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Checkmate: Who is Afraid of Negotiations?
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AssetsBehavioral SentimentBusinessCommoditiesExclusive ContentFeatured HighlightsIra SlomowitzRisk ManagementWorld
President Trump has Laid a Trap for Iran and China
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 15th of April via The Angry Demagogue.
Both the defeatist camp and the “victory now” group see the advent of negotiations between the United States and Iran as a defeat for the United States and Israel. The argument by the defeatists is that victory was supposed to be quick and now we are stuck and looking for a way out since no one saw Iranian use of the Straits of Hormuz coming. The defeatists claim that only negotiations can end the conflict and anyway, Iran never should have been considered an enemy so the United States and Israel have overemphasized Iranian danger. The defeatists do not want a military victory and assume defeat as the moral choice.
For the victory now group, negotiations are seen as a weakness by the United States and Israel since a further pummeling of Iranian military and civil assets is the only thing that will guarantee a non-nuclear Iran incapable of threatening their neighbors – and the Straits of Hormuz. If there is no regime change, this group says, then there is nothing left to do except continue fighting until the regime falls or until there is nothing left for them to fight with.
A third group sees tactical victory and strategic defeat – or at least strategic stalemate which has forced both sides to the negotiating table meaning for the United States and Israel it is at least a temporary defeat since a stalemate is not victory.
Which if any of these assessments are correct? Or is there a third explanation that says that the negotiations themselves are a victory even if the absolute goals of the war, removing Iran from the Chinese-Russian axis has yet to be accomplished. We won’t retread the arguments about how much punishment the Islamic Republic has endured nor will we agree that as long as they have one missile launcher and enough Kalashnikov’s to stay in power there is no victory.
However, we do agree as we argued in The Art of the (Middle Eastern) Deal, that negotiations done incorrectly will be a precursor to defeat. Each time there is a rumor of continued negotiations there is panic from the victory now crowd, assuming that this time, President Trump will cave into Iranian demands. The defeatists on the other hand assume that the fact of negotiations is a good thing since military defeat is assured. The Macron-Starmer wing of the defeatists are trying to pretend to be the grownups in the room, as they want to be part of the opening of Hormuz but not be on “either side”. Their attempt to insert themselves into the situation but not on “either side” puts them a step or two below Pakistan but maybe one level above Sanchez’s Spain in influence.
Back to the real world. While the negotiations are between two countries and hosted or mediated by a third, there are two other countries involved on the Iranian side – China and Russia, and four on the American side – Saudi Arabia, Qatar, UAE and Israel. Each has its own interests and in general most of those mesh with the main participants in the talks. American allies need a non-nuclear Iran that is weak enough that it can’t threaten those countries and America has the same interests. Although a non-Islamist regime would be the best guarantor of that, it is not something that can be done only from the outside.
Russia and China need an American defeat more than anything especially after the world has witnessed the poor performance of their weaponry. They will try to re-arm Iran in order to create a war of attrition with the United States that America will be forced to end. This is where the interests of Russia and China clash. Russia would love the damage if not the destruction of Persian Gulf oil fields and refineries but the subsequent rise in oil prices would further damage China’s increasingly fragile economy. If Putin’s Russia has a goal of survival, self-enrichment and embarrassing the west (one seems to go with the other for Putin) and China’s goal is to dominate the Indo-Pacific, then the survival of Iran is a nice to have for Russia but a need to have for China.
China does not have the will and/or ability to do what is necessary to defend their Iranian ally, so they are really in a no win situation without a nuclear Iran. The American insistence on a complete end to the Iranian nuclear program is a shot right at the Chinese global strategy. Without the Iranian nuclear umbrella, China will depend on the United States for the flow of oil to their country.
As for Iran, they have one goal in this war and that is to survive with enough firepower intact to continue their quest to destroy Israel, rid the middle east of the United States and eventually to bring the Sunni Arab states in the Gulf under their thumb. As opposed to a dictatorship that is “only” corrupt and can be bought, they also need their theological goals met – and that starts with the destruction of Israel and genocide of the Jews. That, like Hitler’s Germany is an aim greater than the goal of winning the war.
They have come to the negotiating table because they felt that a continued bombing attack by the U.S and Israel and possibly the Gulf states risks their goals more than negotiating. This is the same reason that Hamas agreed to release the hostages as they saw the needed respite from the IDF in order to retain control of at least part of Gaza. This could be seen as Iran’s last ditch effort to survive and are using the cease fire to reconstitute their industry, re-arm and most important – to dig out and reach their underground missile cities
So why has the United States come to the negotiating table? Is it a show of weakness? An attempt to re-arm and bring more troops to the region? Is there a regime change plan that needs time to take share?
As for the last of these, over that last two days there have been car bombs and shootings at Basij checkpoints and the commander of Basij forces of Teheran has been assassinated. There is clearly something going on inside of Teheran and the head of the Mossad, David Barnea stated yesterday that the Iran mission will not end until there is regime change. Not only are the IRGC using the cease fire to regroup, so, it seems, is the opposition.
