And these games are deadly serious.

In my post on the reasons to target terrorist leaders like al-Baghdadi, I said it wasn’t the killing, it was the chase. A leadership focused on avoiding catching a JDAM or taking a 556 to the noggin isn’t able to take the initiative. I specifically mentioned paranoia, fear of traitors, stress, and the disruptions of communications from constant moves and the need to reduce the possibility of detection.

An AP story from yesterday says, yeah, all that happened:

In his last months on the run, Islamic State group leader Abu Bakr al-Baghdadi was agitated, fearful of traitors, sometimes disguised as a shepherd, sometimes hiding underground, always dependent on a shrinking circle of confidants.

Associates paint a picture of a man obsessed with his security and well-being and trying to find safety in towns and deserts in eastern Syria near the Iraqi border as the extremists’ domains crumbled. In the end, the brutal leader once hailed as “caliph” left former IS areas completely, slipping into hostile territory in Syria’s northwestern Idlib province run by the radical group’s al-Qaida-linked rivals. There, he blew himself up during an Oct. 26 raid by U.S. special forces on his heavily fortified safe house.

. . . .

During that time, al-Baghdadi was a “nervous wreck,” pacing up and down and complaining of treason and infiltrations among his “walis,” or governors of the group’s self-declared provinces, his brother-in-law, Mohamad Ali Sajit, said in an interview with Al-Arabiya TV aired last week.
“This is all treason,” Sajit recalled al-Baghdadi shouting.

. . . .

At times, al-Baghdadi was disguised as a shepherd, he said. When al-Baghdadi’s security chief, Abu Sabah, got wind of a possible raid on the desert Syrian-Iraqi border area where they were hiding they took down their tents and hid al-Baghdadi and al-Muhajer inside a pit covered with dirt, Sajit said. They let sheep roam around on top of the pit to further disguise it. Once the threat of the raid was over, they returned and put the tents back up, he said.
Al-Baghdadi moved with a circle of five to seven people, including al-Muhajer, al-Zubaie and Abu Sabah; and the group’s former governor for Iraq, known as Tayseer or Abu al-Hakim. Al-Muhajer was killed on the same day as al-Baghdadi, in a separate U.S.-led military operation, following a Syrian Kurdish tip, in Jarablus, also in northwestern Syria; al-Zubaie was killed in a raid in March. On Monday, Turkish officials said they arrested al-Baghdadi’s older sister in northwestern Syria’s Azaz region. All are areas outside of government control.

Now Abu Ibrahim al-Hashimi al-Qurayshi is in the cross hairs. Enjoy, dude!

Standard no-arbitrage derivatives pricing theory rules out certain trading strategies because they are seemingly unrealistic. For example, if the set of trading strategies is unrestricted, the following strategy is guaranteed to make any arbitrarily large profit (pick a number, any number! e.g., $10 quadrillion) prior to some finite time T almost surely–and don’t call me Shirley!: specifically, at time s, hold 1/(T–s) shares of stock in your trading portfolio, and cash out when you’ve made $10 quadrillion.

Obviously, this requires you to hold an arbitrarily large–and arbitrarily expensive–position in the stock. No problem: just borrow! Further, this obviously exposes you to risk of infinite loss: the variance of your portfolio value goes to infinity as you approach T. Again, no problem!: just borrow! The self-financing constraint is satisfied, so dream of how you’ll spend your immense riches.

Well, borrowing infinite sums seems a tad unrealistic, so it is standard to rule out such doubling strategies. One good explanation is in the very good book by J. Michael Steele, Stochastic Calculus and Financial Applications:

Nothing is wrong with the model or with the verification of the self-financing property, yet something has gone wrong. The problem is that our model diverges from the real world in a way that any decent banker would spot in an instant. Just consider what happens as the time gets nearer to T if the investor in charge of the portfolio V(t) has not yet reached his goal. In that case, the investor borrows more and more heavily, and he pours the borrowed funds into the risky asset. Any banker worth his salt who observes such investment behavior will pull the investor’s credit line immediately. The simplest rules of lending practice are enough to prohibit the management of a portfolio by any strategy [a(t), b(t)] like that defined by equations (14.36) and (14.38).

