• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Are Pig Farmers Doing All The Trading? "The Top Five Prop Desks Are Buying And Selling Securities With Leverage ... To Each Other!"

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Mon, 03/29/2010 - 12:58 | 279766 non-anon
non-anon's picture

Come now, y'all, pig farming is a respectable business, knee deep in pig shit.

Mon, 03/29/2010 - 13:35 | 279800 Nordberg
Nordberg's picture

Pig shit kept barter town running...

Mon, 03/29/2010 - 13:50 | 279815 Shameful
Shameful's picture

Who run barter town?!?!?

The Federal Reserve

Better not piss them off or break a deal.  Break a deal, spin the wheel.

Tue, 03/30/2010 - 01:22 | 280284 williambanzai7
williambanzai7's picture

Very good...

Mon, 03/29/2010 - 13:46 | 279810 Crummy
Crummy's picture

Why buy the pig when you get the shit for free?

Mon, 03/29/2010 - 18:51 | 280056 Cognitive Dissonance
Cognitive Dissonance's picture

For crying out loud, we're knee deep in here. Who's turn to shovel?

Mon, 03/29/2010 - 13:08 | 279771 Rogerwilco
Rogerwilco's picture

Intervention is not over. Rational limits mean nothing when the government is willing to use its power to manipulate and subsidize almost any activity. IMO the only thing that will stop them is some six-sigma event from left field that catches them totally off guard. Even then I suspect they would react to immediately halt all trading activities and freeze out anyone who dared to bet against the house.

Mon, 03/29/2010 - 13:10 | 279775 anony
anony's picture

Of course. That way the price you see when executing a trade appears legitimate and not just a circle jerk wherein the 'Bots exchange shares with each other.

Be like me and J Lo tickling each other's A and G-spots, buying and selling the same stock, to and from each other, for a few pennies difference continually, from the opening to closing bells.  The print tomorrow morning will say 2,000,000 of BM exchanged hands at a .05 rise in price, and no one will know that only two people did it.

Extend that out to all the mainly traded issues on all exchanges and you create the impression that all is right with the world. That's what Goldman Sucks is doing as a 'favor' to Bernanke, Geithner, and others who created this economy held up on a cushion of air.

Mon, 03/29/2010 - 13:18 | 279781 sheeple
sheeple's picture

easter bunny, pig farmers ... what's with all these animal theme lately 

Mon, 03/29/2010 - 13:58 | 279819 SV
SV's picture

I think you started it with the cool Avatar...

Mon, 03/29/2010 - 14:07 | 279829 carbonmutant
carbonmutant's picture

"Some are more equal than others"

Mon, 03/29/2010 - 13:19 | 279782 sodbuster
sodbuster's picture

I resent the fact that those five prop desks are giving us pig farmers a bad image. Besides, they're not farmers, they're just pigs.

Mon, 03/29/2010 - 21:55 | 280192 Kayman
Kayman's picture

Now, don't you be denigrating pigs by associating them with the crooks on Wall Street.

Mon, 03/29/2010 - 13:20 | 279785 serfdom
serfdom's picture

I feel that this market is either a giant walking robot with an artificial heart  or a psychotic patient full of commanding hallucinations.  I am very scared to stay close to either of them. The robot could clapse if there is machenic failure, the psychotic patient could hurt me if he receives a homocidal commanding voice.

I am very scared.

Mon, 03/29/2010 - 13:22 | 279787 ZakuKommander
ZakuKommander's picture

If the "sidelines money" never came back in, given these low volumes on "up" days, who can be counted on to do the massive selling needed to bring this market back to some level of rationality?

Mon, 03/29/2010 - 13:40 | 279805 Return2Sanity
Return2Sanity's picture

Logically, the selling should come from companies realizing they can make a lot money through new issue.  Cornering the market in equities is not like cornering the market in commodities, it doesn't take a lot of work to get new supplies out of the ground.  Either that, or one of the big players will decide it's time to take the profits and run. Just like in high stakes poker, the pot can keep getting bigger for quite a while, but eventually somebody will call.

Mon, 03/29/2010 - 20:56 | 280147 Lionhead
Lionhead's picture

My sidelines money is waiting to short UST's. What's missing here is a looming currency crisis for bonds & equities. The Great Depression wasn't caused by a stock market crash, rather a currency collapse that tanked everything, hence the need to confiscate gold & simultaneously devalue the USD. Go back & look at the old newsreel films about the inflation campaign. It's all on the record.

Look at Rosie's charts; all non confirming the recovery. When the perceived safety of the USD evaporates some day as the best of the worst, the real crisis will begin in earnest. Greenspan told everyone in his Bloomberg interview why the equity market is rising. He should know...

