Iranian Nuclear Absurdity

Current U.S. Policy is Illogical and Counter-productive


Greg Pickell  12 September 2019

US policy with regard to Iran and its nuclear ambitions is one of the most important issues confronting our nation today.  That, at least, is not open to debate, because anything to do with nuclear weapons automatically assumes a paramount level of importance. 


The challenge, of course, lies in what to do about Iran's pursuit of a nuclear capability, and here we run afoul of two serious issues.  First, we must face the Administration's fixation on reversing most or all of the policies enabled by the previous administration, whether these policies were appropriate or not.  The second challenge lies in the specific nature of the current strategy employed by current U.S. policy makers to address Iranian nuclear ambitions. 


The first of these two challenges is both problematic and insoluble.  No-one will be convincing President Trump of the wisdom of any Obama era policies now or in the future.  There is a degree of justification in this -  the previous administration provided the current leadership with copious ammunition for such a position.  From failed 'red lines' in Syria to bumbling 'regime change' in Libya and elsewhere, the Obama administration provided much of the grist for the mill currently employed by Trump era policy makers and supporters.  While a degree of the ire directed against the previous administration is based on the President's insecurities, there is no denying that Obama's foreign policy decisions provide justification for many of the current Chief Executive's positions. 


With the door closed on any revisitation of the existing Iranian Nuclear Accord, Trump policy makers make two points in arguing for the current approach:   First, they contend that the Iranian Nuclear deal negotiated under the previous administration was hopelessly flawed, because it simply delayed Iranian nuclear ambitions while giving far too much away in the process.  Secondly, they suggest that the only solution is to force the Iranians to renegotiate an agreement more favorable to the U.S. and its allies.


This leads one to a critical question - are the means employed by the current administration to curb Iranian nuclear ambitions appropriate?  The short answer is no, and the evidence for that answer is based on a considerable body of historically irrefutable data. 


The means by which the U.S. intends to force Iran back to the bargaining table - economic sanctions - don't work.  Here, the body of evidence is overwhelming.  Sanctions have been used time and again in an attempt to coerce adversarial behavior, with a near perfect failure rate.  As Angelo Codevilla notes in issue 49 of Strategika, "Iran 1979-2015, Iraq 1990-2003, and North Korea 1994-present—illustrate the insurmountable problems of sanctions as tools of influence."  Compounding this flawed approach are two associated issues.  First, the U.S. has no interest in open war with Iran, John  Bolton's advocacy notwithstanding.  This point was brought home with the recent skirmishes in the Straights of Hurmuz, in which the U.S displayed considerable restraint in its response to Iranian provocations.  While the restraint was indeed considerable, however, it also made clear the limits to which the U.S will go in confronting Iran.  Secondly, U.S. policy makers and their allies in the conservative media have systematically avoided any discussion of the efficacy of sanctions by themselves as a means to achieve our policy goals.  I recently made this point to a close friend who supports the abrogation of the Iranian Nuclear deal in favor of a better agreement.  When I pointed out that sanctions have never worked in situations like these, he had no answer, in part because that element of the discussion is rarely if ever addressed by the administration or conservative media outlets.


The net result of the President's disdain of any policy associated with his predecessor coupled with an avoidance of the futility of economic sanctions leaves the U.S. in a very unpleasant position.  Having abrogated the original agreement, and employing policy tools effectively predestined to fail, the U.S. now faces a nuclear armed Iran in the immediate future as opposed to the 15 years obtained in the failed Irian Nuclear Accord.

Shortselling Stocks and the Definition of Parasitic Behavior


Greg Pickell  28 September 2019

Short Selling in the stock market is defined as "an investment or trading strategy that speculates on the decline in a stock or other securities price."[i]   Short selling has been around for a long time.  The practice has been more or less legal since the 1930s, though there have been a number of attempts to limit or eliminate the practice.


Why is short selling bad?  Because short selling provides little if any benefit to the broader stock market.  Whereas the normal purchase of stocks serves to fund investment and expansion for the companies concerned, short selling is a bet that a company will lose value.  In the end, the only parties benefitting from short sales are the investment advisor and his/her clients.  This means that the act of short selling can be defined as parasitic in nature:


Parasite (Definition).  A person who habitually relies on or exploits others and gives nothing in return:[ii]


Short Sellers clearly meet the definition of parasites.  Unfortunately, the story worsens from there.  As I've noted, short sellers don't make money unless the stock involved loses value.  This in turn means that prominent investment advisors, whose views are widely followed on social media and elsewhere, have every incentive to comment negatively about the stocks they have shorted in an attempt to drive the stock price down.


A look at one prominent target of the short sellers - Tesla Motors - is instructive.  Tesla stock is among the most shorted in the United States.  In April 2019, Tesla's short interest stood at $9.04 billion, with about 30 million shares shorted, according to S3's Ihor Dusaniwsky.[iii] 


While the raw data regarding Tesla's stock is interesting, it's the commentary among prominent short sellers that provides context.  Goldman Sachs' David Tamberrino and other prominent analysts have consistently downplayed Tesla's prospects for survival, even in the face of continuing sales growth enjoyed by the company.  Even the successful introduction of Tesla's Model 3 sedan was no deterrent; the shortsellers continued to speculate that Tesla's end was near.  In June 2019, Tamberrino continued his negative assessment, speculating that demand for Tesla's cars would soon soften.  As October 2019 approaches, Tesla's third quarter deliveries are expected to be stronger than ever, but one can expect short sellers like Tamberrino to find another reason for the imminent demise of the company.   Assuming that Tesla does in fact report strong sales for Q3 2019, the shorts' narrative will go something like this:  "While Tesla sales were robust in Q3, the imminent introduction of numerous competitors in the EV arena  and the elimination of EV tax credits makes Tesla's prospects for success unfavorable in the longer term."  Never mind that U.S. tax credits were phased out during Q3! 


The expected negative outlook is not an aberration - millions are at stake, and the short sellers' investors expect results.   This tendency toward negative speculation is so consistent that the one time investors should avoid buying Tesla stock is immediately following Quarterly results - positive or not.


The larger point here is not about Tesla, but about the philosophy behind short selling generally and the tendency to offer negative speculation in order to realize anticipated decreases in the stock price.  Negative speculation is hardly illegal, and this above all else safeguards the 'shorts' .  On the other hand, the process benefits few other than the short sellers' clients.  The broader market suffers, as do consumers with an interest in a healthy, vibrant economy. 


Bottom line - Short Selling may be legal, but that doesn't make it right.