But maybe not, thanks to the miracles of fintech! Apparently a glitch in the Robinhood app has given users in the know “infinite leverage”:

The cheat code was being shared on social media site Reddit, with one trader claiming he took a $1,000,000 position in stock using only a $4,000 deposit. Through Robinhood Gold, the start-up’s subscription service, users can borrow money from the company to make trades. The backdoor was essentially free money and was being called “infinite leverage” and the “infinite money cheat code” by Reddit users who discovered it.

Looks like we can’t rule out “doubling” strategies, and impose a credit constraint restrict trading strategies to what Steele denotes the set SF+ (“self-financing plus”). I guess Robinhood isn’t “a decent banker.” LOL.

This is what happens when you make coders bankers. They blow no-arbitrage pricing theory all to hell.

Looks like imma gonna haveta rework my lecture notes for my PhD derivatives pricing course.

In a post last week, I wrote that LTC Alexander Vindman arrogated authority beyond his pay grade. I was wrong, to the extent that statement implied that there is a pay grade in the uniformed military that does have the authority that Vindman claimed for himself. There isn’t.

Here’s the Washington Post’s description of Vindman’s thinking and motivation: “he was deeply troubled by what he interpreted as an attempt by the president to subvert U.S. foreign policy.”

Hello! U.S. foreign policy is always set by the president. This is a Constitutional fact and a practical reality. As of 20 January, 2017, U.S. foreign policy has been set–to the accompaniment of wails, rending of garments, and gnashing teeth–by President Donald Trump. Full stop.

It is the job of everyone in the U.S. military, from the Chairman of the Joint Chiefs to some recruit getting screamed at in boot camp (if they do still scream at them) to implement that policy. It is also their job not to substitute their own view of what that policy should be, and act contrary to the policies of the lawful Commander-in-Chief.

Vindman’s view is an oxymoron. It is self-contradictory. The president cannot subvert what he sets. QED.

It is also incredibly dangerous to the military as an institution, and to the stability of the United States. The US military has been almost unparalleled in subordination to civilian authority. Having O-5s (or even retired O-9s, like McRaven) openly challenge that is the road to perdition. (I note that most coups are led by field and company grade officers, for a variety of reasons. Vindman’s middling rank is actually makes his actions more of a concern.)

Maintaining this subordination is of far greater importance than any passing policy matter, let alone Ukraine, a Sovok basketcase. (I am reminded of the line from A Man For All Seasons:  “Why Richard, it profits a man nothing to give his soul for the whole world [Matt. 16:26]. But for Wales?” (Substitute “but for Ukraine?” and the meaning remains the same.)

Now we hear that Vindman is whining that he was told not to discuss the phone call with anyone. Well, obviously for good reason, given his evident agenda, not that it made any difference.

Was this a direct order? Is there even a colorable case that it was an unlawful order? If it was lawful, he acted in disobedience of that order.

Further, if the phone call was classified–as it apparently was, which is another gripe of Schiff and his fellow grifters–to discuss it with anyone without a need to know would also be a violation of the UCMJ.

And what about the guy with whom it appears that Vindman did discuss the call, in violation of his duties? It is evidently Eric Ciaramella. Does he look like the soyboy from central casting, or what? Who elected him to anything?

Just where the hell do these people get off?

The conventional wisdom spouted by the political class in the US is almost always wrong, and often laughably so. The only question on any particular issue is the exact mixture of stupidity, ignorance, and manipulative malignity behind the conventional wisdom on that subject.

The political class’s narrative regarding the Kurds in Syria is a perfect example. According to this narrative, the Kurds are a veritable band of Gunga Dins, selflessly fighting alongside the United States in its war against ISIS. Hence, we owe them. We owe them so much, in fact, that we should risk conflict with Turkey and support their dream of an independent Kurdistan.

