Israeli Fighters

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When my daughter and her friends were in high school, I think that picking up a rifle and defending their country from barbarian hordes seeking to invade and kill them and their neighbors was the furthest thing from their minds. In Israel however, this is reality for every 18-year-old.

Will Iron Dome Protect Israel Against 45,000 Rockets?

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Space Daily reports on the threat facing Israel and how it has grown since the 2006 Hezbollah war.

In 2006, Hezbollah possessed an estimated 12,000 rockets of various calibers, most of them of limited range and destructive power. Last weekend, Israeli Defense Minister Ehud Barak warned that Hezbollah now has some 45,000 rockets and missiles, thousands more than previously estimated and enough to sustain daily fire for months.

According to military analysts, some of those weapons are capable of hitting Tel Aviv, Israel's largest metropolis, the industrial heartland in the center of the country and as far south as the Dimona nuclear reactor in the Negev Desert.

Israel's nightmare is that if hostilities do break out -- most likely if it launches pre-emptive strikes against Iran -- its cities would come under an unprecedented bombardment.

Iran has also supplied Hezbollah with SCUD missiles.  To counteract all this, Israel has the Trophy, Iron Fist, Iron Dome, Stunner, and Arrow-2 systems.

Moving Iran's Uranium Around

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As I mentioned in a previous post, Iran brought their enriched uranium stockpile out of its deeply buried bunker so that it could be enriched further.

Why would they do that and expose what may be almost their entire inventory of enriched uranium to attack?

Well, I figured it out.  A massive amount of enriched uranium in a building on the surface is fairly immune from attack by the US or Israel because it would scatter to the four winds causing a radiological disaster.  So there was little risk.  Unless we came in and stole it.

Once they drew off enough to feed their centrifuges,  they moved it back underground, where it is completely safe.

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How Obama's Shame/Honor Upbringing is Affecting Foreign Policy

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Islamic cultures are still stuck in an old mode denoted by anthropologists as "shame/honor", in which your actions and feelings are based strongly on what other people think of you.  Many ancient societies used shame to force compliance.  Punishments such as being placed in stocks and otherwise being held up to public ridicule were very effective.  Conversely, the honor of society was used as reward.

This is seen clearly in the Bible and in old texts such as the Iliad and the Odyssey, where behavior that seems strange to us modern westerners is not so strange when looked at through the eyes of a shame-based culture.

As ancient cultures evolved, they embraced a guilt-based system where the shame is internalized.  The US culture from the Revolution up until about 1950 was mostly guilt-based, with most people being ruled by their own internal beliefs in right and wrong. In such a society,  few laws are needed, and punishments are light, because the people are essentially good.

We have now however evolved into a corporal punishment phase, where people have very little internal beliefs and are ruled mostly by fear of long periods of jail time.


Mr. 0 is the first President of the United States to have been raised in a shame culture (in Indonesia), and it shows. 

The press and the administration are up in arms recently over Israel's building of new houses in Jerusalem.  This despite the fact that they are homes for Jewish people being built in Jerusalem on their own property -- which was actually purchased from Arab squatters.

And look at the word the administration used.  Obama, Biden, and others in the administration said that the building of houses was an "insult".  I don't think that any US administration has ever called any action by Israel an "insult" before.  As Daniel Greenfield states:

American diplomats have not usually described Israeli policies they dislike as an "insult"-- that is a term much more commonly used by Muslims, who are obsessed with perceived slights to their honor. Complaints over an "insult" is a common feature of Honor-Shame societies. America is not an honor-shame society. However the White House is currently occupied by a man bred in an honor-shame society. It is Obama that feels "insulted" by Israel, both out of the sensitivity of his Muslim heritage and his own egotism, which regularly motivates him to humiliate Republicans, while triumphantly celebrating his own greatness.

It is natural enough for Barack Hussein Obama to rely on such cheap honor-shame gambits. They are what he grew up with. And it is natural enough for him to keenly feel the loss of face of Muslims. After all his father's family was Muslim. And Muslims are keenly "insulted" when they conquer territory and then cannot hold it. Whether that territory is in Jerusalem, Israel or Spain or India. They cannot stand to suffer the loss of face. And neither can Obama.

But Mr. 0 routinely accepts behavior from Muslims that would rightfully be considered insults:

More to the point did Israeli TV air calls for a Jihad against America, as Palestinian Arab TV did? Did Israel name a square after the murderer of an American photographer, as the Palestinian Authority did? Did an Israeli Anchorman do a skit in blackface during Obama's visit, as a Turkish anchorman did during Obama's visit to Turkey? Are Israeli religious institutions issuing Fatwahs against America, as Al Azhar University, which Obama visited and spoke at, has done? Are Israeli leaders funding terrorism against America, as the Saudi King, before whom Obama bowed, does?

