Streetwise Professor

June 29, 2023

Joe Phones It In . . . To Chinese, Russian, Iranian, Nork Intel?

Filed under: Politics — cpirrong @ 6:18 pm

There has been some attention paid to the apparent fact that Joe Biden had a private AT&T global phone paid for by one of Hunter’s companies–although not by the mainstream media of course. For the most part, the focus of the discussion of the phone has been on how it could play into investigations of whether The Big Guy was indeed a principal in The Crack & Hos Guy’s “business dealings” with dodgy foreigners. Not that that’s unimportant, but that misses another major, major disturbing–and gobsmacking–aspect of the story.

Specifically, reporter John Solomon claims to have called the number in question . . . and Joe Biden hisself answered the phone.

This is insane and disturbing on many levels. Specifically, a phone like this represents a huge security risk–a risk that puts Trump locking some documents in Mar a Largo far, far in the shade. Phones can be hacked by intelligence agencies–remember the scandal when it was revealed that the Obama’s NSA had hacked Angela Merkel’s “handy”? This allows interception of calls and texts. Furthermore, intelligence agencies–including our golly gee whiz junior G-men at the FBI–are known to have the capability of turning phones into eavesdropping devices, meaning that there is a real possibility that the Chinese, the Russians, Iranians, Norks, and whoever have listened to highly sensitive conversations at which Biden was present (though they may pay no attention to Joe’s contributions to these confabs, for obvious reasons). And what about geolocation of the phone?

I’m sure Vladimir Putin is rolling his eyes at Joe–and rubbing his hands with glee.

How in the hell has the Secret Service permitted Geriatric Joe to be walking around with such a huge security risk?

But as insane as these things are, the most insane thing is that apparently Joe Biden answered a call from a stranger on this thing. How many calls from unknown numbers do you get a day? I get more than a few, and never ever answer them. I wonder how many scam calls Joe has taken! And it would even be worse if Biden knew that Solomon was calling, and knew who Solomon is: how could he possibly think answering would turn out well? I mean, how stupid can you get?

Some are calling BS on Solomon, and demanding he prove he spoke to Biden. Well, I guess there is some possibility that Solomon could be making this all up, but I doubt it. Doing so would put Solomon’s livelihood and reputation at extreme risk. Further, Solomon could prove with his own phone records that he made a call to that number and the duration of the call (which he says was short, due to Joe apparently having a ruh-roh moment).

Solomon should call for Biden to authorize disclosure of the geolocation data for the phone, along with official documentation of where Biden was at the time. If Joe was where the geolocation data says the phone was . . .

(For the record, I have “the data related to Biden’s phone will be ‘corrupted’ a la the J6 non-bomber’s phone” on my bingo card. Not a certainty, but a possibility.)

Of course Biden and those who do his thinking for him will never agree to this . . . because it would be a stunning admission of the security vulnerability the phone represents. But a refusal to comply should be taken as an admission.

Although Biden et al would not voluntarily take Solomon’s dare, James Comer’s committee should definitely subpoena the records from AT&T. And given the J6 Committee’s subpoenaing such phone records from government/executive branch officials–and the willingness of the phone companies to comply and the courts affirmation of the legitimacy of the subpoenas–the committee has every right to do so and to expect compliance.

Wouldn’t that be fun!

One can only imagine the media and political hysterics had Trump done this. But the media continues to play the Dutch Boy and the Dike (that’s with an “i”, people) on this and most of the rest of the Biden corruption-related allegations. So many leaks–literal and figurative–are now springing, however, that it is doubtful that the media and the administration can plug them all despite their valiant efforts. The phone could be the one that is too big to plug. And even beyond its implications for corruption investigations, it provides a stunning glimpse into Biden’s shockingly cavalier attitude towards security (despite his tut-tutting about Trump’s), and the Secret Service’s complicity in allowing it to happen.

June 24, 2023

The Wagner Putsch: Kornilov Redux or Something More Threatening?

