Dylan Ratigan's Explanation For The Crash

Tyler Durden's picture

...the former Fast Money lead man is actually pretty spot on. And for all you retail investors who think this market is anything but a two-tiered playground built now exclusively for Wall Street to fleece you every single day, our advice is to get the hell out. Everyone else already is... Except of course for the banks and the various 3-3,000 man quant operations, which are the only market participants left. We hope they cannibalize whatever is left of each other and blow themselves all up in the process. Whatever is left will have infinitely more credibility than the busted mockery of capital markets we have now.

 

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Orly's picture

You can donate through PayPal.  No one but your email account knows anything about it.

Oh and get a hat, too.  Mine came the day the SEC sued Goldman.  I am sure that with all the SHTF coming, yours will arrive on an historic day as well.

:D

Trainwreck's picture

Bullshit. It's a trivial and inexpensive effort to set up a little web site like this on Amazon and add autoscale so the fucking web server doesn't go down under load. This is, after all, a fucking block. It's not like we're talking a dedicated HFT battleship here. Lots of guys have much bigger loads on AWS and survive. You're either Cheap, Stupid or Lying.

i.knoknot's picture

would u set up a ZH-like shop in the US?

maybe just use google and google-apps... yeah, that's the ticket. plenty of bandwidth and no NSA (cas and crew) peeking in to see who's involved...

you dont know what you don't know.

Cindy_Dies_In_The_End's picture

You're fucking clueless Trainwreck (or being sarcastic).

 

AWS is a fucking joke. Used them for years. they have their heads up their asses. If Jeff knew how bad it was he would clean house. He doesn't.

 

Tyler  go talk to KD about infrastructure. He managed to stay up the whole time.

ConfederateH's picture

Thanks for the clarification Tyler, it it reassuring to know that you didn't get a phone call from the IRS on behalf of the PPT.

As Marc Faber says:  "It is very dangerous in life to be right when the governments are wrong"

http://www.youtube.com/watch?v=A_L9adtXdk

Mark My Words's picture

I suggest you talk to Karl Denninger at Market Ticker!  KD had more traffic than you did over the past few days and he stayed up and fast.  See the link below!  Love you guys at ZH but you have to do this!  We are counting on you!

 

http://market-ticker.org/archives/2289-Thanks-For-The-Plug-CNBC.html

 

lilimarlene1's picture

It's 8:45 on Mother's Day and all I want to do is read Zerohedge. I'm in love.

seventree's picture

People, you don't test a safe under ideal conditions for the safe and call it good.

Well of course not. Such a low assurance level is only sufficient for missile defense systems.

Pat Hand's picture

Approach everything with skepticism.  "Trust but verify" works in many situations.  "Don't trust" takes care of most of the rest.  "Oh, OK, I believe you" will lose you your candy with no compensation.

"A _______ and his money..."

CombustibleAssets's picture

"An artist is a bloke who can hold two fundamentally opposing views and still function"-

Roy Bland,

Tinker Tailor Soldier Spy

Hulk's picture

Many other Financial sites down on thursday for extended periods.

Finance.yahoo being one

cbaba's picture

Yes, i agree, everywhere was down, not only ZH .

ConfederateH's picture

I agree, but ZH is a much bigger thorn under TPTB's saddle blanket than Yahoo or just about every other financial blog...

lilimarlene1's picture

Yahoo had an article the other day explaining why higher unemployment is good! HAHAHA.

laughing_swordfish's picture

Also Stockcharts.com (intermittent), BigCharts, and MSNmoney.

Thinkorswim held up OK - it's what we use here at DKM

 

KrvtKpt laughing swordfish

Awarded RitterKreuz zum Eisenkreuzen mit Eichenlauben for meritorious actions on 6 May 2010

dumpster's picture

if this is true  lol so you discredit some one by innuendo and tap dancing .

you make this assumption .. your less than a troll but a one legged toad  ConfederateH

 

Pedro's picture

Zerohedge is the only truth out there in my book.  I missed ZH during those outages.  I had to resort to listening to CNBC.

spooz's picture

If you compare him to Cramer, you haven't followed him.  Ratigan was one of the first in the mainstream media  to openly criticize the bailout, Goldman Sachs, the Federal Reserve, etc.  He was becoming more and more vocal on Fast Money and finally left. Since then I try not to watch CNBC since it usually results in me yelling at my television.  Ratigan resurfaced months later with his show on MSNBC.  You may think he's simplistic, but if anybody is going to explain things to the sheeple, so they can be angry at the right people, its Dylan. 