No, none of those incidents were described as insults. Nothing that Muslim countries did to mock, humiliate and murder Americans were even noticed at all. None of them produced furious condemnations from the White House or two hours of Hillary Clinton screeching on the phone at Prime Minister Benjamin Netanyahu. So what did Israel do that was so awful, so horrible and terrible? It built houses. Yes, civilian houses. Not army bases or nuclear missiles or walls. Houses.

And then there is the double standard:

Had there been a Jewish or part-Jewish President in the White House, the media would be raising the question of whether he is showing favoritism toward Israel. A question that has been repeatedly raised regarding Joseph Lieberman. A question that was raised regarding Goldwater, who was a practicing Christian. But the media refuses to allow the question to be raised of whether Obama is favoring Muslims because of his own Muslim background and family ties. Instead the media brands any such questions as racist, and instead spearheads the administration's campaign against Israel.

I greatly recommend clicking this Daniel Greenfield link for quite a story about the Jewish history in that area of Jerusalem, and how America has turned against the only free country in the Mideast.
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Bunker Busters on the Way to Diego Garcia

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The Herald newspaper in Scotland reports that 387 "bunker buster" bombs are on their way to the US airbase on Diego Garcia island in the Indian Ocean. The Herald previously reported in 2007 that the stealth bomber hangers on the island were being equipped to accommodate bunker busters.

A shipping company in Florida, Superior Maritime Services, was contracted in January to carry a large number of military supplies to Diego Garcia, including 195 BLU-110 1000-pound bombs and 192 BLU-117 2000-pound penetrator bombs. Both can be used with JDAM guidance kits to provide smart accuracy.

 

JDAM Warheads (image USAF)

(From top: MK 84, BLU-109/B, MK 83)

Diego Garcia was used to launch attacks on Iraq

during both the 1991 and 2003 Persian Gulf Wars

Despite the headline of the Herald article, these bombs are not the big "bunker busters" people usually refer to.  The true "massive ordnance penetrator" or MOP bomb is a 30,000 pound precision-guided behemoth, that, according to Wikipedia, is still in development and will not be available until December 2010.

Our military is getting prepared.  But the weakest link is Mr. 0.

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The Health Care Plan is Unconstitutional

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I just looked through the Constitution and did not find anything anywhere that gives the federal government the power to provide health care.

It is important to understand that the Constitution is a document that created the federal government and thus is the only source of its power.  Without the Constitution, the federal government has no power at all.  And the government is not allowed to exercise any power that has not explicitly been granted. The whole idea was to severely restrict the government to "just those few things that the people and the states cannot do for themselves."

But look at how much the government currently does that is outside of the Constitution. Regulation of food and drugs, building of roads, Medicare, Social Security-- and all the associated agencies, such as the EPA, FDA, HHS, etc., that create and enforce rules that have the power of law.

I remember how we were shown a little flowchart in middle school about "how a bill becomes law." My teachers never mentioned that most our "laws" are now created outside that process by agencies run by unelected bureaucrats with power delegated to them by Congress.

People used to understand that the government couldn't just pass whatever law or rule they want.  For example, the banning of alcohol required a Constitutional amendment -- and another one to repeal it.  It seems obvious to me that the creation of a federal power to control health care would also require a Constitutional amendment.  But to do so would require more than a majority in Congress, and would also require ratification by the States.  It would never pass that gauntlet.


Thomas Jefferson had some advice in his old age about the situation in which we now find ourselves.  In a letter to William B. Giles on 26 December 1825, Jefferson wrote about how the government was growing beyond the Constitution -- even then -- and what to do about it.  For some reason this letter is rarely quoted.  Here is the relevant portion:

I see, as you do, and with the deepest affliction, the rapid strides with which the federal branch of our government is advancing towards the usurpation of all the rights reserved to the States, and the consolidation in itself of all powers, foreign and domestic;  and that too, by constructions which, if legitimate, leave no limits to their power.  Take together the decisions of the federal court, the doctrines of the President, and the misconstructions of the constitutional compact acted on by the legislature of the federal branch, and it is but too evident, that the three ruling branches of that department are in combination to strip their colleagues, the State authorities of the powers reserved by them, and to exercise themselves all functions foreign and domestic.

Under the power to regulate commerce, they assume indefinitely that also over agriculture and manufactures, and call it regulation to take the earnings of one of these branches of industry, and that, too, the most depressed, and put them into the pockets of the other, the most flourishing of all.  Under the authority to establish post roads, they claim that of cutting down mountains for the construction of roads, of digging canals, and aided by a little sophistry on the words “general welfare,” a right to do, not only the acts to effect that, which are specifically enumerated and permitted, but whatsoever they shall think, or pretend will be for the general welfare.

And what is our resource for the preservation of the Constitution ?  Reason and argument ?  You might as well reason and argue with the marble columns encircling them.  The representatives chosen by ourselves ?  They are joined in the combination, some from incorrect views of government, some from corrupt ones, sufficient voting together to outnumber the sound parts;  and with majorities only of one, two, or three, bold enough to go forward in defiance.  Are we then to stand to our arms, with the hot-headed Georgian ?  No.  That must be the last resource, not to be thought of until much longer and greater sufferings.  If every infraction of a compact of so many parties is to be resisted at once, as a dissolution of it, none can ever be formed which would last one year. 