Filed under: History,Military,Politics,Russia — cpirrong @ 1:30 pm

The news of the day is that Yevgeny Prigozhin has reversed direction, and instead of attacking Ukraine has occupied Rostov-on-the-Don and Veronehz, and has advanced some distance into the Moscow Oblast in an attempted putsch. As in all things Russian, good information is hard to come by–and the Russian authorities are doing their best to shut down all non-official “information” sources.

Prigozhin launched a broadside against Defense Minister Sergei Shoigu and the military chief of staff Valery Gerasimov. In a version of the old “the tsar doesn’t know and is being misled by bad boyars” trope, Progozhin claims that this pair of mouth breathers deceived Putin about the need for an invasion of Ukraine and the ease of accomplishing it, and continue to deceive him by downplaying casualty figure. This is a transparent attempt to claim–incredibly–that this action is directed against Putin. Since Putin is the only man who matters, any challenge to the state is a challenge to Putin.

There are reports of combat between Prigozhin’s Wagner forces and the Russian military, with the former claiming to have shot down several military helicopters and at least one SU-34. There are also reports that some Russian military and national guard forces have thrown in with Wagner, or stood aside.

Some analysts claim that Wagner represents a real military threat to Putin. The conventional wisdom is that it does not: on the BBC Mark Galeotti claimed that Wagner has only 10,000 men at his disposal. But information is scarce, everything is in flux, and there is always the prospect that enough military and security force commanders are so disenchanted with the Ukraine fiasco that they will start supporting Wagner, or refuse orders to attack it, or block other units from doing so.

The most recent reports, from less than reliable sources (such as the Belarussian administration), are that Prigozhin has agreed to return to barracks. Which would be suicidal unless he has some sort of ironclad deal.

The fact is that the die is cast. Prigozhin made his choice and he must win or die. Any pause will be a tactical one.

My conjecture is that Prigozhin has known for some time that Shoigu and Gerasimov and the rest of the establishment intend to eliminate him and Wagner with extreme prejudice. The “sign a contract or else” ultimatum was just setting up the legal justifications for such an action.

Given that, Prigozhin was desperate, and had to throw the dice. He had nothing to lose.

The uncertainties in a situation like this make prediction perilous. If I had to guess, I wold say that this will play out something like the pathetic Kornilov Affair in 1917, when the eponymous general marched on the capital (then St. Petersburg) in an attempted coup against the Kerensky government. (Though some claim that Kerensky was part of the plot–and not surprisingly I have seen some claim that Putin is actually in cahoots with Prigozhin.) The coup attempt collapsed within 3 days.

But you never know.

As for Putin, this morning he gave a fiery speech denouncing the putsch and promising that it would be crushed. In so doing, Vova treated us to some of his Fractured Fairy Tale history:

A blow like this was dealt to Russia in 1917, when the country was fighting in World War I. But the victory was stolen from it: intrigues, squabbles and politicking behind the backs of the army and the nation turned into the greatest turmoil, the destruction of the army and the collapse of the state, and the loss of vast territories, ultimately leading to the tragedy of the civil war.

For one thing, Russia was hardly on the verge of victory in 1917. In fact, its army was teetering on the edge of collapse–and at times did collapse. Widespread desertion and mutiny contributed to the crisis that culminated in the abdication of Nicholas II. After something of a recovery following the February Revolution, the collapse of the military resumed after the utter failure of the Kerensky Offensive. And vast territories had already been lost by 1917.

For another thing. Wait, whut? The Putin I know lamented the fall of the USSR as the greatest geopolitical tragedy of the 20th century. This Putin–is he an imposter?–is lamenting the revolution that resulted in the creation of the USSR. Just another illustration, I guess, that to Putin history is purely instrumental, meant to be distorted to meet the needs of the political moment.

Although who will win in Russia is in doubt, there is no doubt that the biggest winner here is Ukraine. Chaos at the top will distract the Russian military leadership from managing operations in Ukraine. If the Wagner threat persists Putin will have to divert units from fighting Ukrainians to fight Russians.

