Friday, April 13, 2012

Who Would have made the Better Trader, Hitler or Rommel?

Everybody knows that all Nazis were evil.  This is not an attempt to rehabilitate anyone.  However, ruthless as they were, they exhibited certain traits that continue to bear study in war colleges to this day, and no doubt for a long time to come.  Trading can be very similar to military strategy.  We can learn a great deal about successful trading habits by studying the successes and failures of World War II leaders.

Nazi tactics are easier to study than Allied ones because there were fewer gray shadings.  Without having to worry about an electorate, human frailties or human suffering, the leaders were free to take positions and enlarge or dispose of them as they saw fit, based solely on considerations of success or failure.  When Patton slapped a few soldiers in Sicily, he was recalled and essentially demoted.  When Field Marshal Albert Kesselring shot hundreds of defenseless Italian civilians in the Ardeatine Caves as reprisals, he only increased his authority with his superiors and subordinates.  Such were the realities of World War II politics.

Two Nazi leaders stand out as having diametrically opposed views of strategy.  Adolf Hitler and Erwin Rommel each had overall command in their respective spheres, Hitler in Europe, Rommel in North Africa.  In this respect, Rommel was almost unique among German Generals, because Hitler had little interest in African adventures and largely left Rommel to his own devices.  Everywhere else, Hitler imposed his own strategies with an iron hand and allowed his Generals as little discretion as possible.  As Field Marshal von Rundstedt said once, "My only prerogative was to change the guard outside my headquarters every day."

The German Fuhrer, Adolf Hitler, was a former World War I Corporal who engineered a brilliant (from the German perspective) and horrifying (from the Allied viewpoint) sequence of victories in the 1930s.  He bluffed and tricked his opponents into accepting his occupation of the Rhineland, Czechoslovakia, and Austria without a shot being fired.  Eventually, he pushed his luck and instigated a general war that saw further German military successes in every corner of Europe before it all came crashing down.

Erwin Rommel achieved fame during World War I as a Captain who played a large role in the surprise defeat of Italian forces at Caporetto.  He enhanced his fame by publishing books about his war exploits and general tactics between the wars.  Leading a Panzer Division (the 7th "Ghost" Division, so-called because it appeared "like a ghost" far behind enemy formations), he single-handedly occupied half of France.  Based on these successes, he was sent to North Africa with a small force to "help" the Italians who were being mauled by the British forces based along the Suez Canal.  The other General under consideration for this assignment, Friedrich von Paulus, turned down the assignment because of his wife's advice that operations in Africa would not help his career.  Von Paulus, of course, got his career boost to Field Marshal at Stalingrad.

Hitler's Tactics

Hitler's tactics changed as the war progressed.  At first, he continued his successful pre-war tactics of relying on surprise, speed and bluff.  The attack against France through the Ardennes in May 1940 was largely his idea (developed along with General Erich von Manstein), and it succeeded brilliantly because it was so unexpected.  The invasion of Russia, Operation Barbarossa, also achieved surprise and caught Russian forces unprepared for a defensive campaign.  Hitler sent his forces in three different directions, North, Center and South, and they quickly fanned out across almost the entirety of European Russia.  By November 1941, German forces had reached their furthest distance of advance in North and Central Russia, and by November 1942 the Southern forces had stalled as well.

Hitler became famous among German soldiers for his "stand fast" orders.  In December 1941, when the Soviet forces outside Moscow counter-attacked, Hitler said he had to "put a gun behind every General" to keep them from retreating.  Many at the time credited him with saving the German Army with this order.

In May 1942, the Germans went on the offensive again, but only in the South.   By concentrating his efforts, Hitler assembled a massive force in the South (where Soviet defenses had always been weakest) and broke through Soviet lines.  Occupying endless amounts of undefended territory, Hitler advanced to the mountains of the Caucusus and to the Volga (the "Soviet lifeline") at Stalingrad.

