Michael Flynn (Misha to his Russian friends?)

One of the more tragic figures currently in the news is the retired army Lieutenant General Michael Flynn. He had a distinguished military career, which involved 33 years service, and most of the latter part was involved with military intelligence. He retired a year earlier than necessary, but there are assertions he was forced to retire as Director of the Defense Intelligence Agency. There are two versions on the web as to why he was effectively fired. One side says he did not listen, worked against policy, he was a bad manager, and various other things. One such incident involved what Flynn described as a twenty minute meeting with Svetlana Lokhova, who had claimed to have access to Soviet GRU files and was writing a book about them. The meeting was in the presence of an ex-Director of MI6, and a senior person in MI5. Apparently Flynn has been accused of subsequently inviting Lokhova to go to Moscow with him to act as a translator, but that trip did not occur. According to the New York Times, Flynn, as Director of the DIA, exhibited a loose relationship with facts, i.e. initiating “fake facts”. The other version is that Flynn argued al Qaeda was nowhere near defeat, that it would be wrong to topple Assad because radical Islamists were the main force in the Syrian insurgency and that Turkey was looking the other way regarding Daesh in Syria. He criticized Obama for letting al Nusra grow in Syria. The second version suggests he was in fact right, but somewhat inconvenient.

After retiring, he set up a private company as a means of further earning income. This raises a question I cannot answer: what is the exact status of a retired General? Obviously he will be required to keep secure any information he acquired as a General, but as far as I am aware, there is no accusation that he has violated that. However, quite naturally his means of earning income drew on his previous experience. Amongst other things, he had given paid interviews for RT (a Russian television network, which as far as I know, broadcasts in the US), and he also gave an interview unfavourable to Turkish President Erdogan, accusing him of taking Turkey away from secularism. However, after this he was hired by a company indirectly owned by the Turkish Government, to investigate Erdogan’s opponent Fethullah Gulen. Later, Flynn joined the Trump campaign, and spent some time attacking Hillary Clinton. Flynn has been accused of conflict of interest over these events, of accepting money from a foreign agent (although it was an American company) without registering. He also gave a talk in New York for Kaspersky Laboratories (a Russian based company dealing with internet anti-virus software) and received money from these talks. Ex-Presidents are notorious for earning money this way, so it should not be prohibited.

He is also accused of receiving money from Russia in 2015, and he did not fill out the required paperwork and receive consent from Congress, which might violate a clause of the US Constitution. The US Constitution forbids military officers from receiving money from foreign governments, but Flynn could well argue that once he retired from the army, he was no longer a military officer. Added to which, his interview appearing on RT is hardly a covert action. Flynn apparently did report most of these activities to the DIA, so there is no case that he tried to conceal what he was doing. Merely he did not report to all the right places. The essence of all this is, as far as I can see, is that he may or may not have violated laws regarding registration/permission to work, reporting to the required bureaucrats, and he may or may not have done good jobs for those who paid him, but apart from that it is hard to see any problem. Sally Yates, the previous Attorney General, has maintained Flynn would be open to Russian blackmail, but how? Also, like most of the accusers, Yates has several bones to pick with Trump.

President-elect Trump then offered Flynn the job of national security advisor. On the day President Obama announced retaliatory measures in response to Russia’s alleged interference in the US election, Flynn spoke to Russian ambassador Kislyak. The argument was that any secret deal could have violated the Logan act, a rather antique example of a strange law prohibiting a private citizen from discussing anything with a foreign government that might subvert the cause of the US Government, and passed by the 5th Congress. Nobody has ever been prosecuted under it so there is no case law. Flynn argues he never discussed these sanctions. However, somewhere in the mix, Flynn was asked by Mike Pence what happened and Flynn admits he misled Pence. Accordingly he was fired.

Did Flynn offer some deal on sanctions? The evidence that he did seems to be indirect. Immediately after they were announced, Sergei Lavrov announced that Russia would certainly respond. So did some others, but nothing happened. Putin announced there would be no retaliation. The argument is that Flynn had assured Kislyak that the sanctions would not last, and hence had undermined US policy, although how is more questionable, since Russia still received the sanctions that still apply and did nothing back. The US comes out ahead here. A strange way of undermining the government.