Regardless of how this plays out, it is a clear sign that all is not well in Putin’s Russia. In fact, things are quite bad. Some natives are restless–and with good cause. Meaning that Putin is confronted with a war on two fronts, precisely when experience has shown that he is incapable of handling just one.

June 17, 2023

A Near Run Thing On the Steppes

Filed under: History,Military,Russia,Ukraine — cpirrong @ 3:30 pm

So the long-awaited Ukrainian counteroffensive has begun. How’s it going? Who knows?

Initial reports indicate that the Ukrainians have made advances measured in kilometers, but not tens of kilometers, in several areas along the long front. They have suffered losses in armor and of course personnel, but how much is hard to gauge. The Russians have crowed about inflicting large material losses, but showing the same damaged Leopard tank from several angles rather dilutes their boasts.

Regardless, this is hardly Guderian racing to the Channel coast, Patton rampaging from Normandy to Paris to Metz, or the USMC breaching Iraqi prepared defenses and reaching Kuwait City long ahead of schedule. But does that mean anything? Again, who knows?

For one thing, the above are exceptions rather than rules when it comes to offensives, so one should not benchmark Ukraine’s efforts against them. For another, it is still unknown whether this represents the main Ukrainian effort, or is instead probing attacks, or feints, or shaping operations, or initial grinding assaults intended to gnaw through prepared Russian defenses thereby opening gaps through which the main Ukrainian assault forces can pour into the Russian rear areas.

In preparation for the Ukrainian assault, the Russians have constructed multiple lines of defense, with the approaches heavily–and I mean heavily–mined. (Where’s Princess Diana???) Getting through the minefields is a major challenge, and the necessarily slow pace of doing so subjects the attacker to artillery bombardment and air strikes. So the going can expected to be tough, with high casualties.

One model that comes to mind is El Alamein. Rommel had entrenched along the Egyptian border, and sowed massive minefields. When Montgomery attacked, it was extremely slow going at first, with large casualties in personnel and armor. It took about 10 days for British (mainly ANZAC and South African, actually) infantry to clear pathways through the minefields through which British armor could eventually pass. During the 3 week battle, Montgomery shifted the weight of his advance from the right flank to the left and back again as one flank became bogged down. It was a long, slow process, but once the British had gnawed through the prepared defenses, at high cost, Rommel was forced to withdraw, thus beginning a race westwards through Libya and back to Tunisia.

The Normandy campaign is another. Weeks of bitter combat with Allied forces attempting to break through German lines, measuring progress in yards, if that, eventually resulting in breakout at St. Lo and a precipitous German withdrawal to the Seine and beyond.

Today, the Russians have some advantages the Germans lacked. In particular, they have an edge in the air, whereas the British did in 1942 and the Allies did in 1944: the breakout at St. Lo in Operation Cobra was made possible by a massive air bombardment that wrecked and stunned the already heavily attrited Panzer Lehr division–and also killed a lot of Americans hit by “shorts.” After being an non-factor during offensive operations, Russian attack helos have apparently been effective in the defense against the counter offensive. Russian fixed wing aviation has also made itself felt in contrast to its performance heretofore. Ukraine has no ability to execute the equivalent of a Cobra.

That said, German troops were far better than the Russians are–and maybe even the derided Italians in the desert were better than the mobiks currently absorbing blows.

The Ukrainians have advantages in night fighting capability, and that can be decisive. But it’s hard enough to breach minefields in the day, let alone at night. So the night fighting advantage can’t be decisive until the minefields have been breached and the Ukrainians can close with the Russian defenders–assuming, of course, that the Russians stand if the Ukrainians do make a breach or breaches and start running amok in the Russian rear.

So as of now, uncertainty reigns. Uncertainty regarding the Ukrainian operational plan (e.g., is this their main effort, or a shaping operation?) Uncertainty regarding what is actually transpiring on the battlefield. Uncertainty regarding the combat power and endurance of the contending forces.