"It wasn’t a classic double dip recession like we saw in the early 80s, but it was a growth relapse that defied V-shaped recovery hopes at the time and ended up precipitating the unthinkable at the time and sent both bond yields and equity indices back below their cycle lows."   Spot on Rosie, the classic stagflation scenario & it takes strong medicine to break thru it only this time the resources have been spent & the political will for the medicine is missing.

Mon, 03/29/2010 - 13:22 | 279788 Punk
Punk's picture

Unnatural Market Indicator(don't short until the trend changes)

1- Market trades in range most of day, then explodes to upside late in trading day

2- Few and I mean few late day selloffs

3- No midday market reversals to downside. 

4- DJIA down 40 pts in early trading, pops back to flat closes positive

5- When we do get a down 100 point day and you can smell the fear, the spyders explode to the upside. 

Even the 90's bull never saw the above day after frustrating day.

Mon, 03/29/2010 - 13:49 | 279814 cougar_w
cougar_w's picture

My guess is that the above pattern(s) were always there, but hidden under normal volumes. Once the humans gave up and went home only the machines were left. In a way they are trading "naked", meaning here without cover. It's interesting to watch how they operate. You would never get to see this in normal times.

I'll make another guess; they will gun the market to a point where one of the several (5?) decides they can make a good buck at high probability, and tomorrow not so high, so sell today. But they all think the same way (algos are probably all written by the same couple guys who stole ideas from each other) and so they (algos) will pop all at once. There will be enough feckless human buyers to soak up the initial sales, then the algos will trade to each other on the way to the bottom just like they did on the way up. They never intended to make money off each other; they intended to suck in and rip off the humans, who are right now getting the "green shoots baby!" con job.

They'll never know what hit them. $500B will simply evaporate. Easy momey, 16 months in the setup and 2 weeks in the take down. Then pack up the tent and move to the next gig.

Mon, 03/29/2010 - 14:44 | 279875 Cognitive Dissonance
Cognitive Dissonance's picture

I've been thinking along these lines for two months. Greed would prevent anyone from turning off the machines if the markets were to crash. They would see themselves as in survival mode, so screw any dark masters that start calling them, demanding they shut the bots off to halt the fall. No one would possibly give up an advantage to the "others", thus mutual assured destruction plays out.

In fact, I think that was what happened in 2008.

Mon, 03/29/2010 - 13:27 | 279792 john_connor
john_connor's picture

We could have "no volume" for years as everyone is just inclined to take prosac while we descend into a Soviet style system.

Mon, 03/29/2010 - 13:29 | 279794 Edna R. Rider
Edna R. Rider's picture

Hi everyone.  Meant to send this out earlier:  let's work with the big banks today and keep the markets propped up by buying XOM.  Thanks for your help.

Mon, 03/29/2010 - 13:35 | 279798 rubearish10
rubearish10's picture

Well Rosey, we're waiting.......! Those who've been waiting and watching this recent episode of fleecing the worthy, dedicated, fundamentally sound and truth seeking individuals who have decided to avoid this "poor man's rally", we're wondering what it's going to take to break its slumping back. If the key is rising rates to crimp the flow of funds to risk trades and PPT amunition, well, let's get on with it already. 

An event of all events must be forthcoming since it appears all Obama financial cronies are hitting the CNBC boob tube segment today, except for Larry of course.

Mon, 03/29/2010 - 13:38 | 279802 Keyser Soze
Keyser Soze's picture

Well, at least he's consistent.

Mon, 03/29/2010 - 13:38 | 279803 cougar_w
cougar_w's picture

The equities market is now at about the same stage of circular buying -- and for the same reason -- as the energy market was just before Enron blew up.

Fun times ahead, you can count on that.

Mon, 03/29/2010 - 13:42 | 279806 MarketFox
MarketFox's picture

TD, what exactly would be the impact if the banning of proprietary trading by the TBTF's actually occurred ?

Has there been a study on such an impact?

When one combines this, with the elimination of the shadow banking, either by lack of demand, or legal changes, how could there be any sort of bullish case in the intermediate or short term for stocks ?

Add an increase in interest rates to the picture, and indeed one may have openned Pandora's box of a significant devaluing of stocks in general. 

Significant meaning more than a 30% drop ?

 

And stock trading volume would drop by how much ? 50% or more ?

Mon, 03/29/2010 - 13:48 | 279813 carbonmutant
carbonmutant's picture

The current problem here is in order for the prop desks to get out of this do-loop they have to find external buyers. And with a shortage of shorts to squeeze... well it's sort of a "Prisoners dilemma".. who jumps first.

Mon, 03/29/2010 - 14:15 | 279843 SV
SV's picture

The problem of the Prisoner's dilemma will be exacerbated by the other prisoners seeking retribution.  It's all happy smiles until someone leaves, then it turns into lover scorned!

Mon, 03/29/2010 - 14:32 | 279863 carbonmutant
carbonmutant's picture

Totally!