Regarding his "house of cards" analogy, I saw a poster on Seeking Alpha who described things in a similar way (below). The steady climb in equities over the last year has had such thin volume that it was analagous to a house of cards.  As a fundamental trader who has given up trying to figure out the market, especially with the actions of the Fed and government thrown in, to me the buildup has looked suspiciously like the housing bubble, which I also chose not to participate in.  

"Since we all have the option to guess what happen yesterday I'll throw my guess at you. The market fell out of bed due to a combination of HFT and low volume rally over the last year. The HFT has been used to create a nice steady upward price appreciation but with no strength of market participation. Its a kin to building a house that looks fantastic on the outside but in realty its built with no foundation on a fault line. One little tremor and the whole thing comes tumbling down. Ouch" -chazgil


 

Crook County's picture

lol at the fake house of cards

derp's picture

sigh... is this really what it has come to? Any purveyor of information that can reach the masses sinks to the lowest common denominator. House of card props, big foam fingers, Vanna White display girls, rhyming headline titles? Egad we are a pathetic bunch of animals. The subject at hand concerns the very root of people's livelihoods and the only way to make it sink in is to blast them with cheesy gimmicks? For Christ's sake look at the teaser headlines MSNBC is overlaying at the bottom of the screen! "Sex in Older America"!!! No wonder no one gives this more than a fleeting thought of concern. I've tried to spread the gospel from ZH to coworkers and if the analysis is longer than a paragraph they don't bother reading. We've hit a paradox; in order to get people to pay attention, information must be entertaining. However if the information is entertaining it can be treated as passing whimsical fluff not worthy of their attention. There is a secondary side effect of this infotainment system that leads people to believe if information = entertainment, then entertainment = information. I'm not knocking Ratigan or his attempt to buck the green shoots meme the rest of the media has been touting. I just think the problem is too complex and too systemic for the average American Idol viewer to care.

WaterWings's picture

The banksters are hiding the truth in plain sight. Even if you show Fs and Fy this clip they'll just agree as if it's common knowledge - then strawman you to death to make you shut up.

The Ratigan cabal beat you to the punch:

http://www.msnbc.msn.com/id/21134540/vp/36522064#36522064

AN0NYM0US's picture

Buiter May 8

The fiscal vacuum at the heart of the Eurosystem

http://www.voxeu.org/index.php?q=node/3333

 

El-Erian May 8

A critical weekend for Europe and the economy

http://ftalphaville.ft.com/blog/2010/05/08/224356/guest-post-el-erian-on...

doublethink's picture

 

Buiter:

 

The Fed has compromised its independence and ability to achieve price stability in the medium and long term. It has done so by taking huge amounts of private credit risk onto its balance sheet without a full Treasury guarantee or indemnity.

 

Does Buiter mean that the US taxpayer is not on the hook for toxic assets purchased during the course of the bailout? It appears that the huge increase in the Fed's balance sheet is therefore leverage accruing to the Fed's owners (i.e., the banks). This would be good news for US taxpayers.

 

Fraud-Esq's picture

Just because the United States has an account at the NYFed doesn't mean I own the Red Roof Inn. The shareholders of the NY Fed own it. But, since they control the credit of the country, I own the problem.

Not enough has been written about this issue, glad you raised it. Answering this question usually makes people's heads explode. Then they realize there's a huge piece of dark matter sitting right in the middle of their democracy.  

lilimarlene1's picture

 

I have worked at jobs like that: all of the responsibility, but no authority. That's a walkaway.

This is something we can't walk away from, though.

Dark Helmet's picture

It's really simple...

1) America's economy, along with most of the western world, is built to run on $20/barrel oil (in approx. Y2K dollars). Oil is NEVER going to be that cheap again, at least not in real terms.

2) Governments and private entities (e.g. pension funds) around the world have made trillions upon trillions upon trillions of dollars of promises that cannot be kept. You are probably not getting social security, except maybe in worthless hyper-inflated dollars or IOUs.

3) We are pissing away about a quarter of our production on maintaining a vast global empire that doesn't really do anybody any good except defense contractors and the military-industrial-intelligence bureaucracy.

Add those three things together, and it's not rocket surgery.

moneymutt's picture

oil will be cheap again when TPTB want it cheap...I vaguely remember Saudis being rich in 2002 when oil was $20 barrel, might not work for Venezuela...

I think we should develope options to oil, but I don't think oil is running out or will be that expensive to get...

DaveyJones's picture

when oil was originally discovered, it took on average one barrel of oil to find, extract, and process about 100 barrels of oil. That ratio has declined steadily over the last century to about three barrels gained for one barrel used up in the U.S. and about ten for one in Saudi Arabia (but they are lying).

doublethink's picture

 

A budget of $8 million for Phil? Ken Starr had $40 million to look into a blowjob.

