Tag: news

Exposing Wall Street's Hidden "Code"

Having been the first to warn the world about the perils of high frequency trading nearly 5 years ago, when momentum ignition, layering and quote stuffing were still incomprehensible buzzwords to all but a select few algo traders from Citadel, GETCO and DE Shaw, and warning about such top-down systemic lock ups like flash-crash over a year in advance; as well as the bottom-up impacts of 20 year old math PhDs being in charge of market topology, our crusade from the micro has since shifted to the macro and the primary nemesis of all that is free and fair, the Federal Reserve. In the intervening years, traders such as Haim Bodek opened the HFT kimono even more publicly a few years ago. The following is a must-watch documentary for every investor and trader to comprehend just what it is (and who it is) that drives stock prices day in and day out.

 

The Dark (Pool) Truth About What Really Goes On In The Stock Market Part 1

“I’ll show you how it works.”

 

The rep told Bodek about the kind of orders he should use – orders that wouldn’t get abused like the plain vanilla limit orders; orders that seemed to Bodek specifically designed to abuse the limit orders by exploiting complex loopholes in the market’s plumbing. The orders Bodek had been using were child’s play, simple declarative sentences sent to exchanges such as “Buy up to $20.” These new order types were compound sentences, with multiple clauses, virtually Faulknerian in their rambling complexity.

 

The end result, however, was simple: Everyday investors and even sophisticated firms like Trading Machines were buying stocks for a slightly higher price than they should, and selling for a slightly lower price and paying billions in “take” fees along the way.

 

Bodek felt sick to his stomach. “How can you do that?” he said.

 

The rep laughed. “If we changed things, the high-frequency traders wouldn’t send us their orders,” he said.

 

The Dark (Pool) Truth About What Really Goes On In The Stock Market Part 2

The game had changed. Bodek became increasingly convinced that the stock market—the United States stock market—was rigged. Exchanges appeared to be providing mechanisms to favored clients that allowed them to circumvent Reg NMS rules in ways that abused regular investors. It was complicated, a fact that helped hide the abuses, just as giant banks used complex mortgage trades to bilk clients out of billions, in the process triggering a global financial panic in 2008. Bodek wasn’t sure if it was an outright conspiracy or simply an ecosystem that had evolved to protect a single type of organism that had become critical to the survival of the pools themselves.

 

Whatever it was, he thought, it was wrong.

 

The Wall Street Code


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/WedEbv3Ndwk/story01.htm Tyler Durden

Exposing Wall Street’s Hidden “Code”

Having been the first to warn the world about the perils of high frequency trading nearly 5 years ago, when momentum ignition, layering and quote stuffing were still incomprehensible buzzwords to all but a select few algo traders from Citadel, GETCO and DE Shaw, and warning about such top-down systemic lock ups like flash-crash over a year in advance; as well as the bottom-up impacts of 20 year old math PhDs being in charge of market topology, our crusade from the micro has since shifted to the macro and the primary nemesis of all that is free and fair, the Federal Reserve. In the intervening years, traders such as Haim Bodek opened the HFT kimono even more publicly a few years ago. The following is a must-watch documentary for every investor and trader to comprehend just what it is (and who it is) that drives stock prices day in and day out.

 

The Dark (Pool) Truth About What Really Goes On In The Stock Market Part 1

“I’ll show you how it works.”

 

The rep told Bodek about the kind of orders he should use – orders that wouldn’t get abused like the plain vanilla limit orders; orders that seemed to Bodek specifically designed to abuse the limit orders by exploiting complex loopholes in the market’s plumbing. The orders Bodek had been using were child’s play, simple declarative sentences sent to exchanges such as “Buy up to $20.” These new order types were compound sentences, with multiple clauses, virtually Faulknerian in their rambling complexity.

 

The end result, however, was simple: Everyday investors and even sophisticated firms like Trading Machines were buying stocks for a slightly higher price than they should, and selling for a slightly lower price and paying billions in “take” fees along the way.

 

Bodek felt sick to his stomach. “How can you do that?” he said.

 

The rep laughed. “If we changed things, the high-frequency traders wouldn’t send us their orders,” he said.

 

The Dark (Pool) Truth About What Really Goes On In The Stock Market Part 2

The game had changed. Bodek became increasingly convinced that the stock market—the United States stock market—was rigged. Exchanges appeared to be providing mechanisms to favored clients that allowed them to circumvent Reg NMS rules in ways that abused regular investors. It was complicated, a fact that helped hide the abuses, just as giant banks used complex mortgage trades to bilk clients out of billions, in the process triggering a global financial panic in 2008. Bodek wasn’t sure if it was an outright conspiracy or simply an ecosystem that had evolved to protect a single type of organism that had become critical to the survival of the pools themselves.