In addition to continued operations in Iran, the blockade of the Straits of Hormuz, an act of war in itself, tells Iran not to see negotiations as a sign of weakness by the United States, but rather as an opportunity for the US to widen their attacks beyond bombs and missiles.
The move from bombing to negotiations have trapped both Iran and China in a place where neither can win unless the U.S, against all statements by the President, VP, Secretary of State and Secretary of War, decides to fold.
Iran is trapped in a place where if they starts to shoot they will have their economy in worse shape than it is now and they no longer are lords of the Straits of Hormuz – THE trump card (no pun intended) that the defeatists have been gloating about.
China is trapped in a place where they need the United States to guarantee their flow of oil and their ally is no longer able to sell it to them on the cheap.
Negotiations have taken away the two things that were pressuring America and its allies – Iran’s daily missile attacks and their veto over the Straits of Hormuz. While they are using the time to try and rebuild what has been destroyed, that will take so long that, assuming no surrender by the United States, will be irrelevant to this war and the next -if there is one.
President Trump and the United States have set a trap for Iran and China and there does not seem to be a good way out. That doesn’t mean Iran will recognize it and end their genocidal quests, but it does mean that their path to victory has been shut down.
Checkmate?
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/
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What Do the Markets Say?
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AssetsBehavioral SentimentCentral BanksEquitiesExclusive ContentFeatured HighlightsFederal Reserve, Interest RatesFinancial InstitutionsInvestingIra SlomowitzRisk ManagementWorld
Ambivalence Rules the Day
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 7th of April via The Angry Demagogue.
There is nothing we capitalists like saying more than “the markets say….”. What we mean is that the amorphous group of individuals and institutions that together form some sort of consensus as to the value of “things” taking everything known by the individuals involved into consideration. Since no one can know everything, the idea is that the market represents the sum of knowledge of everyone who has money to invest – or, as we like to say, “skin in the game”.
Below is a graph from the start of the war until April 2, of oil, gold, 10-Year U.S Treasury yields, American and European stocks. Each should tell us something and in general all together they should be saying the same thing. However – that is not the case here considering we are in the midst of a major Middle Eastern war, with China and Russia watching with interest and Western Europe squirming with unease.
Normalized at 100 via ChatGPT as source.
Those items that signify a flight to safety are the price of gold and the U.S Treasury yields, while those that signify a faith in the future of the economies are the index levels of the U.S and European stocks. A commodity that is directly affected, oil in this case, is expected to rise and it has, by over 50% since the start of the war.
While one would expect the price of U.S Treasuries to rise considerably as it is considered a “safe haven” by investors, it has risen just 4% as yields dropped from 4.31% to 4.13% (with bonds, prices and yields moving inversely. A rise in bond price is a decline is their yield – meaning they earn less for the bondholder). Gold, the other safe haven, though has dropped by nearly 12% since the start of the war. True enough, the price of gold has skyrocketed over the past year, but still while there is a reason why gold might underperform U.S Treasuries, it is odd that it has underperformed stocks on both sides of the Atlantic, in spite of the 50% increase in the price of oil – forcing up energy prices for industry. Stocks in the U.S have dropped by just 4.95% while in Europe the decline is just 5.8%. Neither number is one an investor wants to see in just six weeks, but all things considered the war has not caused a lack of confidence in the economies of the EU or the U.S.
People might claim that gold has lost its safe haven luster over the years, but that is not the belief of governments as India and China have been buyers of vast stores of gold and France decided to repatriate all of their gold reserves. They still see it as necessary.
So, what are the markets telling us about this war and the future of domestic and global economies? Regarding Iran, the supposed victors in this “quagmire”, the Iranian Rial has dropped 96.8% in 2026 and has moved from 0.00002378 to the dollar to an incredible 0.00000076 (that means that 1 million Iranian Rial equals 76 cents) the market speaks in one voice – no confidence.
Regarding the rest of the world the markets are not really telling us much of anything because there has not been a rush to safe havens as usually happens in wars and happened during Covid, nor has there been supreme confidence. The markets are, shall we say, ambivalent.
That volatility is high and that they move drastically on each Trumpian proclamation is more a sign that the algorithms that control the very short term market trends are mostly chasing the same thing. When X happens, sell Y is a race to the bottom by unthinking and unsophisticated (in spite of AI) analysis until that race causes the “when Y hits a certain price, buy it” or “when Z happens then buy A” algorithms kick in. After a few days or weeks, we can start to see trends as long as we ignore the record highs or lows. However, there is nothing other than “wait and see” ambivalence in the current market data.
While this does not necessarily mean that the “markets” are in support of the war, but neither does it see a debacle of any sort. The Libyan bombing campaign of 2011 lasted seven months with no real Western interests involved and the Kosovo ariel campaign of 1999 lasted around 3 months and involved humanitarian but not economic interests. The 6 weeks of this war, so far, is not at a level of “quagmire” for the markets.
If the markets are telling us anything now it is that while oil may stay high for awhile, the world is not heading south due to the war. This can change– for good or bad – but the markets themselves are not currently taking a stand either way. They are not telling us we are in for a rough ride. While we believe that this war will reshape global politics and alliances and create an economic boon for the victors, no one can be sure who will end up on top and who will suffer once the war winds down.