The advantage of the offense is that it is only necessary to break through in one place to achieve a decisive victory–provided the attacker has highly mobile reserves to exploit a breakthrough and the defender doesn’t have the mobile reserves (and especially mobile reserves led the by likes of a von Manstein or a Model) to seal the breach. It remains to be seen whether the Ukrainians have the ability to break through, and more importantly, the force to exploit a breach if they do. Several Russian counterattacks have apparently been repulsed quite bloodily (wrecking an entire division in one instance), and based on prior performance and the attrition of the past months I seriously doubt whether they can execute a mobile defense if their lines are breached anywhere–or even if Putin will let them. The necessity of deploying over a very long front extending hundreds of kilometers combined with the pronounced lack of skill at combined arms mobile warfare suggests that a Ukrainian breach anywhere would be devastating to the Russians. But whether Ukraine can achieve that breach before culmination is a very open question.

So I predict that the race between Ukrainian counteroffensive and the Russian defense will be like how Wellington described Waterloo: “the nearest run thing you ever saw.”

June 7, 2023

Drive a Stake Through the Heart of Stakeholder “Capitalism” Before It Is Too Late

Filed under: Economics,Politics — cpirrong @ 6:10 pm

The recent controversies embroiling many corporations, notably Target, Disney, and Imbev (the owner of Anheuser-Busch) has brought the issue of stakeholder “capitalism”* to the center of American political discourse. These controversies demonstrate clearly why corporations and their executives should not indulge their own preferences or preferences of “stakeholders” other than shareholders, but should instead limit their efforts to what is already a very demanding task–maximizing shareholder value.

At its root, stakeholder capitalism represents a rejection–and usually an explicit one–of shareholder wealth maximization as the sole objective and duty of a corporation’s management. Instead, managers are empowered and encouraged to pursue a variety of agendas that do not promote and are usually inimical to maximizing value to shareholders. These agendas are usually broadly social in nature intended to benefit various non-shareholder groups, some of which may be very narrow (transsexuals) or others which may be all encompassing (all inhabitants of planet earth, human and non-human).

This system, such as it is, founders on two very fundamental problems: the Knowledge Problem and agency problems.

The Knowledge Problem is that no single agent possesses the information required to achieve any goal–even if universally accepted. For example, even if reducing the risk of global temperature increases was broadly agreed upon as a goal, the information required to determine how to do so efficiently is vast as to be unknowable. What are the benefits of a reduction in global temperature by X degrees? The whole panic about global warming stems from its alleged impact on every aspect of life on earth–who can possibly understand anything so complex? And there are trade-offs: reducing temperature involves cost. The cost varies by the mix of measures adopted–the number of components of the mix is also vast, and evaluating costs is again beyond the capabilities of any human, no matter how smart, how informed, and how lavishly equipped with computational power. (Daron Acemoğlu, take heed).

So what do climate-concerned executives do? Adopt simplistic goals–Net zero! Adopt simplistic solutions–deprive fossil fuel companies of capital!

Maximizing shareholder value is informationally taxing enough as it is. Pursuing “social justice” and saving the planet is vastly, vastly more so.

Meaning that even if corporate executives were benevolent–a dubious proposition, but put that aside for now–they would no more possess the information necessary to pursue their benevolence that does a benevolent social planner.

Instead, executives pursuing non-shareholder wealth objectives are almost certain to be Sorcerer’s Apprentices, believing they are doing right but creating havoc instead.

Agency problems exist when due to information asymmetries or other considerations, agents may act in their own interests and to the detriment of the interests of their principals. In a simple example, the owner of a QuickieMart may not be able to monitor whether his late-shift employee is sufficiently diligent in preventing shoplifting, or exerts appropriate effort in cleaning the restrooms and so on. In the corporate world, the agency problem is one of incentives. The executives of a corporation with myriad shareholders may have considerable freedom to pursue their own interests using the shareholders’ money because any individual shareholder has little incentive to monitor and police the manager: other shareholders benefit from, and thus can free ride on, any individual’s efforts. So managers can, and often do, get away with extravagant waste of the resources owned by others placed in their control.