 

ToucanSam's picture

Can't have regulators snooping around where they shouldn't.

Fraud-Esq's picture

that 8M says it all, doesn't it. funny thing is, if you gave Spitzer subpoena power, half that money, a courtroom, open access contributions, he'd have the whole thing nailed in 6 months. It's plain, obvious and easy. He'd end big careers with just the AIG's emails alone. Starr needed $40 to go hunting in the dark. 

Frederic Bastiat's picture

The argument against HFT needs to be a lot more solid.  While I am skeptical that HFT is good for our markets, lets not go the way of the CNBC drones and just call it bad for no reason.  Ratigan gives 2 reasons for HFT being harmful.  1. They trade really fast.  2. They "pick people off"--which I suppose means they take the other side of legitimate trades, that for some reason the other party didn't want executed.  

These obviously are crappy arguments, and if we want HFT stopped, then we either need to fuel the a propaganda campaign against it...or come up with some real reasons.  

 

huggy_in_london's picture

yeah his reasons are stupid.  He should have said its giving a false sense of liquidity etc rather than say stuff like "pick people off"... but thats much more emotive isn't it!

Clycntct's picture

In a effort to be civil.

Frederic Bastiat Go back and study the function of HFT and rephrase your corrected comment.

Cheeky Bastard's picture

OK; if you have any doubts left about the role of HFT Algos, can you explain this to me; if their main and only purpose is to provide liquidity for the market as a whole and thus insure we DONT see the volatility as we did [or the down and ups] on May 6th then why the fuck was there a 30 second period where not even 1 bid was done. WTF was that all about, and where the hell were the HFT Algos for those 30 seconds. Also, can you explain to me how come a basket of stocks went down more than 60% and some stocks [Accenture for example] almost got wiped the fuck out and traded for a 0.01$ [the same amount the aforementioned HTF Algo books as a profit each time it front runs you because FUCK YOU HUMAN BEING HA HA HA]. The truth is that HFTs surve one purpose and one purpose only, to book a profit for the proprietary equity desk and to ramp the market higher by artificially bidding up a price. Mission fucking accomplished for both the FED, the Government and WS. Thank you very much; your next question please.

SantosLhalper's picture

The problem was that HFT pulled out of the market.  You can't have it both ways.  How can HFT have caused the crash if the crash occured b/c HFT wasn't there?  The problem was LRP's were hit on New York and rather than wait for New York to reopen, people routed away to ECN's where they are not guaranteed a fair and orderly market.  The market function properly.  The prints away from the market were all on ECN's while NY was halted.  Be careful what you wish for.  The specialists on NY are way bigger thieves than HFT'ers.  The option to trade on ECN's has greatly reduced the Specialists margins, which is money in the pocket of off floor traders.

Cheeky Bastard's picture

How can HFT have caused the crash if the crash occured b/c HFT wasn't there?

Exactly. HFT is three of the four pillars which support US equities trading and the specialists account for sub-10% of the daily NYSE volume. Given that the dominating low volume days are completely dominated by HFT and the synthetic trading i can blame them directly for not providing the liquidity in a market where there should not be symmetry breaking [orderly bid-offer correspondence]. The absence of HFT during those 30 seconds yesterday does not free them from the guilt of causing high volatility and fast multi handle drops [at moments 10 sec charts showed -50 pts on 5 occasions]. If the argumentation for allowing the HFTs to dictate trading volume with the, almost monopolistic position, is providing the necessary liquidity so that days like these do not happen i see no need for them at all if they do not fulfill their supposed role and the role which, by the way, legitimizes their position in the market. How csn it be that there is not one bid in over a minute on the biggest exchange on the Planet Earth. Statistically there should have been some bids even if the djia was down 10k bips if by no one else then by some day-trading schmuck. But no since every bid gets frontrun by the algos and there was no algos to display bids yesterday even though i suspect there were bids done by market participants. This just shows you the vulnerability of the market and its dependence on algos. Well not dependence, more of a blackmail done by the big boys; its either give us what we want [front running, fatter margins] and all will be well, shut us down we bring down everything. It really is that simple, no ifs, ands or buts. Also the biggest proposal concerning the monetary policy, size of the banking institutions and WS regulations was voted on yesterday. Do you want to guess what the vote turned out to be. 