 

Mon, 03/29/2010 - 13:56 | 279818 Comrade de Chaos
Comrade de Chaos's picture

Ludacrous, repeat after me:

"we live in a society with the FREE market system!"

 

there are certain elements that will try to tell you otherwise, however we should be wise enouth to know better so don't worry, be happy.

and dare you to forget , must party like it's 1987!

 

 

 

- this message was brought to you by our carrying government officials, working for the good of our nation since ...hm 1969.

Mon, 03/29/2010 - 14:11 | 279836 Tic tock
Tic tock's picture

That's exactly why running this ring at such a clip made no sense. The downside risk (going in one direction, above the fundamentals) was painfully imprudent. A decline may spur a dollar appreciation, which might be handy, but the Treasury market has already tanked...!  

Mon, 03/29/2010 - 14:17 | 279848 cognitis
cognitis's picture

Prop traders and other large aggressive daytraders not only trade with each other but also with themselves; expect such traders to often trade 100s of contracts hitting their own bids and offers in order to simulate high volume breakouts both up and down. Indisputably illegal and transparent? Certainly, but so is "naked" shorting stock that are not.

Mon, 03/29/2010 - 14:40 | 279872 SRV - ES339
SRV - ES339's picture

Thanks for the insightful information.

Mon, 03/29/2010 - 15:08 | 279892 Ned Zeppelin
Ned Zeppelin's picture

David's is the only analysis I can read and nod my head in agreement.  He is logical and reasoned, attributes that have not made him profitable post March 2009, but he may yet have his day in the sun.  He makes an effective case for a grossly oversold equities market and for surprising hidden strength in future demand for US debt. One note: He explains part of this future strength as coming from the "over-investment" of US investors in equities and real estate, but I see an issue in assuming that there can be a seamless transfer of wealth from one category (equity and real estate) to another (debt) - the timing of that ttransfer will decide how seamless that is. Move it now, and you've got a shot at getting it done. Move it when everyone else decides it's time to do so, and look out.

The end of QE, and a rational assessment of where we stand after all of this unprecedented governmental support, will start in April.  I think the ceiling is much closer than we think, and the floor miles below.

 

Mon, 03/29/2010 - 15:14 | 279895 john_connor
john_connor's picture

From "Breakfast w/Dave", on why April 15th is likely a key date:

"April 15 looms as a critical day from a geopolitical standpoint. It is the day that the Treasury Department will issue its report concluding whether or not China is a currency manipulator. If it is viewed as such then trade sanctions are likely to ensue and very likely some bilateral tensions. This could be very good news for the bullion market (as well as the Bloomberg News report today stating that gold imports in India are surging right now — up six-fold from a year ago — as there are an expected 1 million marriages planned for April and May). Sentiment is so negative on the U.S. Treasury market it’s not even funny. Everyone seems to focus strictly on supply without realizing that the only way to predict a price is by forecasting both supply and demand"

My comment: Therefore expect extend and pretend at least until that date, which means roll any short exposure with April expiry to May.

Mon, 03/29/2010 - 16:54 | 279964 SV
SV's picture

Not mention that you have OpEx on the 16th.

Mon, 03/29/2010 - 16:11 | 279935 williemays
williemays's picture

 A powerful government intends to reward it's elite. It will end badly but no one can know when.

Mon, 03/29/2010 - 17:40 | 280008 non-anon
non-anon's picture

Monday LYAO, couldn't let this go by, hope you enjoy this korny video

http://www.funnyconservatives.com/2010/03/wacky-washington-health-care-e...

"And Medicaid expansion will insure 9 million more young adults."

http://www.breitbart.com/article.php?id=D9EOGMT03&show_article=1

 

Mon, 03/29/2010 - 19:23 | 280081 TheMacroView
TheMacroView's picture

VIX call options appear to be a good bet here. This ponzi scheme will only continue so far as the government continues its stimilus. Just wait until they start pulling out.

The Macro View

http://themacroview.wordpress.com

Mon, 03/29/2010 - 20:00 | 280117 Justin Credible
Justin Credible's picture

> 500 spoos since the last bottom...

 

...one day, rosie will be right, one day.....

Tue, 03/30/2010 - 08:48 | 280359 fUny1
fUny1's picture

What I want to know is whether or not the robots are plugged into the PROMIS electronic system in Belgium or the other way around.

The financial markets have always ran the biggest Ponzi scheme in the History of the World and they mostly did it by having Governments take on outsized debts, turned over to the Marketeers via the clueless worker drone recipients of Government Debt.

Now that Governments are turning off the faucets due to their debt going exponential, it is a race to the bottom even if they induce the comatose patient into shock treated QE2.0

http://funy1.blogspot.com/2010/03/do-recent-parabolic-market-moves.html

 

 

Tue, 04/13/2010 - 05:34 | 297713 mark456
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