We must have patience and longer endurance then with our brethren while under delusion;  give them time for reflection and experience of consequences;  keep ourselves in a situation to profit by the chapter of accidents;  and separate from our companions only when the sole alternatives left, are the dissolution of our Union with them, or submission to a government without limitation of powers.  Between these two evils, when we must make a choice, there can be no hesitation.

If the health care plan currently under discussion actually becomes law, I would certainly hope that the Supreme Court would immediately invalidate it.   But I am not holding my breath.  After all, they haven't invalidated all the unconstitutional government agencies.

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And Now for Something a Little Nicer

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Relax, It's the Weekend. What Could Happen?

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Spaceflight Hopes and Dreams

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With Mr. Obama's cancellation of the entire US manned space program, we are left with private companies providing access to space. They will still be funded by NASA, but will have their own designs, and a lot of freedom to do whatever they want.

This would have been a good thing if we had decided to do it in 1990. Twenty years down the road, we would probably have had a good Shuttle replacement in operation, along with a more utilitarian space station designed to support a full space infrastructure (refueling and maintenance of lunar and interplanetary spacecraft for example) instead of just some lame biology experiments. Instead of interminably studying the effects of weightlessness (we've studied it for like 50 years!), the station would probably spin to provide gravity simulation.

But now, with the Shuttle on its last legs, a really rather useless space station, and the cancellation of the Constellation program, I don't see that private space can come up to speed fast enough to provide the kind of future we need.

In the mean time, we plan on paying the Russians to put us into space.

Add the fact that the Chinese are pushing ahead with tens of thousands of engineers on their own space program, and I fear we will be left far behind. The implications of this for the future of the US are dire. If the Chinese are allowed to own orbital and cis-lunar space -- and maybe even the moon itself -- they will be able to deny access and use for both military and economic purposes.

Long-term, I believe that this means an enormous disadvantage for our country.

Tiangong-1 module of the Chinese Space Station
to be launched in 2011

Imagine where we would be if another country could completely prevent us from flying any aircraft. In the near future, space will be as important to us as flight. (It already is, for our military use.)  If China is allowed to dominate space, a third-world role for our country is the best we can hope for.  Actually, if we are not the dominant player in space for the next 50 years, I don't see us existing as an independent country in the 50 years after that.  It is that important.

Let's look at our best hope for private spaceflight and the future of our country: Space Exploration Technologies Corporation, otherwise known as SpaceX.

Elon Musk, Founder of SpaceX

SpaceX was founded in 2002 by PayPal co-founder Elon Musk of South Africa. They have produced one small rocket design, the Falcon-1, that has had two successful orbital flights in five launches, one of which actually delivered a 400-pound Malaysian satellite to orbit.  Here is a photo of the launch.  I think those are semi-truck trailers on the left, which provide a sense of scale.  I think the rocket may have burned a hole in the grass:

The launch history looks like this:

• 24 March 2006.  Failure. Engine failure at T+25 seconds
• 21 March 2007.  Failure. Harmonic oscillation, premature second stage engine shutdown, loss of satellite
• 3 August 2008. Failure. Residual stage 1 thrust led to collision between stage 1 and stage 2, loss of 4 satellites
• 28 September 2008. Successful.  Delivered RatSat and dummy payload to orbit
• 14 July 2009. Successful.  Delivered Malaysian RazakSAT to orbit

Joking aside, this is not bad at all for a private launch company.  They have achieved orbit and the last two flights were successful.  Most of the bugs appear to be wrung out.  It took them eight years.  I anticipate that one or two other failures will occur over the next couple of years until reliability is fully achieved.

SpaceX has been developing the much larger Falcon-9 since 2005.  It has not flown yet.  Their manned system concept is a Falcon 9 with a capsule called the "Dragon" on top.  It is in the early stages of development.

But with the Shuttle retirement months away, how long do you think it will take to complete the SpaceX system and make it reliable?  My guess is somewhere around 12 years, with a first flight in the 10-year time frame.  In the meantime, we have no human access to space except via the kindness of the Russians.  By 2025, the Chinese could well be doing asteroid mining, while we will just be getting back to low earth orbit, barely above the atmosphere.

Long term, space is the most important investment we can make as a country.  It will have the largest payoff in terms of military and economic dominance in the 50-year time frame.  Imagine what WWII would have been like had the US decided not to develop aircraft technology from 1910 to 1940 -- but Germany and Japan did.

I saw an interesting question posed recently:  If Mr. Obama were intent on the destruction of our country, what would he be doing differently from what he is doing now?

Oddly, the answer appears to be: "Nothing."