SantosLhalper's picture

Firstly, day trading schmucks did provide bids in stocks during the free fall.  Traders in my office made small fortunes providing liquidity when no one else would.  Secondly, ECN's do not guarantee a fair and orderly market.  NYSE does.  When NY halts, and you rout away, you are guaranteed nothing.  This is the responsibility of the trader to know.  The crazy outside the market prints on ACN, RDN, EXC, and other stocks were off NY while NY was halted due to LRP being hit.  If you don't want to deal with HFT, rout to NYSE and deal with the specialist, who is a crook and his job is to steal money.  If you don't mind trading in the wild west, rout to wherever you want whenever you want.  Just know that ECN's  make no guarantees of fair and orderly markets.  Traders/investors need to take some responsibility, understand the market structure, and stop bitching about how the computers stole their money.  Get rid of HFT's and ECN, and you're back to specialists arriving at the exchange via helicopter.  Be careful what you wish for.  Would you rather have the option to trade with fast computers or thieves or be forced to trade with thieves?  HFT didn't cause a no bid market.  NY halted and people routed away to markets with no bid.  Liquidity providers don't cause market crashes.  Liquidity takers do.  Only those taking can affect the price.  

i.knoknot's picture

i'm not sure this response is in argument... what you say sounds better than most of what i've read. but...

those small fortunes your friends made were in the noise - i assume a coupla hundred-thousands... good on them. seriously. they were ready, they pressed the buttons, that was *real risk*. and they won.

and what if the market had kept going down. it could have.

the market we've been led to understand 'broke'. the real market 'spoke'. as it should be.

it does have a way of fixing itself, but that's not always pleasant.

i wish you well in all of your investments.

leftcoastfool's picture

Man, Cheeky, you're firing on all cylinders today!

nmewn's picture

If one comes at this from the perspective that everything happens for a reason, no one can discount the possibility that the system needed fiat...real fiat, being held outside of the system.

What better way, than to devalue an "asset" for a short period of time...accumulate said "asset"...and then ramp the "asset" back up for later sale.

Fat fingers and "m" & "b's"...I usually use decimal points or percentages when transacting over ONE share...LOL.

ToucanSam's picture

What do you think most retail investors will understand more readily:

"HFT is really fast and pick people off"

or

HFT is the ability of very fast computers running highly sophisticated computer algorithms that scan all of bid/ask data to try to determine where the paper is trying to get in the market.  Then these systems could come in front of these participants to scalp tiny bits of their money by front-running their order before anyone can notice.  They do this every sub-millisecond, generating tremendous profits for no real purpose except to force themselves in between the market and the participant.  HFT is neither a market maker nor a liquidity provider as they claim, but a mosquito, a parasite, a virus.  Always on the hunt for a host to suck off while providing no benefit and potentially sickening the host, maybe killing them.

Simple explainations keep people's attention and if they're curious, will seek out more information.

moneymutt's picture

its interesting that technology took away Wall Street's overly compensated middle man positions in trading and they are now using technology in the form of HFT to take back same overly compensated skimming on transactions in supposed open markets.

Its also interesting when they lost their previous easy money they also turned to swaps, so they book major profits from old fashioned middle man activity in opaque, crony derviative markets.

trav7777's picture

HFT is bad because their predatory order flow interception led to the mass departure of liquidity providers and market neutral players.  WTF is the point of being a market-maker if an IB is out there with a HFT intended to destroy your spread and take it for themselves?  This is why liquidity has vanished.  The HFT phenomenon was never about cheating "retail," it was about capturing the bid/ask spread provided by neutral players by front-running the order flow and manipulating price to eat into that margin.

ZerOhead's picture

Awesome delivery! Looks like a coherent easily understandable message is finally getting out to the sheeple.

And in other news... looks like Louisianas "The Big Easy" is about to meet BP's "The Big Oily" (TM) in a no-holds barred deathmatch... Result?... "The Big Greasy" (Just have to wait for "The Big Breezy")

http://fromtheold.com/news/trajectory-bp-oil-spill-2010050818063.html

 

WaterWings's picture

Yes. Would suck to be a smoker during "The Big Breezy".

Stop. Drop. and Roll:

http://online.wsj.com/article/SB1000142405274870396110457522547257751341...

faustian bargain's picture

I still maintain that the "flash crash" was a brief controlled glimpse of fundamental economic reality, and the ramp back up was the retreat back into Plato's Cave. The old Hank Paulson nuclear option. "Without us, you're toast."

huggy_in_london's picture

"Economic reality" is trading a stock at zero or 1c?  Nah, I don't think so.  More like some program trying to dump something and is programmed to sell at market if px move is more than x% away (and obviously there weren't bid in the crappy electronic markets).  Mind you, I am not saying what happened was nothing for concern - it clearly is, but i think for different reasons than most would have you think.