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Laying Siege To Gaza

Portfolio Armor's Photo
by Portfolio Armor
Sunday, Oct 29, 2023 - 10:08
Tanks lined up in front of an urban area.

Laying Siege To Gaza

Readers who have followed the Russia-Ukraine War closely may remember the name Naftali Bennett. Bennett is the former Israeli Prime Minister who travelled to Moscow shortly after Russia's invasion of the Ukraine in an attempt to mediate an end to the conflict. He later said that both parties were close to agreeing to a ceasefire, but the West blocked the Ukrainian government from further negotiations. 

On Saturday, Bennett laid out his plan for besieging Gaza, in a way he argued would avoid playing in to Hamas's strengths or unnecessarily provoking Hezbollah, while also being consistent with international law with respect to humanitarian concerns. Below is an X translation of his post, with some slight additional formatting to improve readability and a bit of bolding for emphasis of key points. Following that, we'll look at an example of an investing approach that can offer some protection in the event this war expands. 

Authored by Naftali Bennett on X 

The Gaza Siege Plan

Siege of Gaza, suffocation of Hamas operatives in tunnels, and occupation of a security strip inside Gaza until Hamas surrenders, the demilitarization of the strip and the release of the abductees. *Not to act in the way that Hamas expects us to act and prepared for*

*Publicizing the siege plan scares and stresses Hamas leaders and will be a catalyst to bring about results*

Base Assumptions 

  • For 15 years, Hamas prepared a vast tunnel system, an underground state, precisely against the entry of Israeli forces.
  • When Hamas carried out Black Sabbath [the October 7th attack], it was exactly expecting a "cast lead" style ground response and the other operations.
  • Hamas is counting on us entering every bunker and every tunnel with tweezers in order to exact a heavy blood price from us.
  • Hamas is counting on us entering every bunker and every tunnel with tweezers in order to exact a heavy blood price from us.
  • Hamas wants us to get involved during the entry, which will force us to cause heavy collateral damage of killing Gazan children, etc., so that the world will force us to stop.
  • Hamas has probably removed many assets, including leadership and commanders to the south of the Gaza Strip, leaving simple activists in the north of the Gaza Strip to quarrel with us.

We must not act according to the expectation of Hamas

The siege plan for Hamas in northern Gaza:

  1. To surprise *and not go deep into the Gaza Strip as Hamas expects us to do*, but to impose a complete siege on the north of the Gaza Strip, dry up and suffocate the Hamas terrorists in the tunnels until they are forced to leave.
  2. To create a new security strip 2 km deep into the territory of the strip along our entire border, a permanent strip. This is through the use of massive firepower and ground forces, and engineering. Imagine bulldozers simply leveling the area.
  3. Continuously use firepower on Hamas all over the Strip. Israel conducts a continuous series of targeted ground operations with enormous firepower, to separate neighborhood from neighborhood from Hamas. There is no need to hunt down every Hamasnik in a hole and a tunnel.
  4. The residents of Gaza stay in the southern half of the Strip or outside the Strip until the end of the war: when Hamas disarms unilaterally and releases all the hostages. This, of course, according to international law, to preserve their lives. Countries around the world can take in the refugees—temporarily, of course—until Hamas surrenders and the war ends. Between 6 months and 5 years.
  5. In the south of the Gaza Strip, humanitarian corridors are allowed, and we allow (but do not give ourselves): water, food, medicine. This is as required by international law.
  6. Do not allow any drop of fuel to enter the entire strip. Without fuel there are no tunnels because there is no ventilation and no lighting. Every drop that enters the Gaza Strip goes to Hamas. Fuel = fighting. So not a bit.
  7. Strategic patience: make the passing time work in our favor. We have all the time in the world.
  8. After initial ground operations, 250,000 military personnel must be released home as soon as possible, in order to release economic-civil pressure, to restore the economy and life to order. We must not just stress ourselves artificially just because we called up 350,000 reservists.
  9. Any country in the world that expresses pain over the situation of the refugees in the south is invited to temporarily host refugees (Scotland, Egypt, Turkey, etc.).
  10. Avoid collateral damage as much as possible, which could interrupt the Israeli operation before achieving Hamas's surrender.