As I’ve argued several times, however, this is close to an inversion of reality. The Kurds were fighting ISIS out of necessity because ISIS wanted to destroy them, and American intervention on behalf of the Kurds saved them from mass slaughter, even though this was not a necessity for the US. This fascinating account of a raid in which a Delta Force soldier was killed provides a great illustration of just who was sacrificing for whom:

A number of Joint Special Operations Command (JSOC) sources with intimate knowledge of the operation spoke to SOFREP about that fateful night.  What they described is a story of leadership and bravery under fire.
Intelligence indicated that the prisoners were facing imminent execution after freshly dug mass graves were spotted in the compound’s perimeter.  Discovering this, the Kurds were adamant to go in even without American forces (the U.S. didn’t have a real stake in assaulting the compound). They thus took the mission lead. The plan that the Kurds came up with, however, was below average and would have resulted in a catastrophe if it hadn’t been for the tactful recommendations of their Delta partners.
The Unit agreed to accompany the Kurd assault force, and the 160^th Special Operations Aviation Regiment (160^th SOAR) chipped in the air transport. But once on target, the Delta operators were supposed to stay back and let the Kurds breach and clear the target. The compound was surrounded by a wall. Behind the wall, there were a number of buildings. One of those buildings contained the hostages.
Once on target, the assault force was divided in to two parts: The Kurds took the lead and assaulted the compound while the Delta operators stayed behind and provided support. The Kurds breached the wall and flooded into the compound. Identifying the correct building, they ran toward it and breached it. At that moment, however, they began receiving accurate fire from the other structures, which were occupied by ISIS fighters. The Kurds began suffering casualties, and the attack lost momentum at the most critical point.
The Delta operators could see and hear everything from their vantage point. And they understood that if they didn’t do something then the Kurdish assault would turn in to a bloodbath.  The imposing figure of MSG Wheeler was in the front of the Delta group. He turned around, locked eyes with the nearest operator, and shouted: “On me!”
These were his last words.
The two shooters run through the wall, into the compound, and past the pinned down Kurds. MSG Wheeler led the way into the target building. As he stormed into the breach, a random bullet went through his throat. He died almost instantaneously. His fellow operator neutralized the enemy fighters in the room. The rest of the Delta shooters came in and cleared the rest of the building.
“This would have been a disaster hadn’t Wheels been there,” said one Delta operator. [Emphasis added.]

And that is the reality of the Kurdish-American relationship. The Kurds needed to assault a compound to save Kurds. It wasn’t in the direct interest of the US to participate in the assault, but they did, selflessly assisting an ally. When the Kurds ran into a buzzsaw, a few brave American GIs ran into it with them, snatched victory from the jaws of defeat, and saved dozens of Kurdish lives.

Who? Whom? Read that story, and you get an idea of how the political class in the US as the answers to those questions backwards.

Maybe the inversion is the result of mere ignorance or stupidity. But read this piece and one gets the sense that it’s more malign than that. The gravamen of the article is that elements within the State Department, the CIA, and the military had a far bigger agenda in Syria than defeating ISIS. These elements were actually scheming to affect the broader outcome of the Syrian war, presumably desiring to overthrow the Assad regime.

And replace it with what, pray tell? What has happened in the last 20 years that could lead any sentient being to conclude that the outcome would be any better in Syria than in Libya or Yemen or Iraq? (Maybe I should go back 30, and add Somalia to the list.) The probability of “success”?–close to zero. And what would “success” even look like? A failed state with warring factions like Libya or Yemen or Somalia? A state in the hands of Islamist fanatics? As horrible as Assad is, it is necessary to compare him to the real-world alternatives, which include exactly zero good outcomes. In the battle of the bads, Assad may well be the least bad. And the State Department, CIA and Pentagon types who claim otherwise have no record that they can point to to argue otherwise. Theirs is a sorry litany of failure.

Viewed from this perspective, the attention being lavished on the Kurds appears manipulative in the extreme, and the tears being shed for them of the crocodile variety. The permanent bureaucracy wants to use the Kurds as a pawn in their wider–and delusional–game. They wanted to use them in Syria to achieve their broader aims. They are using them now to attack a president who is thwarting their attempt to achieve these broader aims.

Trump has upset their game–although he continues to vacillate after making categorical declarations, meaning that he has not escaped the pull of the blob altogether–and hence the players need to turn on him. Turning the Kurds into betrayed selfless allies, rather than a people that survives in Syria by the grace of the United States (and its Sergeant Wheelers and JDAMs), is merely part of the scheme.