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Biden Fails in Israel, Gates Immediately Called to Riyadh

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Debka reports the following.  No mainstream media confirmation yet.

US Secretary of Defense Robert Gates arrived in Riyadh Wednesday, March 10, flying in unexpectedly from Kabul in Afghanistan, after the Saudis demanded urgent clarifications of the Obama administration's Iran policy.  DEBKAfile's military sources report that the demand followed the failure of US Vice President Joe Biden's talks with Israeli leaders to resolve their differences on Iran.

Reports of the Biden conversations in Jerusalem Tuesday have reached Riyadh. They reveal that not only is the Obama administration leaning hard on Israel to abstain from attacking Iran, but is even retreating from harsh sanctions. Such penalties have now been put on hold for five months.

The Saudis are as deeply alarmed by the latest American stance on Iran as are the Israelis.

In September of last year, there were reports that the Saudis had authorized Israel to use their airspace for a "go-it-alone" attack on Iran.  But it is always a mistake to think the Saudis are on "our side".  They are on their own side.  Sometimes, maybe even quite often, their desires line up with ours.  But as Chico said about Harpo...

"You gotta watch him a little"

I still think the reason Obama has sent our Aegis-capable guided missile cruisers and destroyers to the Persian Gulf is not to attack Iran or defend oil tankers against Iranian attack, but to shoot down Israeli nuclear missiles.  Mr. 0 seems almost as determined as Ahmadinejad to destroy Israel.

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Iranian Preparation for the War Against Israel

Iran has vast underground facilities for both nuclear and conventional military purposes.  Syria does too.  And Hamas and Hezbollah both have large networks of underground tunnels and storehouses for bringing in thousands of  rockets and other weapons from Iran.


According to a UPI story today, the Iranian Revolutionary Guards control four separate companies that have been busy building underground facilities including hidden missile launching sites, smuggling tunnels and weapon storage bunkers in Iran, Syria, Gaza, and the Bekka Valley.  The vast tunnel network in Gaza was used and is still being used to supply Iranian weapons, including short range missiles that continue to be launched into Israel. 

These little-known companies -- the Fater Engineering Institute, Imensazen Consultant Engineers' Institute, the Makin Institute and the Rahab Institute -- are subsidiaries of Khatam al-Anbia.  This is a sprawling construction empire that has been under U.S. Treasury sanctions since 2007. It is owned by the Revolutionary Guards, which has become a vast military-based conglomerate that controls much of Iran's economy.

Iran is using these firms in its efforts to provide hardened underground complexes for its nuclear facilities, such as the new uranium enrichment center near the holy city of Qom that is being built inside a mountain.

According to Arab sources, engineers from Khatam al-Anbia helped Syrian build several underground bunker complexes. They also acted as consultants to Hezbollah, which has built an elaborate network of bunker complexes containing missile storage and launching facilities, command and communications centers and linking tunnels in south Lebanon following the 2006 war with Israel.

Similar underground networks have been built in the Bekaa Valley, Hezbollah's heartland in northeastern Lebanon along the border with Syria, which supplies much of the movement's weaponry.

An earlier system built in the south, and largely undetected by Israeli intelligence, gave Hezbollah a decisive advantage in fighting Israeli ground forces during the second half of the 34-day war in 2006.

We know that Hezbollah now has 300 Scud missiles in underground launch sites.  All of these facilities are politically immune to Israeli attack, since many of them are hidden in civilian neighborhoods.  When Israel attacked the facilities in Gaza, the rest of the world condemned them for killing civilians.  Some European organizations are still advocating war crimes trials.


The enemies are gathering.  Never before have so many weapons of such strength been arrayed against Israel.  Behind it all is Iran and Ahmadinejad, working to isolate, then attack, then "wipe Israel from the face of the earth".  They already have tens of thousands of rockets on Israel's borders, and soon will have nuclear missiles launched directly from Iran.

An Israeli defense would necessarily involve full scale war (with ground troops and tanks) against Syria, southern Lebanon, and Gaza, and a long-term aerial bombing campaign against Iran.  Since some of Iran's facilities are deeply buried, Israel would likely need to use nuclear weapons to ensure their destruction -- especially since the US will not give them bunker buster bombs.  Since Israel only has 6 tanker aircraft (converted old Boeing 707s), and since the US may even interdict aerial attacks on Iran, Israel may need to use their Jericho nuclear missiles instead of aircraft.

Russia recently confirmed that they will be sending the S300 air and missile defense systems to Iran, so Israel must act soon.  Since the Islamists hide in the civilian communities surrounding Israel, hundreds of thousands of civilians in those neighborhoods would be killed during the Israeli attacks on Hamas and Hezbollah.

Did I mention that Hezbollah has cruise missiles now too?

Iran and their surrogates have worked for 30 years, moving chess pieces to their proper places, in order to put Israel into a corner that they have no way of getting out of.  And with Obama in office, they will get no help from the US.