 

Whatever it was, he thought, it was wrong.

 

The Wall Street Code


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/WedEbv3Ndwk/story01.htm Tyler Durden

The US Economy In Pictures

Submitted by Lance Roberts of STA Wealth Management,

I have written extensively about the data behind the headline media reports. I have also discussed the importance of the relationship between the underlying data trends relative to broader macroeconomic perspectives.  However, it is sometimes helpful just to view the various economic indicators and draw your own conclusions outside of someone else's opinion. 

With the economy now more than 4 years into an expansion, which is long by historical standards, the question for you to answer by looking at the charts below is:

"Are we closer to an economic recession or a continued expansion?"

How you answer that question should have a significant impact on your investment outlook as financial markets tend to lose roughly 30% on average during recessionary periods.  However, with margin debt at record levels, earnings deteriorating and junk bond yields near all-time lows, this is hardly a normal market environment within which we are currently invested.

Therefore, I present a series of charts which view the overall economy from the same perspective utilizing an annualized rate of change.   In some cases, where the data is extremely volatile, I have used a 3-month average to expose the underlying data trend.   Any other special data adjustments are noted below.

If you have any questions, or comments, you can email me or send me a tweet:  @stawealth

Leading Economic Indicators

LEI-Coincident-To-Lagging-110413

Durable Goods

Durabld-Goods-Orders-110413

Investment

GDP-GDI-110413

Private-FixedInvestment-GDP-110413

ISM Composite Index

ISM-Composite-110413

Employment & Industrial Production

Employment-fulltime-joblessclaims-103113Capacity-Utilization-110413

Industrial-production-vs-employment-110413Retail Sales

Retail-Sales-110413

Social Welfare

Social-Benefits-DPI-110413

The Broad View

GDP-6-Panel-Chart-110413

Economic Composite

(Note: The Economic Composite is a weighted index of multiple economic survey and indicators – read more about this indicator)

STA-EOCI-GDP-110413

If you are expecting an economic recovery, and a continuation of the bull market, then economic data must begin to improve markedly in the months ahead.  If not, the drag of economic growth will ultimately continue to erode corporate earnings, profitability and weigh on the financial markets. 

For the Federal Reserve, these charts make the case that continued monetary interventions are not healing the economy, but rather keeping it aflo
at by dragging forward future consumption.  The problem is that it leaves a void in the future that must be filled. 

In my opinion, the economy is far to weak to stand on its own two feet.  Therefore, while the Fed may ease off on the current rate of bond purchases, likely not before mid-2014, it is highly unlikely that they will remove their "highly accommodative stance" anytime soon.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/my3wm-xwWcI/story01.htm Tyler Durden

Central Connecticut State University Locked Down After Campus Shooter “Scare” That Could’ve Been a Halloween Costume; Campus Police Chief Says There Was No Real Threat to Anyone, Charges Likely

college 2013Central Connecticut State University declared a
state of emergency and ordered a
campus lockdown after reports of a possibly costumed armed man
on campus also carrying what looked like a sword. “Somebody was
seen either with a gun or was thought to have a gun,” a university
spokesperson told the press. The lockdown
ended after police took three people, including at least one
student, the primary suspect, into custody. They recovered no
weapons, and the Hartford Courant
reports that the campus police chief said there was never a
threat to anyone.  Nevertheless, even while acknowledging the
incident “possibly could have been a Halloween costume,” the campus
police chief insisted it “wasn’t a prank because there was concern,
there was alarm.”

for the camerasThe Courant has a
photo gallery illustrating the overwhelming police response,
which included cops from several local towns and state police
sending two SWAT teams to the school. The first photo, of a couple
embracing, is captioned “A man hugs his girlfriend as they reunite
on Manafort Street as students and faculty were finally released
Monday afternoon,” a caption worth a thousand words.

Police say charges are likely in the incident, according
to the Courant’s David Owens.

from Hit & Run http://reason.com/blog/2013/11/04/central-connecticut-state-university-loc
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Don't Track Me, Bro! Glenn Reynolds on Mileage-Based Gas Tax

Glenn Reynolds of Instapundit comes out against
replacing the gas tax with a mileage-based levy, which would likely
be assessed via a GPS-style “black box” installed in cars. The
irony behind the reform idea? People are burning less gasoline,
which is one of the goals of transportation policy. But that means
government collects less money from the gax tax.