The defeatists around the western world could do worse than listen to what the markets are not telling us.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/
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Iran: What Losing Looks Like
Who is Losing Militarily, Technologically, Economically and Diplomatically?
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 20th of March via The Angry Demagogue.
It is difficult for many to admit that the US and Israel are winning the war and that conquering a country the size of France, Germany, UK, Netherlands and Spain together with only air power does not take a day or two. However, by any objective (meaning without thinking that all Trump/Bibi/Hegseth, etc. bad) standard, the allied coalition is systematically destroying the military industrial complex that is the Islamic Republic of Iran (what it is not is a State dedicated to the good of its citizens). People forget that the American air campaign in Gulf War 1 was 38 days. It started on January 17, 1991 and only by February 24 did the generals feel that they could invade and take Kuwait.
The air campaign then poured over 88,000 tons of bombs in approximately 100,000 sorties. And this to capture a country a bit smaller than New Jersey.
As we finish the third week of this war we can assess who is winning and who is not. We have spent this past week discussing what it means to be victorious in this war (The Economy and The Military) and to state unequivocally that victory is the moral choice no matter the price of oil. That being said, the price of oil is rising and hit $120 a barrel before dropping. Economists see $138 barrel as the price that could send the US into a recession. So far, the US economy is holding firm. The S&P 500 closed on the Friday before the war at 6740 and yesterday’s close was 6624 – a drop of about 1.7% – not the panic that the front pages would have us think. The Eurostoxx 50 is actually up slightly from 5719 to 5736.
The Federal Reserve did not cut rates, signifying that they don’t need to prop up the economy and risk inflation as they do when they fear a collapse.
The economies of the West seem strong in spite of (or because of?) the war which should end with the cessation of the 47 year of Islamic Republic price premium. The Russian and Chinese economies meanwhile will be under stress for quite some time. While China will have to wonder about its oil supply, Russia understands that $100 a barrel oil will encourage increased US production (and now Russian and Chinese free Venezuelan?) that will hurt them when oil prices go back to normal levels. As we will now discuss, Chinese and Russian arms deals might start to go south, too.
Technologically, this war is a further test of American and Israeli technology and abilities, and they have passed with flying colors. The American and Israeli missile and drone defense systems are outperforming what they did less than a year ago in the “12 Day War” and the U.S Navy is untouchable. The Gulf States are also fairing better than expected although due to the short distance and the lack of experience, they are getting hit more than Israel is. To top it off, the Russians have forced Ukraine to become global leaders in the defense against drones and there are now 2,000 Ukrainian anti-drone personnel in the Gulf States.
But is the air-forces that are performing so well, that one would think that the Iranians did not invest in the most advanced Russian and Chinese air-defense systems over the past few years. The S-300 or S-400 advanced Russian systems or the Chinese HQ-9B long range surface to air missile and the JY-26 (alleged) anti-stealth radar, are performing so poorly, the Chinese themselves must be hoping it is a personnel issue and not a technological one.
Speaking of personnel, this war has shown that pilot skill still matters. It is the bravery, daring and success of American and Israeli aviators that matters as much as the technology. Just look at the Gulf countries who fear sending their combined force of around 400 F-15’s and French Rafale fighters into the air.
The Russian air force (and army) has already shown it is lacking the skill to compete with even poorly trained Ukrainian pilots, let alone with American or Israeli aviators. The Chinese too, must be wondering if their air force, made up of untested, pilots from one-child families will brave the fire coming from Taiwan as well as the American and Japanese navies in order to complete their missions.
Technology is great – especially if it works as advertised, but if the “operators” are inferior, even great technology will not be up to par. No one yet has been able to match American and Israeli personnel, in the air or on the ground.
Which brings us to that annoying wild-card, the Straits of Hormuz. While the Iranians have not succeeded in closing the straits they are scaring off shipping to an extent that it is a concern not only for the present but for the future. By using this tool, by playing this card, if you will, Iran has forced the United States to make the security of the Straits a war aim. The success of the U.S operation in the Straits will turn it from an international waterway under the veto power of Iran to a U.S controlled and protected gateway from the Persian Gulf. In times of war with China the U.S Navy will be able to turn it into a Chinese energy chokepoint. If the U.S was not there prior to the Iranian gamble, they will be there now.
As for pure military, Iran is losing as no one has lost before. The combined forces have destroyed nearly all their production capabilities for military hardware, have destroyed air defenses, command and control centers, leadership on multiple levels and most of their navy. We don’t need much more to declare Iran the military loser.
Diplomatically, things are not as they appear. While no western European countries support the fighting or even the aims of the war, the Gulf States, India and others are quietly forming an unofficial coalition against regional terror. As Europe tries to figure out how to pacify its growing radical Moslem population, other counties, including Moslem ones, are finally realizing that terror against Israel and Jews slowly but surely works its way back to them. For fanatics, no one is religiously or ideologically pure enough, even if you are descended from Mohammed.