During the Winter of 1942, just as they had the previous year, the Soviets counter-attacked.  Von Manstein, by then a Field Marshal, and most other Generals advocated a withdrawal from the exposed positions at the tip of the advance.  Hitler decided that the effects of a withdrawal would be worse than holding on and rejected any retreat.  Eventually, he relented with Army Group A in the Kuban and allowed it to retreat, but it was too late for the Sixth Army trapped at Stalingrad.  After killing or capturing those 20 German Divisions, the Soviets advanced quickly.  In March, von Manstein counter-attacked and regained a small fraction of the lost ground, but an extension of this attack in July at Kursk led to total German defeat.  Thereafter, Hitler increasingly relied upon his "stand firm" doctrine, turning important towns into "kessels" or fortresses in which occupation troops were to fight and die or be captured where they stood.  This remained German operational doctrine until the end of the war.

Rommel's Tactics

Erwin Rommel took over a dispirited and decimated Italian force when he arrived in Tunisia in December 1940.  The Italians had advanced into Egypt at first, but thereafter had been chased back across the length of Libya by British forces.  Strengthened by the addition of several German Divisions (the "Afrika Corps"), Rommel turned this Panzerarmee Afrika around and sent it back toward Egypt.  Reeling in confusion, the British forces fell back to Egypt, leaving the old Italian base at Tobruk occupied by Australian troops in the belief that it could be resupplied by sea and thus was impregnable.  Rommel occupied Sollum and Halfaya Pass in Egypt and then stopped to rebuild his forces.

The British were being supplied through the Suez Canal by India and Australia.  They rebuilt their forces faster than Rommel, whose own supplies were being sunk in the Mediterranean by the Royal Navy.  In December 1941, they attacked again (Operation Crusader), and swept the Germans out of Egypt.   After giving it a great deal of thought, Rommel abandoned the siege of Tobruk and retreated to his supply bases in Western Libya.

Rommel now was closer to his supply bases than were the British, and he rebuilt his forces and went back on the attack in June 1942.  Following vicious victories at Gazala and Tobruk, which he finally captured, Rommel tried to break through to the Canal but was stopped at El Alamein.  It was nothing but a minor stop on the coastal railroad, but that was where the British assembled their forces.  After his attempt at a breakthrough was denied in August, Rommel built a complex defensive position which the Allies attacked at the end of October.  It took over a week of battle, but eventually the Allied superiority in supplies told.  Rommel asked Hitler for permission to withdraw, which was denied.  The next day, Rommel asked again, and this time permission was granted.

Thereafter, the Germans scurried back to their supplies in Tunisia.  In the meantime, an invasion to the West of Tunisia by the Americans put pressure on them from that direction as well.  Eventually, the Germans were compressed between the British forces in the East and the Americans to the West.

Rommel, against all the odds, then went on the attack.  Leaving holding forces on the old Italian Mareth Line facing the British, he attacked the Americans at Kasserine Pass.  By concentrating his forces, he achieved one of the few clear victories over the Americans during the entire war, forcing them back from one mountain range to another further west.  This gave the German forces some breathing room.  Unfortunately for them, Allied pressure on their supply lines was increasing daily.  Another hindrance on the German side was that Rommel was not in complete command in Tunisia.  A new force had been created there under another (inferior) German General who did not coordinate his forces optimally with Rommel.

After it became clear that the initiative had passed back to the Allies, Rommel returned to Europe and commanded the German occupation of Italy after it switched sides in September.  Then, he was transferred to the Atlantic Coast of France, where he engineered the beach defenses there.  They were mostly concrete obstacles designed to present ship landings.

When the Allies attacked in June 1944, Rommel's forces were ready.  They quickly contained the Allied invasion forces along the beaches, but Rommel did not have sufficient forces to push them into the sea.  Instead, he gradually gave up ground, managing to contain the eruption far longer than he might have.  The Normandy front was still intact when he was shot in his staff car on July 17th and relinquished command for good.

Trading Comparison

By this point, you are no doubt wondering why TheSlayer is spending so much time and effort recounting old battles that belong in the history books.  There is a purpose here.

Hitler exhibited the qualities of a gambler, not a trader.  His early victories were a product of initiative and daring, not of study and deliberation.  He took risky positions that quickly paid off.  Many rookie traders have the same experience.  They see a Bull market and jump in, catching it late in the game but still active.  Their profits mount quickly, and they congratulate themselves on how easy this simple matter of buying stocks is (Hitler is famous for noting in late 1941 that "anyone can master this simple matter of operational command").