This agency problem is one of the costs of public corporations with diffuse ownership: this form of organization survives because the benefits of diversification (i.e., better allocation of risk) outweigh these costs. But agency costs exist, and increasing the scope of managerial discretion to, say, saving the world or achieving social justice inevitably increases these costs: with such increased scope, executives have more ways to waste shareholder wealth–and may even get rewarded for it through, say, glowing publicity and other non-pecuniary rewards (like ego gratification–“Look! I’m saving the world! Aren’t I wonderful?”)

Indeed, we now have a highly leveraged agency problem, due to the ability of asset managers like Black Rock to vote the shares of their customers, thereby allowing the likes of Larry Fink to force not just one corporation to indulge his preferences, but hundreds if not thousands. Larry Fink and his ilk can influence the direction of sums of capital dwarfing anything in history to pursue their agendas.

The agency problem pervades stakeholder capitalism even when you dispense with the idea that the shareholders are the principals, and expand the set of principals to include non-shareholder interests (which is inherently what “stakeholder” capitalism means). And as discussed above, in stakeholder capitalism these interests conceivably encompass all life on earth.

The problem is that just as shareholders are diffuse and cannot prevent managers from acting in their interest, stakeholders are often diffuse too. And in the case of climate, All Life On Earth is about as diffuse as you can get. Furthermore, whereas at least in principle shareholders can largely agree that the firm should maximize their wealth, when one expands the set of interests, these interests will inevitably conflict.

So what happens? Just as in politics and regulation, small, cohesive minority groups who can organize at low cost will exert vastly disproportionate influence. It is not surprising, therefore, that companies like Target (to name just one) have responded to the interests of transsexuals–a decidedly narrow minority group–and given the finger to others who should be “stakeholders” as well, namely customers. Customers being a diffuse, dispersed, heterogeneous group that is costly to organize–precisely for the same reasons that it is costly for shareholders to organize.

(The Target and Bud Light episodes suggest that social media has reduced the costs of organizing diffuse groups, but even so, it is far costlier to do that than to organize ideological minorities.)

In other words, stakeholder capitalism inevitably creates a tyranny of minorities, and especially highly ideological minorities (because a shared ideology reduces the cost of organizing). Minority stakeholders will succeed in expropriating majority ones.

Minority tyranny is the big problem with democratic politics. Extending it to vast swathes of economic life is a nightmare.

So what is stakeholder capitalism, when you get down to it? A world of Sorcerer’s Apprentice executives (the Knowledge Problem) with bad incentives (the agency problem).

Other than that, it’s great!

Some libertarians have a peculiar take on this phenomenon. They view stakeholder capitalism as benign, because it is undertaken by private actors, rather than the government.

This take is gravely mistaken. It ignores fundamental principle, and commits at least two category errors.

The forgotten principle is that a liberal society should aim to minimize coercion.

The first category error is to believe that private actors cannot coerce–only governments can. In fact, private actors–including corporations and their managements–can clearly coerce. Come and see the violence inherent in the stakeholder capitalism system straight from the mouth of its primary exponent:

“We are forcing behaviors.” Coercive enough for you? Help, help, I’m being repressed:

That bit, by the way, concisely expresses the stakeholder capitalism movement, right down to the “shut up!” and “you bloody peasant!”

The second category error is to believe that there is some sort of clear boundary between private entities (corporations especially) and governments. In fact, the true picture is like the Escher Hands:

Corporations influence government. Government influences corporations (cf., Twitter Files, etc.–the examples are almost endless). Governments often outsource coercion to corporations. Corporations induce the government to coerce for their benefit–and to the detriment of alleged “stakeholders” like customers, labor, and competitors.