Western Europe is a clear diplomatic loser in this war as President Trump is the last person who will forgive their teachery and allow them to share in the spoils of this war. Their role in the Middle East and in global politics generally is done. Their ability to use their victory in WWI to determine and influence events around the world is finished even though they have now backtracked and agreed to help on the Straits of Hormuz issue.
Regarding China, they have now abandoned one of their main allies and the country they have depended on to provide them not only oil but a strong military presence in the Middle East. The war was clearly coming and just as the United States sent carrier groups to protect its and its allies’ interests, so too, could have China. They could have sent naval vessels to help defend Iran – or at least deter the United States but did not, either because they don’t have the ability to do it or they don’t have the will. In either case, China is a diplomatic loser in this war.
Russia is also losing the diplomatic game as Ukraine becomes closer to the Gulf states and Israel and America are neutering their best technology. Regarding Israel’s recent sinking of Iranian naval ships in the Caspian Sea, reports are coming out that they were laden with Russian military aid. Russia, like China, has not raised a finger to help their main Mideast ally, making it hard for them to claim the loyalty of other purported allies.
And Israel? Israel seems always to be a diplomatic loser, war or peace. However, this war has strengthened the bonds between the American and Israeli military in ways that no one could have foreseen just months ago. The cooperation and trust between the two militaries is beyond anything America has had since its partnership with the UK in WWII. Western Europe’s continued irrelevance on the global scene has lightened the pain the Israeli public feels for western Europe’s betrayal.
India on the other hand has tightened its ties with Israel as Prime Minister Modi’s pre-war trip to the country showed. As for the Gulf Countries, the UAE seems to be interested in strengthening its Israeli ties while Qatar does not. While Qatar is angry at Iran for their attacks it is not clear that this will lead them to abandon their goals of Islamicizing the West and ridding the world of Israel. Saudi Arabia is hard to call. We don’t expect any diplomatic breakthroughs especially if the Islamic Republic actually falls.
Israel we can say is neither a winner nor a loser, yet, in the diplomatic arena – which, considering the beating Israel gets on the world stage, might be called a win but most certainly is not a loss.
The United States can hardly be considered a diplomatic loser in this war as they are the only major power to be able to come to the aid of allies when U.S interests are also involved. The tough talk out of western Europe is a very small thorn in the side of the United States.
To summarize, Iran is the big loser of course as their support comes from a neutered Russia, an apathetic China and a global progressive left that has no power to influence, let alone determine events. Iran’s main allies have been proven ineffectual at best, uninterested at worst and their “brand” has been diminished no matter what else happens in the war.
The only part of the war that the United States and Israel can be said to be losing is the news and propaganda (but I repeat myself) war.
For the things that count though, one thing is certain – the United States and Israel are not the losers.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/
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Iran: What Victory Looks Like, Part 2 – The Military
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AssetsBehavioral SentimentBusinessCommoditiesExclusive ContentFeatured HighlightsFinancial InstitutionsIra SlomowitzRisk ManagementWorld
Missiles, Drones, the Straits and Regime Change
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 17th of March via The Angry Demagogue.
In a recent X post, Edward Luttwak, the elder statesmen amongst strategists and one who we ignore at our own peril, stated that “The regime is impotent viz the U.S but all-powerful against its own people. So, regime change with bombs may fail but without bombs it might last for ever.” In other words, American and Israeli bombing is a necessary, but not sufficient condition for the overthrow of the Islamic Republic. Luttwak also made it clear that the Iranian people cannot overthrow the regime without native military support.
Not only will bombing not be sufficient to overthrow the regime, but American and Israeli commandos combined with Mossad and CIA operations will not be enough because for the Islamic Republic, internal, Iranian opponents of the regime are a bigger religious and ideological threat than Americans, Israelis or Sunni Arabs and they will always have enough Kalashnikovs and machine guns to kill 30,000 Iranians a night.
But regime change is not the only path to military victory. The mistaken views of the war when the opponents are “shocked”, Casablanca style, when they realize that wars are difficult and unpredictable and come with speed bumps, unexpected ups as well as downs and that not everything is in your control.
The first path to victory is one that is occurring now. That is the destruction of the military and command and control assets of the Islamic Republic. That focuses as we know, on the Revolutionary Guards (IRGC) and the “Basaj” – essentially the IRGC’s domestic militia who are responsible for keeping Iranian citizens in line and are, for the most part, ideological hardheads. With other types of dictatorships, the embarrassing way their military has handled Israeli and American attacks past and present would have been enough to topple them. However, with Shiite fanatics who know no borders (morally or geographically) and whose main enemies are domestic, that is not the case – and no one expected that to be the case.
The attacks must continue until either the regime changes or until their military-industrial infrastructure is destroyed. This means its drone and missile production, its naval forces, air-defenses and underground missile storage and nuclear facilities must be done away with. It does not mean the nearly impossible attempt to secure enriched uranium. Regime change can lead to cease fire and negotiations but without regime change the attacks must continue until the mission is completed.