These successes can't last because they are built on an insecure foundation.  Surprise, initiative and daring are temporary factors of advantage.  Eventually, you are holding a position and have to manage it.  All the quick buys and grabbing of fleeting opportunities won't help you there.  Every day, every hour requires a re-assessment of whether to buy or sell or hold.  The decisions pile on each other, and they all have to be right.  Hitler made a common rookie error of refusing to sell, or at least until it was too late.  Once he had occupied territory, he held it against all counsel to the contrary.  He reasoned that his forces would bounce back, and they often did, as in the Spring of 1942.  However, his position steadily eroded as more and more of his soldiers were consumed by the "hold fast" orders, and simply buying and holding robbed him of all trading flexibility.  If he had sold at Stalingrad and allowed his 20 Divisions to retreat when they still had a large degree of value left, he could have extended his counter-offensive in March and captured Kursk then.  Instead, his inflexibility weakened his remaining forces, forcing them to put off the recapture of Kursk until July, with catastrophic results.  Selling in the Kuban, allowing those troops to retreat in time, was the only thing that made the Spring counter-offensive possible at all, further reinforcing the idea that getting out in timely fashion makes all the difference.

Thereafter, Hitler repeated the same error over and over, refusing to give up any positions voluntarily until it was too late, and the results were always the same: his forces were surrounded and lost.  No matter how brilliant the operations of his Generals, such as when General Hans Hube saved the entire First Panzer Army after it had been surrounded, eventually all his forces were cut to pieces because they were not allowed to retreat in good order.

Rommel exhibited precisely the opposite strategy.  When the British counter-attacked in 1941, instead of trying to hold on to the Tobruk siege, he retreated despite the pain of being denied a victory after waiting so long.  By keeping his forces in good form despite unavoidable losses, he was able to launch another offensive in 1942 that almost broke through to Cairo.  If that had happened, it might have altered the entire complexion of the war.  Even later, when the British overcame his forces at El Alamein, Rommel realized his position and cut his losses.  He sold rather than take an even greater loss by "standing firm."

In this, he was fought by Hitler, who only gave in when the situation was grim.  Hitler's inflexibility, if he had not relented due to Rommel's brilliance, would have had the same consequences in North Africa as it did in Russia.  With the Allies about to land to the West in Morocco, standing firm in Egypt would have been as catastrophic as Stalingrad.  As it was, by selling out and retreating to Tunisia, Rommel was able to keep his forces in being and enter an entirely new campaign which saw some German successes.  At the very least, he prolonged the war in North Africa by six months and perhaps postponed the Allied invasion of Northern Europe for a year.

His actions in Normandy show similar shrewdness.  The beach defenses were akin to stop losses, in that, if they are hit (and work), they greatly minimize losses.  Once the Allies were ashore, the flexible strategy that served him so well in North Africa helped to contain the Allied invasion.  By compressing the invasion forces for so long, he enabled the German forces (after he was gone) to marshal their armored forces and to have one last go at the Allies with the August 1944 count-attack at Mortain.  It failed due to relative strength of the forces, but at least it gave the Germans a second (and final) chance at victory, just as Rommel had managed in Tunisia.

The point by now should be clear: you have to own up to the situation and learn to take your losses while they are still manageable.  That prevents bigger losses that will destroy you.  You can "stand firm" and get away with it time after time, but eventually it will do you in, just as it did in Hitler.  Better to take a small loss now rather than a catastrophic one later.

Conclusion

Erwin Rommel would have made the better trader.  Hitler was a gambler whose luck ran out.  Rommel recognized his situation for what it was and reacted intelligently.  Hitler, when faced with similar situations, reacted inflexibly.  The flexible strategy, taking your losses and moving on, worked brilliantly and made Rommel one of the few German Generals whose reputations outlasted the war.  The inflexible strategy cost Hitler his empire.

Be flexible.  Take your losses and move on.  It pays in the end.




No comments:

Post a Comment