Archive - Aug 2009 - Story

And no, no discussion of HFT, predatory algos or flash orders. Tune in for a broader, comprehensive market analysis.

So, the question becomes, when will the true “animal spirits” on Wall Street reveal themselves? It has not happened yet. And that says liquidity and momentum support for the markets is narrow and potentially volatile. Squeezing shorts and running technical stops can work well for a while. But what happens next if animal spirits broadly are not fully engaged? For now, margin debt is telling us animal spirits are very subdued. Very subdued.

"Are you stimulated yet? We hope you are, because we’ve just witnessed the largest
economic stimulus in the history of the world. Never before have so many government
dollars been thrown at the economy to prevent a depression. When added together, the
combined financial, monetary and fiscal stimuli in the US are more than the cost of the two
World Wars and “The New Deal” combined." - Eric Sprott

The challenge before regulators, politicians and anti-trust commissioners with regard to all these very salient issues is greater now than it has ever been in the history of a "free and fair" equity capital market. Whether the approach taken is one that will perpetuate the dominance and the increased profitability of a select few or will bring back a sense of democracy and remove the highly speculative element Mr. Merrin discusses, will be critical for the future of US capital markets, and the participation of retail investors in what was once the only way to reward success and punish failure. But then again, the last two seem to be no longer a key concern for the administration, which has taken a sharp detour from the primary tenets of the capitalist system that over the past 200 years managed to make America the greatest country in the world. We hope the right choice is made for the sake of continuing America's greatness, even if it means one quarter where a company like Goldman Sachs has more than 2 trading days of capital loss.

I sent this Op-Ed proposal to the New York Times on Friday. Perhaps they will print it. If so, I will donate the proceeds (don't they pay you $450?) to the Electronic Frontier Foundation.

Going through and sorting new music, as well as dumping old. Join us if you like. The Sunday morning dull music cull (and general audio tom-foolery), at Studio Zero

http://cdo.zerohedge.com:8000/listen.pls

Chat up the DJ (and send your .mp3 files) here: radiozh.

Always a unique and compelling perspective

The good old cash-for-favors system, known as lobbying, is in full swing again, with General Electric valiantly leading the pack of beltway brown-nosers, having spent $7.2 million in Q1 for various lobby purposes. This represents a 60% increase over the $4.5 million spent in Q1 and $1.8 million over Q2 of 2008. Ironically, General Electric, which with AIG, is at the forefront of hobbled companies who continue existing solely thanks to generous taxpayer bailouts in various forms, was by far the biggest lobbying contributor, with only Chveron spending over $6 million in Q2 of 2009. GE's $7.2 million represents a recycled taxpayer spend to promote private interests of $160,000 for every single day that Congress was in session.

Ok, ok.  Stop emailing already.  You talked me into it.  More Radio Zero, LIVE, tonight.  Come back for the URL, say,  7:30 ET?

Listen here: http://cdo.zerohedge.com:8000/listen.pls

Chat up the DJ (send your .mp3 files) here: radiozh.

Yet another good introduction for the novices in the field. Keep in mind the various participants have extensive interests so read between the lines.

A one hour program in which Ron Paul provides the basics of the Federal Reserve and why it is high time transparency was introduced to this most critical of institutions. Must watch.

I know you are always quite concerned about secrecy and so I thought you might want to know about what appears to be a real breach in your security veil. No, not for software. We're talking about reporting systems for product sales. You may or may not know of a company called Brightstar. This company is one of the largest distributors of mobile handsets in the world. And yes, they do distribute Apple iPhones, as well as phones from RIMM, Nokia and Samsung. One of my anayst colleagues in the hedge fund industry told me earlier this year that a senior Brightstar executive is or was in the employ of a company called DeMatteo Monness. This company is a close partner of LinkedIn and is one of the "expert networks" we've been writing about here on ZeroHedge.

As disclosed two days ago, German regulators staged a raid at the office of German carmaker Porsche to determine whether the car company had been manipulating Volkswagen stock prices, leading to a massive squeeze and the eventual suicide of Adolf Merckle who lost a fortune on what allegedly may have been a Porsche orchestrated act. It seems the investigation is taking a turn for the serious, with Bloomberg reporting that today former Porsche CEO Wendelin Wiedeking and former CFO Holgar Haerter had their homes raided by investigators earlier in the day.

Since the beginning of July, the most prominent feature of the market has been the divergence in volume between financials and "all other" stocks. While overall stock market volume has been flat if not down over the past two months, and a continuation of a long-term downward trend since the March ramp up, the volume in financial stocks has staged an unprecedented pick up.

I heard an incredible thing yesterday. Apparently, mutual funds are being stolen from by algorithmic traders.

Late in the day "The Narrator," one of our dedicated public relations gurus, spoke for almost an hour with a reporter who called in to talk about high frequency trading, dark pools and topics of similar ilk. I talked with The Narrator for a couple of hours after the encounter. I paraphrase: What, the reporter asked, do we make of the argument that "predatory algos" (a brand of algorithmic trading) cost large mutual funds billions a year by sniffing out "iceberging" (the practice of breaking up of large orders into smaller blocks to avoid swinging the price significantly in response to a large block of demand or supply)? What did we make of the TABB Group's estimate that $20+ billion in profits stem from certain algorithmic trading strategies. Are algorithms evil?

In a word: no.