The second path to victory is the opening and complete control of the Strait of Hormuz. While there still are ships that make it through, this is the one thing that the regime still holds over the United States and the world. The missiles they send to Israel and the gulf will be degraded enough if the bombings continue, but the Western world cannot allow a vicious, cruel dictatorship to control any waterway. Freedom of navigation is one of the key reasons why Taiwan is so important (which Japan knows well – making us wonder why it has not sent ships to help with the Straits) and a key reason this war must be fought. We wrote the other day about the price premium that the Islamic Republic holds over the world (and there was a Jerusalem Post article quoting Peter Navarro, head of the White House Office of Trade and Manufacturing state that the price premium is between $5-15 a barrel – we think that is understated). The Islamic Republic must be denied this ability to blackmail the world.
Of course, it seems that Western Europe is happier with the Iranian regime not losing, than with the American (or Israeli) government winning, but that is something to be dealt with later
The third thing that will bring a military victory is of course, regime change. First, the presence of a new leader on Iranian soil must be attained. This can either be the Shah’s son, Reza Pahlavi, who has been encouraging his countrymen to revolt and therefore needs to show real leadership by making his way home, or someone, possibly a senior military figure, who is in Iran now. Pahlavi is the natural choice, but he must take some risks and show he has the pull and prestige with at least part of the military in order to be able to accomplish the mission of overturning the regime.
In order for that to happen, circumstances must be created where a few divisions of the regular army can protect Pahlavi as he enters the country and he can lead the people to revolt. Once a few divisions defect and with American and Israeli air-power, they can liberate territory, further army divisions will probably join in – assuming they see a path to victory. A revolution need not happen overnight but can come with the army moving across the country and the defeat or defection of some in the IRGC. A few million in Swiss or Dubai bank accounts will also encourage defection.
Without a leader and an organized armed force, the regime just needs small weapons fire to put down any citizen revolt – and they will.
Military victory can come either with the destruction of the drone/missile capabilities and stockpiles along with the forced re-opening of the Strait of Hormuz or with regime change. If the former two, then the Iranian people will continue to suffer, but the Persian Gulf countries, Israel, the United States and the rest of the free world will not. If the latter, then everyone except China and Russia will be winners.
Let us not forget what everyone has been saying since day 1 – that only the Iranians can overthrow the government and that will only be done if the regular army decides to throw itself to the side of the people. The United States and Israel can only create the necessary (but not sufficient) conditions for this to happen. Without regime change, but with the opening and complete control of the Straits, the destruction of the regime’s naval, air defense, missile and drone forces and production, along with the elimination of senior Basaj and IRGC commanders, will still constitute a satisfactory military victory.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/
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Iran: What Victory Looks Like, Part 1 – The Economy
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AssetsBehavioral SentimentExclusive ContentFeatured HighlightsIra SlomowitzRisk ManagementUncategorizedWorld
Ridding the World of the Islamic Republic Price Premium
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 16th of March via The Angry Demagogue.
There has been much chatter about what “victory” over the Islamic Republic means and it is mostly an attempt to deny the very concept of victory. We wrote about “The End of Defeatism and a Return to Victory” last week where we criticized the whole aversion to victory in Western society. The naysayers don’t like to admit that an anti-Western regime can be all that bad, and therefore endless diplomacy needs to be a goal until the final surrender of the West. They don’t really care about the cost of gasoline in the United States – they actually want it to rise – but as long as it was brought up, let us examine in part, the cost of the Islamic regime and what “economic victory” will look like.
Victory in WWII meant not only the defeat of the evil that was Nazi Germany, but it also meant the resurgence of Europe as an economically successful continent. The Marshall Plan that was the crux of the European revival was as much a part of the Allied (sans the Soviets) victory as the surrender signed by German generals.
What is “economic victory” in this war? The media is all over the costs of the war, but no one has examined the costs of allowing the Islamic Republic to continue as it is. No one has examined the cost that the mere existence of the Islamic Republic (as opposed to non-Islamic Iran) creates for the world in general and the United States in particular.
Let’s start first with the most talked about and panic-ridden event and that is the Strait of Hormuz, the gateway to the Persian Gulf and a chokepoint in international shipping to and from that region. It is the gateway to much of the oil shipped to the world, but also fertilizers and other products. The Wall Street Journal news section in another ignorant headline it considered a “scoop”, wrote that President Trump was told that the Straits might be closed in case of war and he attacked anyway. I am not sure there is a knowledgeable military or diplomatic figure or layman in the world who didn’t consider that an option, but to the WSJ news editors it was the surprise of the century.
As Condoleezza Rice said on the recent episode of Hoover Institutions “Goodfellows” a 50 cent rise in gasoline prices for a few weeks is not a reason not to attack a country who has been at war with you for 47 years. But before we even get to that point, has anyone analyzed the cost of giving Iran a veto over who gets to ship through those straits?
If we look at the insurance rates for shipping through the Strait of Hormuz from Lloyds of London we will get a first hint. From 1970-1979 (before the Islamic Republic) the typical premium was 0.01-0.05%. Once Khomeini took power the rates were 0.05-0.2%. During the Iran-Iraq war when there were the “tanker wars” (between 1984-7) those rates jumped to around 5% with a peak of 7.5%. The post Iran-Iraq and Gulf war period of 2004-19 ranged from .0.05-0.25% – well above the pre-Islamic Republic days.