The next accusation against Flynn is that he has committed a significant crime. Why? Well, he has been asked to give evidence to Congress about Russian involvement in the US election, and he has demanded immunity from prosecution. According to various experts, this “proves” there was serious wrong-doing. I am not so sure. Various people have already accused him of violating various regulations, such as the Logan Act and the requirement to register as representing foreign agents, and when you know there are accusations against you, wouldn’t you ask for immunity? You would be stupid not to. At the very least, by making it a condition to give evidence he can refuse by arguing the Constitutional Amendment against self-incrimination, which, even if he feels he has nothing to hide, at least gets him out of the expense of having to have lawyers present through what could be an extended witch-hunt. If nothing else, you don’t get to be a Lieutenant General by being stupid. You get there by doing things, which is what Flynn apparently did. That was a mistake. According to Congress, he should have sat on his backside for two months, and maybe that says something about Congress.

As an aside, I tried to write a similar tragic figure in my Dreams Defiled, which is on discount over Easter. I don’t think I quite managed someone like Flynn, though, but I would be curious to know what others think.

The stock market dives. Woe! Woe! Woe!

The news this week appears to be focused on the stock markets around the world seemingly going into a dive. One of the things that puzzles me is why this is regarded as such a disaster. I accept that if some investor actually badly needs money and has to sell, this is not good news, but apart from that, and apart from speculators getting it wrong (and here I have little sympathy) what is the problem? If the number of people employed stays the same, the amount produced stays the same, the wages and salaries stay the same, what is important stays the same. What matters in a business is cash flow. If raw materials are available, if costs are stable, if interest rates are low, and if sales are constant, variations in stock prices seem to me to be irrelevant.

Maybe we are all a bunch of wailers! Recall that as oil prices kept rising, there was a general wailing that energy costs would stifle the market. Well, now oil prices seem to be as low as ever, thanks to fracking, and there is general wailing, seemingly because the oil merchants are no longer able to extort such high profits from everyone. (Although, from the price of petrol locally, I rather fancy oil companies are doing rather well out of this too. Prices go up very quickly, and down rather slowly.) It seems to me quite probable that if oil prices stayed the same, there would also be general wailing.

In the alleged “bad news” column, growth in China is falling. The most pessimistic prediction I have seen is that it will fall to (horrors) 5 % this year. So, there may be problems. Thus the Australian mining sector will suffer because construction in China is slowing to a more sustainable level. So? Who else is growing at 5%? If growth were universally zero, would not things be the same as last year? Was last year that bad?

So the European economies are falling backwards. The Greek financial mess is at least partly the fault of the rest of Europe. The huge number of asylum-seekers from the muslim regions also hardly helps, but surely that is a problem Europe has to face. The sanctions against Russia is self-imposed. Cutting off your biggest markets carries a price, and politicians should have made preparations for those consequences, but they did not. The inability to make good predictions and then act on them was also a failure. Consider the dairy industry. A year or so ago there were very high prices. However, the sanctions against Russia removed one of the bigger consumers, and worse, only too many farmers thought the dairy prices were so high they had to get into it. A major reduction in the market size, and a major increase in production meant that prices would collapse. All the money you pay in taxes and that leads to information gathering might have been analysed and appropriate advice given. Of course this presupposes governments are interested in their citizens.

I suspect reality has little to do with the collapse. Quantitative easing pushed too much money into the system for too long. Low interest rates have forced people to invest in stocks because they are one of the few assets that would normally give much better returns in period of low interest. There was too much cash chasing too few stocks, and the prices rose to ridiculous levels. The price to earnings ratios of many mature shares exceeded 17, and that was in a period of high earnings. Those who know would have decided this could be the time to liquidate. The problem is, once some start selling, everyone wants to sell and the stock prices tank, an issue compounded by computerized trading.

Is this all that bad? If you are a long term investor, or a value investor, this is good, because as the prices tumble, there are bargains out there if you know what you are doing. Those that get hurt are the greedy ones who do not know what they are doing, and surely there is some justice in that.