From Road & Track:

The response in many places — from Oregon to New
Jersey and points in between — has been to propose taxing
people based on the miles that they drive rather than on the gas
that they burn.  There are even test programs going on in
several states in which GPS trackers are being used to collect
drivers’ mileage.  Needless to say, this sort of thing has
people worried about privacy, especially in the wake of the recent
scandals involving government spying and abuse of data.  It
also raises the question of whether, by moving to a mileage tax,
we’re giving up on trying to get people to save gas….

After noting that tracking drivers in this way creeps out
privacy advocates, Reynolds further notes:

Simpler still, of course, would be an increase in the gas tax.
 Politicians don’t like that, because tax increases are never
popular, and gas is already expensive enough.  But, of
course, the mileage tax would be a tax increase
too, since the whole reason it’s being proposed is
because the highway administrators want more money than they’re
getting now.  If you’re going to pay more anyway, why give up
your privacy to boot, just so that politicians can pretend
something else is going on?  And the gas tax is still a pretty
good proxy for road use:  The heavier the vehicle and the more
it drives, the more gas it burns and the more tax its owner pays.
 Hybrids get better mileage (though often no better than
diesels) but that’s not enough to undermine this much, and
pure-electric cars are a tiny fraction of those on the road, and
that isn’t likely to change any time very soon.


Read the whole thing here.

The federal gas tax hasn’t increased in about 20 years and,
unlike most levies, is more clearly designed as a user fee – the
money collected is supposed to be used for highway and
infrastructure upkeep (though
it’s often diverted to other purposes). Note that Adrian
Moore of Reason Foundation favors trying out the black boxes. He
believes that privacy concerns can be addressed while getting more
accurate tallies. From an LA Times story:

Wonks call it a mileage-based user fee. It is no surprise that
the idea appeals to urban liberals, as the taxes could be rigged to
change driving patterns in ways that could help reduce congestion
and greenhouse gases, for example. California planners are looking
to the system as they devise strategies to meet the goals laid out
in the state’s ambitious global warming laws. But Rep. Bill Shuster
(R-Pa.), chairman of the House Transportation Committee, has said
he, too, sees it as the most viable long-term alternative. The free
marketeers at the Reason Foundation are also fond of having drivers
pay per mile.

“This is not just a tax going into a black hole,” said Adrian
Moore, vice president of policy at Reason. “People are paying more
directly into what they are getting.”


More here.

from Hit & Run http://reason.com/blog/2013/11/04/dont-track-me-bro-glenn-reynolds-on-mile
via IFTTT

Don’t Track Me, Bro! Glenn Reynolds on Mileage-Based Gas Tax

Glenn Reynolds of Instapundit comes out against
replacing the gas tax with a mileage-based levy, which would likely
be assessed via a GPS-style “black box” installed in cars. The
irony behind the reform idea? People are burning less gasoline,
which is one of the goals of transportation policy. But that means
government collects less money from the gax tax.

From Road & Track:

The response in many places — from Oregon to New
Jersey and points in between — has been to propose taxing
people based on the miles that they drive rather than on the gas
that they burn.  There are even test programs going on in
several states in which GPS trackers are being used to collect
drivers’ mileage.  Needless to say, this sort of thing has
people worried about privacy, especially in the wake of the recent
scandals involving government spying and abuse of data.  It
also raises the question of whether, by moving to a mileage tax,
we’re giving up on trying to get people to save gas….

After noting that tracking drivers in this way creeps out
privacy advocates, Reynolds further notes:

Simpler still, of course, would be an increase in the gas tax.
 Politicians don’t like that, because tax increases are never
popular, and gas is already expensive enough.  But, of
course, the mileage tax would be a tax increase
too, since the whole reason it’s being proposed is
because the highway administrators want more money than they’re
getting now.  If you’re going to pay more anyway, why give up
your privacy to boot, just so that politicians can pretend
something else is going on?  And the gas tax is still a pretty
good proxy for road use:  The heavier the vehicle and the more
it drives, the more gas it burns and the more tax its owner pays.
 Hybrids get better mileage (though often no better than
diesels) but that’s not enough to undermine this much, and
pure-electric cars are a tiny fraction of those on the road, and
that isn’t likely to change any time very soon.


Read the whole thing here.