I fear that the US is getting ready to sacrifice Israel much as Britain sacrificed Czechoslovakia to the Germans -- to have "peace for our time", as Chamberlain said.

It will work just about as well as Chamberlain's appeasement did.  I truly foresee Iranian domination stretching from Afghanistan to the Mediterranean -- unless Saudi Arabia's Wahhabis decide not to let it happen.  But that would risk the overthrow of the House of Saud.

It will be very interesting indeed to see how this will all play out.

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Just Chillin'

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Need a 5:42 break from the too serious?  Yeah, dude.

2010 Volcom Pipeline Pro Contest Highlights

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Every Solution Should Create the Next Crisis

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Yesterday, Mr. Obama lambasted insurance companies for raising premiums and making profits "as long as they can get away with it."  Hmmm... I always thought that in free market capitalism, that was a good thing -- Adam Smith and the invisible hand and all that.   But once again, Mr. 0 rails about big evil companies making profits at the expense of the poor little guy.

Why doesn't he just bite the bullet and ban all evil companies and all evil profits forever?  People, rise up against Walmart, your oppressor!  Let the government run everything for the good of all, in a true economic democracy!

"Dr. Zhivago, your house had enough room for thirteen families.  This is more just, comrade, don't you think?"

Anyway, I have been trying to make sense of where Mr. Obama and the Congress are going on this health care debate, but no real plan exists right now as far as I can tell. (There may be one being passed around in Congress, but who knows?)

But it appears that any future plan probably would have these pieces:

1. An edict that insurance companies will no longer be allowed to deny coverage for pre-existing conditions, and could no longer drop coverage for any reason.
2. People who do not have insurance from their employers would have an option to choose from a large number of plans provided by insurers, but presented to them by the government.
3. The government would provide some subsidy for poor people.
4. The cost of premiums would be controlled by the government. If an insurance company wanted to raise rates, they would have to apply to the government and extensively justify why.

This plan is consistent with the Cloward-Piven Strategy of forcing political change through orchestrated crises.  The Strategy says to set up impossible entitlements, then when they fail, set up even more impossible things that the society must provide.  Thus crisis follows crisis, each one larger than the last.  And each one involving more and more government.  In the end the capitalist system fails, and is replaced by socialism.

The insurance companies will have no control on who they insure, so their costs will skyrocket. They will also have no control on how much they charge for premiums, so their income will not be able to go up. This impossible situation sets up the crisis.

As the insurers try to cut back more and more as they go under, politicians will say things like, "These companies do not care about the health of Americans.  All they care about is their own profit."  "Their selfish greed is killing Americans."  "This shows how the free market cannot be allowed to dictate our healthcare."  Scandalous stories will be told of people being denied care in violation of the law, backroom deals to prop up the companies, and various financial shenanigans.  Private health insurance collapses in a heap.

Then the government steps in with full harmonized medical care.  Everyone will get the same care, and it will be illegal to go outside the system -- punishable by fines and jail.  (Remember the "health crimes" in Hillary's bill?)  As the limitations and inefficiencies of a socialized approach become evident, more and more people will clamor for more and more benefits. The largest organizer groups with the most money will get what they want, but discontent will grow.  The overall level of health care will fall.  Doctors will leave and start other businesses, or just retire early.  There will be a health care shortage.  Elective surgery will be scheduled years in advance, then just eliminated.    The government will pass new laws offering more and more benefits.  The cost of health care will become the second largest budget item after interest on debt.

And another step toward a glorious progressive future will be complete.

As Mr. 0 says, "We are going to fundamentally transform America."




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"Exceptional" Snowfall in the South of France

 

Nimes, France

Up to 15 inches of snow fell in southern France yesterday (7 March 2010) including areas of Languedoc-Roussillon, Provence, Gard, the Rhône valley and Mid-Pyrénées. Near Nimes, over 250 motorists were trapped in their cars, and had to be rescued and taken to shelters.

Such snowfall is "exceptional", especially at the beginning of March, according to national weather bureau Météo France. The forecaster expects the snow clouds to make their way east on Monday, concentrating over the Hérault department.  Snow fall will nonetheless continue throughout the day in the more westerly Aude and Pyrénées-Orientales departments. Météo France warns that the icy conditions will increase the risk of accidents, and advises drivers to be extra careful on the road.

  

From Meteo France - Snow Alerts in Departments Marked in Orange

And to think that just a few years ago, the global warming folks were saying that the rise in CO2 meant the end of snowy winters. Of course now they are saying that global warming causes global cooling, so I guess they are always right no matter what.

I don't think we are supposed to remember what they used to say... "The Party said that Eurasia had always been the Enemy and what the Party said was the Truth."  Ah yes, and the "science is settled".

Two plus two indeed equals five.