As for absolute figures, a tanker valued at $200m with a rate of 0.01% (pre-Islamic Republic) cost $20,000 and .05% will cost $100,000. The cost at 0.5% is $1million. So, the pre-Islamic republic rate for a $200m tanker ranged from $20,000-$100,000 while the absolute rate at the lowest level since the Islamic Republic came into existence ranged from $100,000-$400,000 – during the best of times. This does not take into consideration the war premium for the many years Iran threatened and even hit tankers even without the excuse of American or Israeli bombing. The average “war premium” from 1979-2020 was 0.83% or $1.66 million for a $200 million vessel.
We don’t have the wherewithal to continue this analysis, but this is exactly the type of article that we used to expect from the pre-ideological WSJ (or even NY Times) news sections. Maybe some economist or even the WSJ editorial page can start to do the heavy lifting and tell us how much the Islamic Republic of Iran has added to the gasoline bill of the average American even during non-war periods.
In economic terms – victory means a eliminating the price premium for shipping energy and global trade in general brought on by the very existence of the Islamic Republic. We will know victory is here when there is a return to the insurance premiums of the pre-Islamic Republic days and when the price of oil, due to increased supply from a non-terrorist Iran reaches the levels it is capable of. A 50 cent or even a 1 dollar rise in gas prices for a month will be followed by $2-3 decreases permanently. We won’t reach the 28 cents a gallon I remember from my childhood (actually 27.9 cents), but neither will it be $4.00 (except maybe in California).
This economic victory will reverberate to other theatres. While the Russians might profit from a temporary rise in oil to $100 a barrel, in the medium and long term, if oil drops to $40 a barrel or even less, they will struggle to support the war effort.
The short term costs and dire predictions that the journalists and diplomats have foisted upon us will end up being a drop in the bucket after economic victory is achieved.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
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End of Defeatism and a Return to Victory
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The Iran War Brings a new Strategy Against Tyrants
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 8th of March via The Angry Demagogue.
We are witnessing not the end of some amorphous “rules-based international order”, but the end of defeatism and a return to victory.
The defeatist attitude amongst the talking heads regarding the Iran war stems from an inability to imagine victory. For the West, as a friend pointed out, victory has been absent from the vocabulary of war since the end of WWII. The “there is no military solution to the problem” crowd can’t imagine that force is sometimes not only necessary but is the only way to move forward. Giving up on diplomacy does not mean that force will attain the compromises that diplomacy looks for but rather attain the victory that diplomacy can never gain.
This is why the NY Times headline is “In War’s First Week, a Punishing Military Campaign with No Coherent Endgame” while the Wall Street Journal decided that the main story of the day is “Dread and paranoia spread across a 1,000-year-old city” – Teheran. The Financial Times quotes one of America’s foremost defeatists, Richard Haass – “America chose this war — and must now choose how to end it”. These are just small samples of the panic that encrusts the progressive mind when someone stands up to terrorists and tyrants with military force. For the defeatist, the “endgame” can never be victory and the deposing of an illegitimate, tyrannical and genocidal regime.
This is the hope of the tyrants worldwide and they have basically been correct in their assessment of western behavior. The so-called “rules-based international order” is not liberal in any sense of the word but a recipe for the spread of cruelty. This so-called “order” not only tolerated the disorder that tyrants and terrorists have brought for the past 70 years it has funded them, too. In South America, from Maoist terrorists in Peru to the Cuban and Venezuelan kleptocracies, they always knew there would be a chance to “negotiate”. Russia’s Putin was allowed to destroy Chechnya and occupy the Crimea, supported by European thirst for their oil and gas and American desires for a piece of the pie. In the middle east, Yassir Arafat’s Palestinian Authority and later Hamas were given billions of dollars by the United States and Western Europe in spite of their clear and present danger to the West by their spread of terror. Hezbollah and Iran run drugs throughout the world, engage in human trafficking and money laundering all to bring disorder and upset the national governments that support them by purchasing their oil and simply giving them planeloads of cash.
Off ramps are needed when victory is not possible but that is not the case regarding Iran. Imbecilic questions that the press likes to ask like “will you commit ground troops?” trying to trick the leaders of the free countries into showing their hand, are just part of the defeatist culture that has occupied the minds of the chattering classes since the French Revolution. That attitude was fine tuned in Vietnam when defeat was the preferred option and victory deemed immoral. The “end of diplomacy” in this and many other cases is not only the moral option it is the correct strategic option. The WSJ thinks there is no connection between an American victory in this and other theatres and the deterrence of China. The ignorant headline that the WSJ news section has today (one of many since the start of this war) “America’s Military Is Focused on Iran. Its Biggest Challenge Is China” cannot imagine that victory – absolute, total victory – is the greatest diplomatic weapon one can have when dealing with a country the size and strength of China.
A history professor once told me that the reason why diplomats hate war is because it means they have failed but the West has upped the ante on that failure by always insisting on a diplomatic (read: defeatist) end to whatever military action is or is about to take place. Diplomacy might be a necessary end to some conflicts but not to one that one is winning. Any description of the current war as a “quagmire” is bad faith reporting at best, traitorous propaganda at worst.