Furthermore, as the Arrow Impossibility Theorem teaches, any coherent social welfare function (i.e., any theory of social justice) is inherently dictatorial, and thus inherently coercive. Thus, to the extent that stakeholder capitalism is intended to implement any particular vision of social justice, it is necessarily dictatorial, and hence coercive. It is antithetical to a liberal system like that envisioned by Hayek, that is, one in which a set of general rules is established under which people can pursue their own, inevitably conflicting, aspirations. (Less formally than Arrow, Hayek also argued that any system of social justice is inherently coercive and dictatorial.)

Stakeholder capitalism is therefore a truly malign movement, and an anathema to liberal principles. We need to drive a stake through its heart, before it stakes us to the ant hill.

*I put “capitalism” in quotes because stakeholder capitalism is an oxymoron. Recall that capitalism is an epithet devised by Marx to describe a system ruled in the interests of capital, i.e., shareholders. Stakeholder capitalism is a system intended to be ruled in the interest of everyone but capital. Hence the oxymoron.

** Jeffrey Tucker has also eloquently and rightly excoriated the response of many libertarians to COVID. Here again, these libertarians forgot that limiting coercion is the bedrock libertarian principle.


June 6, 2023

Stop Me If You’ve Heard This Before: Those Damned Speculators Are Screwing Up the Oil Market!

Filed under: China,Commodities,Derivatives,Economics,Energy,Russia — cpirrong @ 1:05 pm

Saudi Arabia is fussed at the low level of oil prices. So true to form with those unsatisfied with price, they are rounding up the usual suspects. Or in this case, suspect–speculators!

I’m sure you never saw that coming, right?

As the world’s biggest oil producers gather here Sunday to decide on a production plan, the spotlight is on the cartel kingpin’s fixation on Wall Street short sellers. Abdulaziz has lashed out repeatedly this year against traders whose bets can cause prices to fall. Last week he warned them to “watch out,” which some analysts saw as an indication that the Organization of the Petroleum Exporting Countries and its allies may reduce output at their June 4 meeting. A production cut of up to 1 million barrels a day is on the table, delegates said Saturday. 

Claude Rains is beaming, somewhere.

I’m so old that I remember when oil prices were beginning their upward spiral in 2007-8 (peaking in early-July), in an attempt to deflect attention from OPEC and Saudi Arabia, one of Abdulaziz’s predecessors blamed the price rise on speculators too.

Is there anything they can’t do?

Not that I’m conceding that speculators systematically or routinely cause the price of anything to be “too high” or “too low,” but if you do think that they influence price, they should be Abdulaziz’s best buddies. After all, they are net long now and almost always are. (Cf. CFTC Commitment of Traders Reports.)

If the Saudis (and other OPEC+ members) have a beef with anybody, it is with their supposed ally, Russia. Russia had supposedly agreed to cut output in order to maintain prices, but strangely enough, there is no evidence of reductions in Russian supplies reaching the world market, even despite price caps on Russian oil and the fact that they are selling it at a steep discount to non-Russian oil. Perhaps Russia has really cut output, but (a) that doesn’t really boost the world oil price if Russian exports haven’t been cut, and (b) it would mean that Russian domestic consumption is down, which would contradict Moscow’s narrative that the economy is hunky-dory, and relatively unscathed by sanctions.

But I think that the more likely story is that Russia is playing Lucy and the football with OPEC.

Which would be a return to form: see my posts from years ago. And I mean years ago. Apparently Won’t Get Fooled Again isn’t on Abdulaziz’s play list.

The other culprit behind lower oil prices is China: its tepid recovery is weighing on all commodity prices–not just oil. A fact that Abdulaziz should be able to understand.

But it’s much easier to shoot the messenger, and that’s what speculators are now–and almost always are. Venting at them probably makes Abdulaziz feel better, but even if he were to get his way that wouldn’t change the fundamental situation a whit.

Bashing speculators is what people who don’t like the price do. And since there’s always someone who doesn’t like the price (consumers when it’s high, producers when it’s low) bashing speculators has been and will continue to be the longest running show in finance and markets.

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