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Connie Sellecca, the Price of Oil in 2018, and How Obama Reminds Me of Lenin

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Back in the mid-1980's there was a program on NBC called "TV's Bloopers and Practical Jokes". The most memorable episode to me was when they had a semi truck full of pigs show up in front of actress Connie Sellecca's house. The driver and a friend of hers tried to explain that her broker had allowed her investment in pork belly futures to expire without being sold, so she would have to take delivery of 60 pigs right then and there at her big house. It was pretty funny, and I suppose it may even be theoretically possible.

In the world of finance, commodity futures are an interesting instrument. You buy a contract to take delivery of a commodity at some particular "expiration date" in the future at a particular price. As the value of the underlying commodity changes, the value of the contract changes too. You can sell that contract at any time before the expiration date, and hopefully make money on your brilliant insight.

Typically, you need a fairly large chunk of money to play directly in the futures market. But with the introduction of Exchange Traded Funds (ETF), regular folks can invest too. ETF's trade just like stocks. The commodity-based ones usually invest in a set of futures contracts over a period of time, or in futures contracts that expire in the next month.

I have always known that futures contracts exist for most commodities out several years into the future, but recently I was surprised to find out exactly how far they go. As of Friday, the price of June 2018 oil is trading at $96.01 per barrel. This seems low to me, but then again a lot can happen in eight years. The price could be $500 per barrel or $30 per barrel by then.

Here is a chart of Friday's closing crude oil futures prices through December 2011 from WSJ.com.

Click for larger version

As you can see, the prices for future delivery are higher than the price next month.  This situation is called "contango", and is fairly unusual if you stop to think that it costs money to store any commodity.   Often, the price of a commodity for future delivery tends to be less than the near-term price -- a situation called backwardization.

Right now, pretty much every tank that can hold oil is full of oil.  Even old tanker ships that do not go into the open seas anymore are sitting off the coast being used as storage tanks.  So the fact that oil is still in contango means there is significant nervousness about oil supply.  Part of the reason we have such a stockpile is because of people like me who are invested in oil ETFs and futures. If a war were to break out in the Mideast, the large stockpile of oil in the US would be a very good thing.  Thus, speculation serves to ensure adequate future supplies.

The International Petroleum Exchange in London 

If you look at history, communists and socialists always rail against "speculators".  They consider them criminals, particularly if they make high profits in bad times.  I am reminded of this every time I hear about "price gouging" during disasters.  Shouldn't a prudent person, who rents a warehouse and stockpiles food and water, be able to make good money when the disaster he was planning for actually occurs?  If there are laws forbidding "price gouging", then there is no incentive to prepare for the worst, or to truck in supplies, or really to help in any way.

For example, a couple of years ago there was a gasoline shortage on the east coast, because of a pipeline problem if I remember correctly.  Because of price gouging laws, there was no incentive to truck in additional gasoline at a higher cost, so gas pumps ran dry.  If people could price gouge, trucks would have been rented and diverted, and gas from other areas of the country brought in.  Instead, Congress talked about how they needed to control oil companies more, telling them where to build pipelines and refineries, and how to ensure a more reliable system. The government now sees a need to be in charge of gasoline distribution because "the free market failed".

I am also reminded of all the old communist decrees against "speculators" every time Obama speaks about how "Wall Street speculators" and "oil speculators" need to be controlled.  (Already the government has shut down several leveraged oil ETFs because "they contributed to excessive speculation".)

Obama sounds exactly like Lenin did in the early 1900's.

Without speculators, markets do not work at all.  Maybe that is what Mr. 0 wants.

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Imagery Shows New North Korean-Derived Simorgh Missile Launch Site in Iran

The following press release from Jane's highlights new imagery showing further development of Iran's Simorgh "Space Launch Vehicle" (SLV) infrastructure.  We all know that a missile capable of putting a reasonably sized satellite into orbit can also deliver a warhead thousands of miles away.  So the Simorgh is likely Iran's first true Intercontinental Ballistic Missile (ICBM).

The fact that the missile and the launch site look very similar to North Korean systems indicates that there continues to be intense collaboration between the two regimes.  Since North Korea has already demonstrated a complete nuclear weapon capability (from mining, through enrichment, through physics package development, to several actual detonations), it is likely that they have been working with the Iranians to bring their weapons program up to speed as well.

It is important to note that ICBM's do not have enough "throw weight" to be very useful carrying conventional weapons.  The development of an ICBM indicates the intent to have a nuclear warhead to put on it -- unless you believe that the Simorgh is just a satellite launcher.

A "Simorgh" in Persian folklore is a divine mythological mix of bird, man, lion, and dog.  In one tale, Simorgh provides a path from the Dark World into the Light World.  It is said to be able to purify the land and waters, removing all taints.  It is particularly inimical to snakes.  Ayatollah Khomeini referred to the US as a "wounded snake".  It is still a popular epithet for the US in Iran.

In the top image, which is from the Iranian package announcing the Simorgh missile, I note that the Simorgh is shown as a bird of fire, lofted into space and looking down directly at Israel -- getting ready to "purify" it, I suppose.
 