As we have stated here in the past, predicting President Trump is a fool’s game but it is also a fool’s game to assume this administration thinks in the same defeatist terms that has been the essence of the Western “rules-based international order” for the past half century and more. The same is true regarding Israel’s attitude towards this war. Israel too, has been caught up in the same defeatist attitude as it took the word “victory” out of the goals of the IDF. “Managing crises” is what brought us to October 7 as the IDF General Staff pre-October 7 were mediocrities who gained their positions for political reasons and because they “checked-off” two year stints in various jobs in the military.
Netanyahu was part of that defeatist attitude and that is why people still doubt his ability to see this through to the end. But he now has a military that is determined to win and we all hope he, under encouragement from the US administration, will follow suit. The headline that purposely plays to the anti-semitic woke and Tuckerist followers “Netanyahu Finally Got What He Wanted on Iran by Appealing to an Audience of One” misses the whole point – this is as much Trump’s pressure on Netanyahu as Netanyahu’s on Trump.
This is more than “whatever is good for Trump must be bad”. This is a failure of imagination by a large group of modern day “influencers” (yes, the so-called journalists reporting on the war are no better than Instagram and Tick Tock influencers) who can’t fathom what victory looks like and who believe that a military victory of any sort is one that is, by definition, immoral. The failure of diplomacy is not a failure of morality. Rather it is a realization that the moral way requires military force. The off ramp and the end-game is victory, plain and simple. The fact that some can’t imagine what that looks like does not mean it is not within reach.
The flip side of this of course is that the enemies of the west have an inability to admit defeat. This comes from the fact that the west seems to enjoy surrender in the name of diplomacy so these enemies can always count on the west playing the short game and demanding a return to negotiations. That is why these negotiations failed so miserably. The enemies of the west don’t seem to realize that things have changed and that the Starmer-Macron-Obama defeatist wing of the West is no longer making the decisions.
Contra all the defeatist headlines and analyses, the idea that the off ramp and endgame is now “victory” might actually deter the next tyrant and allow future negotiations to succeed.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/
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Market Volatility: Structure, Geo-Politics and Culture
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Why the (Free) World is so Confused and Depressed
Opinion: The following article is commentary and its views are solely those of the author. This article was first published the 16th of February via The Angry Demagogue.
Having been involved in the capital markets for the better part of the last four decades, I wouldn’t go so far as to say that I have not seen this amount of volatility and uncertainty in the markets, but I will say that this uncertainty and this volatility is different. The differences are important and have to do with the current structure of the markets as well as the geopolitical goals of the various powers and would-be powers. The trading world has changed radically over the last two decades with the advent of algorithmic trading and how they respond to global events as well as the type of money that is coming to dominate the markets.
The “type” of money has changed from those who invest in “things” – be they long term value investors like Warren Buffet and Peter Lynch, to those who chase income and dividends and to those who like to follow trends and industries. These investors, different in their own methods and goals had one thing in common – they invested in companies they felt had a future, or in the case of short-sellers (as legitimate as buyers) who thought it didn’t. The few hedge funds that were around four or five decades ago did what the name of the type of fund said – it “hedged” positions and gave up some potential upside in order to cushion losses when markets went south. That changed sometime at the end of the last century when George Soros nearly ended the United Kingdom by mercilessly shorting the Pound.
We are being very general of course and have not spoken about those who invested in bonds of “fixed income” products, corporate, federal or municipal as well as the basic speculator in all sorts of investment products. Nor have we spoken of the crooks who populate any era. We don’t want to give the impression that all was wonderful “then” – this is not a nostalgic look at the recent past but an attempt to understand what people were doing and how they did it, and how things have changed.
We are seeing now a sea change in the way the markets are responding to news and the way money is being invested. We still have the value and income investors; we have the large and small investors doing their best to pick the right stocks and bonds, and some of these investors also use options and futures to enhance and hedge their investments. Investing has become more sophisticated- read more mathematical – and the “basic” investor, large or small has been able to use this sophistication. However, the current hedge fund environment is based on much more than picking the right stocks or bonds and all that goes with it. The current hedge fund system is a group of funds, many of multiple hundreds of millions or even billions of dollars that don’t make investments per se as they try to beat their competitors by the microsecond in order to profit a very small amount on a a large but extremely short term investment (we will speak of the money of unfree countries, below).
As an example, there are dozens of hedge funds who work their “algos” to respond to market news and announcements only to get out of the position within minutes or even seconds. Each algo basically says the same thing – if X happens then buy and if Y happens, sell. The only difference is who will buy or sell quicker and then reverse what they have done. There have always been those with fingers on the button ready to buy or sell but the amounts were smaller and the effect less. Today, the reaction time is so quick that the large firms have their servers in the stock exchange buildings, close to the exchange computers so that they will get their orders in first. Remember, these are electronic so they are going at the speed of light. The difference between 100 feet way and 100 miles should not matter – but it does. We are talking the difference between 0.0000001 seconds for 100 feet and 0.000537 seconds for 100 miles – a time difference that people cannot discern.