The federal gas tax hasn’t increased in about 20 years and,
unlike most levies, is more clearly designed as a user fee – the
money collected is supposed to be used for highway and
infrastructure upkeep (though
it’s often diverted to other purposes). Note that Adrian
Moore of Reason Foundation favors trying out the black boxes. He
believes that privacy concerns can be addressed while getting more
accurate tallies. From an LA Times story:

Wonks call it a mileage-based user fee. It is no surprise that
the idea appeals to urban liberals, as the taxes could be rigged to
change driving patterns in ways that could help reduce congestion
and greenhouse gases, for example. California planners are looking
to the system as they devise strategies to meet the goals laid out
in the state’s ambitious global warming laws. But Rep. Bill Shuster
(R-Pa.), chairman of the House Transportation Committee, has said
he, too, sees it as the most viable long-term alternative. The free
marketeers at the Reason Foundation are also fond of having drivers
pay per mile.

“This is not just a tax going into a black hole,” said Adrian
Moore, vice president of policy at Reason. “People are paying more
directly into what they are getting.”


More here.

from Hit & Run http://reason.com/blog/2013/11/04/dont-track-me-bro-glenn-reynolds-on-mile
via IFTTT

Obamacare: Coming to Your Favorite Primetime Show?

Maybe they can sell the success of the program on "Once Upon a Time" along with the other fairy tales.Will Mike and
Molly soon be browsing HealthCare.gov to find coverage for
their diabetes treatments? Will Tyrese on The Walking Dead
lament that the zombie apocalypse has ended any possibility of
getting the mental health assistance he would have been able to
access had the world not ended? Will CSI investigate the
murder-suicide of an elderly couple who had their insurance
policies canceled because they weren’t good enough, according to
the Obama administration?

Maybe. A California-based foundation is dangling
hundreds of thousands of dollars in front of television shows
to see if anybody bites. From the Associated Press:

The California Endowment, a private foundation that is spending
millions to promote President Barack Obama’s signature law,
recently provided a $500,000 grant to ensure TV writers and
producers have information about the Affordable Care Act that can
be stitched into plot lines watched by millions.

The aim is to produce compelling prime-time narratives that
encourage Americans to enroll, especially the young and healthy,
Hispanics and other key demographic groups needed to make the
overhaul a success.

“We know from research that when people watch entertainment
television, even if they know it’s fiction, they tend to believe
that the factual stuff is actually factual,” said Martin Kaplan of
the University of Southern California’s Norman Lear Center, which
received the grant.

Read the whole piece
here.

A Republican strategist quoted thinks it’s way too late in the
game to attempt using television shows to help recover the
Affordable Care Act’s ailing image and will be perceived as
partisan. 

It’s much more interesting to imagine what the outcome would
have been had ACA supporters had been prepared, and pro-Obamacare
stories were showing up on television shows right now as the
disaster was unfolding. Imagine patients at Seattle Grace Hospital
being earnestly encouraged to visit HealthCare.gov and sign up for
coverage in just minutes and have a good laugh.

Follow this story and more at Reason
24/7.

Spice up your blog or Website with Reason 24/7 news and
Reason articles. You can get the widgets
here. If you have a story that would be of
interest to Reason’s readers please let us know by emailing the
24/7 crew at 24_7@reason.com, or tweet us stories
at @reason247.

from Hit & Run http://reason.com/blog/2013/11/04/obamacare-coming-to-your-favorite-primet
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"Just When Consensus Thinks Europe Is Exiting The Crisis" Or Why You Can't Handle The Truth About Europe

… but for those who can, and wish to see beyond the propaganda of the Eurozone’s unelected leaders, here is Natixis with a candid, honest summary of Europe’s sad, “unsustainable” predicament.

Just when the consensus thinks Europe it is exiting the crisis…

by Patrick Artus of Natixis

This growing differential between real interest rates and growth rates is significantly harming borrowers’ solvency. Consider the case of public finances. Due to the widening differential between the real long-term interest rate and the real growth rate, the primary fiscal surplus which stabilises the public debt ratio (Chart 5) is currently (percentage points of GDP):

? 4.5 in Spain, versus an actual deficit of 4.0
? 7.0 in Italy, versus an actual surplus of 2.0;
? 11.7 in Portugal, versus a deficit of 1.0;
? 4.8 in Ireland, versus a deficit of 2.0;
? 26 in Greece, versus an actual deficit of 1.5.

These countries are therefore clearly entering deflation, a situation in which disinflation leads to excessively high real interest rates.

The rest of the euro zone is not in this situation. The real long-term interest rate in the euro zone, excluding the troubled countries, is 1%, just above the growth rate (Charts 7A and B); the euro zone excluding the troubled countries has no primary fiscal deficit (Chart 7C) and is therefore close to solvency.