Update:  I am reminded that last September, Obama decided not to deploy interceptor missiles in Poland and the Czech Republic.  WSJ reported at that time:

The White House justifies its decision by claiming to have new intelligence showing that Iran's long-range missile capabilities are not as advanced as previously believed.... [But] it's also hard to square the intelligence community's sanguine assessment with Iran's successful launch of the solid-fuel Sejil missile in May. With an estimated range of 1,560 miles, the Sejil could deliver a one-ton payload as far as Warsaw.

And now we have the announcement of the Simorgh, with a likely range of twice that.

By the way, the new launch site is at 35.2584 N, 53.9547 E, if you want to view it in Google Earth/Maps.

 

The Farsi writing says, "Satellite Carrier Simorgh"

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[Note: None of the images below were in the original press release.  I have added them to provide some additional background.]

Imagery of Construction of New Launch Site in Iran

Saturday, 6 March 2010, 12:36 pm

Press Release: IHS Inc.

IHS Jane’s Analyses Satellite Imagery of Construction of New Launch Site in Iran

LONDON (5 March 2010) Through the use of commercial satellite imagery from DigitalGlobe and GeoEye, IHS Jane’s has revealed that a new launch pad is being constructed at Iran’s Semnan space centre that could ultimately launch Tehran’s next-generation Simorgh rocket.

DigitalGlobe WorldView-2 satellite image from

http://press.ihs.com/ihsjanes/imagegallery

Ball Aerospace built WorldView-2
Click image for full-size version

Jane’s Defence Weekly, 4 March 2010, reported that Iran unveiled the Simorgh space-launch vehicle (SLV) on 3 February, but as of March 2010 has not publicly revealed the location of the rocket’s launch complex. However, IHS Jane’s has observed a new site four kilometres northeast of Iran’s existing launch facility at Semnan on a WorldView-2 satellite image dated 6 February 2010. It contains a gantry tower, which is 13 metres wide, approximately18 – 20 metres tall and has a cliff-side flame bucket nearly as high as the tower itself. It appears midway towards completion. Although the tower is not yet tall enough to facilitate vertical assembly of the 27-metre Simorgh, the launch pad could easily accommodate Iran’s new rocket if the gantry were to be extended by an additional 10 metres.

In addition to this site, IHS Jane’s has observed another facility two and a half kilometers to the southwest; between the new site and the existing one. Although this facility is in early stages of construction, its heavily secured nature and restricted access indicate it is a primary element of the newly constructed complex.

Using satellite imagery from the Ikonos and WorldView-2 satellites taken on 11 February 2010, IHS Jane’s has identified the Simorgh and Safir-2 rockets displayed during the pro-revolution rallies in Tehran’s Azadi Square. The commercial satellite imagery is coded with geographic metadata that enables IHS Jane’s to garner several accurate measurements of the Simorgh.

 

Possible configuration of the Simorgh

The development of the Semnan facility and the Simorgh SLV both demonstrate the likelihood of collaboration with North Korea in Iran’s missile programme. The platforms seen on the new gantry tower resemble those seen on the gantry tower at North Korea’s new launch pad at Tongchang. A drainage pit 170 metres directly in front of the pad also mirrors one at Pyongyang’s new west-coast launch site. Similarly, the first stage of the Simorgh strongly resembles the North Korean Unha-2, with four clustered engines and nearly the same dimensions.

 Ahmadinejad views Simorgh four-engine cluster (likely North Korean-derived)

IHS Jane’s concludes that given these investments in its missile infrastructure, and despite the United States attempting to garner support for further sanctions against Iran for its nuclear programme, Tehran appears determined to continue developing its missile and rocket capabilities in the foreseeable future.

Further analysis of the Simorgh 3 SLV and the new installation at Semnan can be viewed at jmr.janes.com and in the April edition of Jane's Missiles and Rockets .

IHS Jane’s is an IHS (NYSE: IHS) company.

ENDS

More info on the Simorgh from the US Naval Institute:  http://blog.usni.org/tag/simorgh/

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Update on the Big Dustup Index Fund

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Note:  Charts have been updated with Friday's closing prices (5 March 2010).

The Big Dustup Index Fund (BDUIF) has been performing fairly well over the last two weeks, meeting expectations.  The Fund is based on oil and gold, and is designed to follow the ratio of oil and gold to the general US stock market, going up when oil and gold diverge positively from the market.  It is particularly tuned to react to troubles in the Mideast and, to a lesser extent, inflation.  General economic ups and downs are automatically damped out, and should not effect the Fund very much.  Thus, the downside risk of investing in oil and gold is somewhat mitigated, since changes in commodity prices that follow the stock market are counteracted.  For details on how this is possible, and why it may be advantageous, see my previous post.

Once again I must advise caution: If you want to make a similar investment, don’t take my word for it. Do some research and figure out if I am really making sense or not.  I am not an investment counselor, and this is not intended to be advice in any way.