This of course is not necessarily a bad thing if the algos themselves were correct for the long or even medium term (or what used to be called the short term – a quarter of a year). But they are programmed for the shortest of short term – what will happen over the next 30 or 40 seconds or maybe a day or two or a week. We see incredible volatility and panic where we should find none. A good or bad jobs report, inflation release or even a Federal Reserve rate cut or hike might have long term consequences but these trades that cause this radical volatility are not concerned with that. The market dropping two or three percent in a matter of minutes does not provide the comfort that investors usually seek. People jump on the bandwagon fearing the worst –when it was just the algos responses to the news rather than intelligent judgement on the news that drove the prices.
We will stop with the details and summarize – a large part of the uncertainty of the markets is structural as technology and the sheer amount of money being traded has surpassed what the markets, as currently structured can stand. As an example, as an employee of the Nasdaq Stock Market in the early 1990’s we were told to prepare for a 1 billion share day. During those days, there were very few shares that traded above $100 as the companies wanted more investors and there were many stock splits (more rare these days). The 1 billion share day in 1995 would have totaled around $40 billion. Today, daily trading activity has passed 15 billion shares and the total money is above $1 trillion.
It is not clear what structural changes need to be made in order to take all of this into consideration, but we do have some ideas (which we won’t bore you with now).
The second major issue that is the cause of the volatility and uncertainty in the markets has to do with what news is “good” and what news is “bad”. Not in the moral sense but in the economic and geo-political sense. What we mean by this is that there does not seem to be a unified view in the Western world where it should be going and because of this, it is not clear what news is in fact good and what is not. Economically it might be easier to figure out but even that has been hard since so many major American cities and so many young people are voting socialist and so much foreign money from non-free countries is flooding the market. News may say one thing for a free market economy and something entirely else for a planned socialist economy. It might mean one thing for investors in New York or Cleveland and something entirely different in China or Qatar.
Therefore, geo-politically the uncertainty is confusing. During the cold war of course we basically understood what moves were positive and which were negative. That is not to say there were no policy arguments but for the most part, the ends were agreed upon. Selling grain to the Soviets may or may not have bettered the Western world but both those like Henry Kissinger who supported it and Senator Scoop Jackson who opposed it argued based on the same goal – what was better for the free world.
This goes beyond who is considered the “enemies of the West” to what is considered the West – or even if it exists! We have always tried to write here from the perspective of what is good for free countries even if many free countries seem to think that Israel, for example, is not a member of that community. The same goes for those who doubt the cause that Ukraine is fighting for, as they support the Putin tyranny in the name of balance or alleged Christian values or whatnot. Interestingly, both sides – the right in the Russia-Ukraine war (and the Tuckeronian Right regarding Israel, too) and the left in the Israel-Islamist war – are willing to forgo freedom for some amorphous, form of justice or truth.
Iran is the perfect example. In every measure of Western values since WWII the Islamic Republic of Iran is an evil country. It denies freedom to its citizens, massacres them, executes women for immodesty and homosexuals for being homosexual. We don’t have to go on regarding the evils of the Islamic Republic of Iran but even with that, there are those in the West who support it. We are not talking about the legitimate policy debate regarding a war with Iran – morally as well as politically – but rather the fact that many just don’t consider that Iran is on the wrong side. Israel as we said is another example, but we can go on and on. Venezuela, Cuba and even China come to mind.
True enough, there were always people in the West that thought the Soviet Union or Maoist China was morally “better” than the United States or Europe, but never did they influence the politics, culture and businesses as the current naysayers do. The markets “understood’ that the Soviet Union was bad and reacted accordingly. The geo-political goals were mostly in sync.
The global markets reflect the geo-politics of the day and “vote” on it in a daily basis. The fact that there is a vast sum of money that influences the markets that are actively opposed to the freedom project – China, Qatar and Russia come to mind – does not help the situation. It is not the “foreign” money that disturbs the markets but rather which foreign money. There is a difference between an investor who is looking for the good company or the safe bond, and one who is looking to use their investment to further a radical Islamist or Chinese Communist agenda. President Trump’s trillion dollars of investments from Qatar and Saudi Arabia and others comes with a price tag he does not usually deal with – the price tag of undermining the market economy that has made him so successful. The proof of “goodwill” in the investments in the United States ought to be shown before that money flows into the economy. They have already contributed to ruining the universities (not that they needed the help) – there is no reason to permit them to ruin America’s great corporations, too.
The markets are crazy due to its structural issues and due to the “uncertainty” that is today’s world. Sadly, that uncertainty is not just uncertainty about what will happen, but uncertainty about what is good or bad (news). This goes beyond unity and “can’t we just get along?” and gets to the heart of why we are living today in the same culture. We say culture instead of country or city since that culture is the one that “got us here” as basketball or football coaches like to say.
The lack of agreement as to what matters most has affected the markets more than we think, and it all has contributed to the depression that so many in the free world are feeling at the moment.
Disclaimer: the views expressed in this opinion article are solely those of the author, and not necessarily the opinions reflected by angrymetatraders.com or its associated parties.
You can follow Ira Slomowitz via The Angry Demagogue on Substack https://iraslomowitz.substack.com/