The troubled euro-zone countries are faced with not only a rise in their real interest rates but also with the need to return to restrictive fiscal policies in 2014. In 2013 fiscal deficits were not reduced, except in Greece (Chart below, left), because these countries took advantage of the postponement of the date by which they have to bring their deficits under control. This situation is leading to a very rapid increase in public debt ratios (Chart below, right) and is therefore unsustainable; moreover, it is unacceptable for the European Commission, the ECB and Germany.

The ECB is therefore faced with a new heterogeneity in the euro zone. The troubled countries are being pushed into deflation due to the very large differential between real interest rates and growth rates which results from the rapid decline of inflation; this is not the case for the other countries. If the ECB does not react, the troubled countries will therefore find themselves in an even worse situation of confirmed deflation. What can it do? The solution that would be most effective, but is probably unacceptable for the ECB, would be to act like the Bank of Japan: massive purchases of government bonds of the troubled countries (Chart 10A) leading to a rise in inflation expectations and actual inflation (Charts 10B and C) and a fall in real long-term interest rates (Chart 10C). The probability of the ECB conducting this policy is very low; part of the euro zone is therefore likely to become mired in deflation just when the consensus thinks that it is exiting the crisis.

Source: Natixis


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kj35xU6XCbc/story01.htm Tyler Durden

“Just When Consensus Thinks Europe Is Exiting The Crisis” Or Why You Can’t Handle The Truth About Europe

… but for those who can, and wish to see beyond the propaganda of the Eurozone’s unelected leaders, here is Natixis with a candid, honest summary of Europe’s sad, “unsustainable” predicament.

Just when the consensus thinks Europe it is exiting the crisis…

by Patrick Artus of Natixis

This growing differential between real interest rates and growth rates is significantly harming borrowers’ solvency. Consider the case of public finances. Due to the widening differential between the real long-term interest rate and the real growth rate, the primary fiscal surplus which stabilises the public debt ratio (Chart 5) is currently (percentage points of GDP):

? 4.5 in Spain, versus an actual deficit of 4.0
? 7.0 in Italy, versus an actual surplus of 2.0;
? 11.7 in Portugal, versus a deficit of 1.0;
? 4.8 in Ireland, versus a deficit of 2.0;
? 26 in Greece, versus an actual deficit of 1.5.

These countries are therefore clearly entering deflation, a situation in which disinflation leads to excessively high real interest rates.

The rest of the euro zone is not in this situation. The real long-term interest rate in the euro zone, excluding the troubled countries, is 1%, just above the growth rate (Charts 7A and B); the euro zone excluding the troubled countries has no primary fiscal deficit (Chart 7C) and is therefore close to solvency.

The troubled euro-zone countries are faced with not only a rise in their real interest rates but also with the need to return to restrictive fiscal policies in 2014. In 2013 fiscal deficits were not reduced, except in Greece (Chart below, left), because these countries took advantage of the postponement of the date by which they have to bring their deficits under control. This situation is leading to a very rapid increase in public debt ratios (Chart below, right) and is therefore unsustainable; moreover, it is unacceptable for the European Commission, the ECB and Germany.

The ECB is therefore faced with a new heterogeneity in the euro zone. The troubled countries are being pushed into deflation due to the very large differential between real interest rates and growth rates which results from the rapid decline of inflation; this is not the case for the other countries. If the ECB does not react, the troubled countries will therefore find themselves in an even worse situation of confirmed deflation. What can it do? The solution that would be most effective, but is probably unacceptable for the ECB, would be to act like the Bank of Japan: massive purchases of government bonds of the troubled countries (Chart 10A) leading to a rise in inflation expectations and actual inflation (Charts 10B and C) and a fall in real long-term interest rates (Chart 10C). The probability of the ECB conducting this policy is very low; part of the euro zone is therefore likely to become mired in deflation just when the consensus thinks that it is exiting the crisis.

Source: Natixis


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kj35xU6XCbc/story01.htm Tyler Durden

Wall Street Code Released

VPRO Backlight has just released the documentary we did with them earlier this year.  Wall Street Code is about the blatant and planned fixing of, specifically, the US financial markets.  After meeting with Haim Bodek and being introduced by him to the guys at Sang Lucci, we decided to ban together and contact Marije.  The following is a culmination of that initial meeting and the specials skills possessed by the journalists at VPRO.  @DirtyAutomatik aka Bryan Wiener who was Haim Bodek’s head trader and makes a special appearance worth noting.  Look for Bryan to join me over on BTFDtv.com on this coming Sunday to talk special order types and order book manipulation.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JK3nuuRYNIU/story01.htm CalibratedConfidence