Recent Performance

In the following, we compare the performance of the Fund since inception on 4 February to three baselines:  the daily spot price of West Texas Intermediate Sweet Light Crude Oil at Cushing, Oklahoma (WTI Cushing), the daily London Afternoon Gold Fix (London Au), and the daily closing Dow Jones Industrial Average (DJIA).  We also compare the performance of the Fund to the ratio of WTI Cushing to the DJIA, and to the ratio of London Au to the DJIA, since those measures are what the Fund is intended to track.  (Note: I should probably use the S&P 500 instead of the DJIA as a broader indicator of the market, but the difference is slight.)

The above chart shows overall performance of the Fund, compared to WTI Cushing, London Au, and DJIA, all normalized to 1000 at Fund inception.

Remember that the goal of the Fund is to do nothing if the gain or loss in oil and gold simply follow the DJIA.

Thus if there are no world "events", the Fund should stay at 1000.  The increase seen in the Fund is due to the over-performance of oil prices compared to the DJIA, likely due to increased Mideast tensions.   This is shown more easily in the next chart.

The above chart shows that the Fund is tracking the arithmetic average of the two ratios (oil to DJIA, and gold to DJIA) very well.  The Fund is performing as designed.  Gold however is not performing.  More on that later.

Recent Changes to Improve Performance

Although the ratio of oil to the stock market has been increasing, BDUIF performance has been somewhat hindered by the fact that gold vs. DJIA is not going up in response to tensions, and by the fact that over the last two weeks, I had a significant portion of the Fund in Direxion's FAZ which is a triple bear on the Russell 1000 Financial Index.  That index has outperformed the DJIA, unfortunately. 

 

Previous BDUIF Holdings (3 March 2010)

On 4 March, I sold FAZ and DXD (DJIA 2x bear) completely, increased my holding in Direxion's BGZ (3x large cap bear), and took up a small but significant stake in Direxion's DPK (3x developed markets bear).  The DPK inversely follows market indexes in 20 developed countries (Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom).  The thought here is that most of these countries, particularly the European ones, are in more trouble than the US.

  

  Current  BDUIF Holdings (4 March 2010)

Thus the negative market hedge position now consists of two triple bear Direxion ETF's, BGZ and DPK, which together represent 19% of the Fund. Their 3x nature gives them a leverage much greater than their percentage would otherwise imply, and allow a much larger stake in oil and gold.  However, over periods of time longer than a day, the BGZ and DPK ETF's are not well-behaved since they use a odd variety of financial instruments to attempt to track three times the inverse movement of their underlying indices.  Holding them a long time is not recommended, and typically results in an underperformance from what one would otherwise expect.  Appropriate management involves buying and selling on error trends, which is a real pain, and fraught with its own risks.

With the inclusion of DPK, the hedge position has become a little bit of a play on the Greece/Spain/Portugal/UK and all-of-Europe troubles.  If the BDUIF were a tightly controlled fund, managed by rules, the managers would likely not be allowed to do this, but hey, I can do whatever I want.  It is important to note though that my similar divergent venture into FAZ was a bust.

I also increased my holdings a few percent in UGL (2x gold bull), and moved a small but significant portion of my USO holding into Powershares DBO (1x oil bull).  By moving into DBO, I am attempting to partially counteract roll-yield losses caused by contango that are sustained by OIL and USO due to their forced buys of next month futures immediately when their this-month futures contracts expire.  DBO has a more flexible approach to futures roll, which allows their managers to roll to whatever futures contract generates the best possible "implied roll yield." Thus, they are able "to potentially maximize the roll benefits in backwardated markets and minimize the losses from rolling in contangoed markets," according to their statements.  The downside is that the futures are then spread out over time, and may not react as positively as next-month oil futures to Mideast tensions/war.

Additionally, I moved a small amount out of the Fund into another investment that I wanted to chase.  This marks the second time I have removed money from the Fund.  The total amount removed since inception of the BDUIF on 4 Feb has been approximately 5%.  All data has been corrected for these removals so that they do not impact the statistics.  In other words, looking at the charts etc., it has been made to appear that the money was removed before inception.

The Problem with Gold

The basic premise that gold prices compared to the DJIA would go up following a Mideast event has always been suspect to me, and is even more suspect after the large gains in the oil to DJIA ratio with essentially zero gains in the gold to DJIA ratio, in the face of increasing Mideast tensions in the last month.

This would argue for the reduction of my UGL holding, especially since it has a 2x leverage.  I will consider this some more over the weekend, and possibly sell a significant amount of UGL and buy additional DBO, turning the BDUIF into a more oil-driven fund.  The use of UGL in the Fund to provide a gain on inflation really won't work unless the inflation is so severe that the resulting regulatory tightening negatively impacts the stock market -- and inflation is still uncontrolled.  In other words, it works best in a stagflation economy, which probably would take months or years to develop.

I plan to provide another update in two weeks, or as conditions warrant.  I leave you with an interesting chart:

Click for larger version

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