Advantages Of The Program

  • Trickery and surprise: this is exactly the opposite of what Hamas has been preparing for for a decade. Contrary to what he expects us to do. Hamas believes that we have a breathing space of 4-5 weeks inside Gaza and then we will leave, as has always happened in the last decade.
  • Dehydrates Hamas operatives. Imagine "Muhammad" a Hamas operative who is currently waiting for us in the tunnel, alert and ready. Under siege, he will be forced to wait for months in his humid tunnel, wet, hungry, depressed, and when the fuel runs out, the tunnel will go dark, and there will be no oxygen: his family may be in the mud in the south of the Gaza Strip or in Egypt or Belgium: what am I doing here?
  • Transfers the pressure from Israel to Hamas; Passing the lever from Hamas to us. Right now all the leverage is with them. the abductees They will play and play us. This thing turns the bowl and basically the lever goes to us.
  • The Hamas leadership will find itself in a dilemma: either Hamas or the state of Gaza. If Sinuar does not disarm he will go down in history as the one who destroyed his country and brought a historical disaster on his people.
  • Dramatically reduces the chances of Hezbollah involvement: A. They have no specific trigger to go to war. B. Israeli forces are kept fresh and free to strike in Lebanon.
  • A sustainable political line of defense: until the Israelis do not return home, neither will the Gazans return home. Everyone is going home together: Israeli hostages are returning home to Israel, families from the Gaza enclave will return only with the disappearance of Hamas, and the residents of Gaza will also be able to return because the war is over and the danger to their lives has passed.
  • The program was tested by DBA experts and meets all the tests of international law.

Bennett's Plan Versus The Economist's Reporting

The former Prime Minister's plan sounds consistent with The Economist's reporting about what Israel is doing, as Richard Hanania summarized on X: 

Hanania's summary in full: 

The Economist reports on Israeli strategy. It has invaded Gaza from two sides, with Israeli soldiers being seen in Beit Hanoun in the north and Bureij in central Gaza.

Instead of overwhelming force going straight into Gaza City, the strategy looks like an encirclement of the North. Hamas won't get the glorious quick battle in which they can hope to inflict enough casualties for Israel to reconsider. It will be slow and methodical, as they hide underground and run out of supplies.

That means it'll be a longer war that will be brutal for the people of Gaza, but less deadly for Israelis. After Israel called for an evacuation of the north, an estimated 2/3 of the 1.1 million people of the region left. That means there are close to 370K civilians still in the area. The south of course is still being hit and blockaded, and it's not going to be pleasant there either.

 

Once Hamas' military capabilities in the north are destroyed, I can't imagine Israel ever letting the area become a threat again.

The way out for the civilians of Gaza is to let them leave and become refugees. Unfortunately, Hamas won't let that happen, and the rest of the world would rather pressure Israel into sacrificing its safety rather than pressure Hamas and other countries to let them leave as refugees.

A true humanitarian movement would focus on the refugee question. It's the only hope that the people of Gaza have to live decent lives, now that it's become clear that they cannot peacefully co-exist next to Israel.

As Carl von Clausewitz famously wrote, "No battle plan survives contact with the enemy", so we'll see if the Mideast war actually continues in this direction. But we ought to remain cautious that it could spiral out of control, causing chaos in markets. 

Investing Amid War And Uncertainty 

In a previous post, we sketched out an approach for investing amid uncertainty, our hedged portfolio method. 

In a nutshell, you tell our system how much money you're looking to invest, and how much risk you're willing to take, and it presents you with a handful of securities and hedges designed to maximize your returns over the next six months while protecting your downside to the level you indicated. 

Another Real World Example

Here's the portfolio our system created for an investor on April 20th who had $3,000,000 to put to work and didn't want to risk a decline of more than 20% over the next six months. 

And here's how that portfolio performed over the next six months, net of hedging and trading costs: It was up +11.94%, versus +3.01% for SPY. 

You can find an interactive version of the chart above here. 

 

If You Want To Stay In Touch

You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on Twitter here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).

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