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Guest Post: Market Price Is An Illusion
Bo Peng submits a theoretical thought experiment on the discontinuity of security prices in a world in which two bids one millisecond apart are an eternity away from each other thanks to supercomputers in charge of markets, and thus the price discovery function can go anywhere from zero to infinity in the space of nanoseconds. Are the now daily flash crashes nothing more than an actual representation of the fractal nature of markets, as popularized by the now late genius Benoit Mandelbrot, and as was validated on Zero Hedge some time ago? If so, prepare for a market in which melt downs and melt ups become a daily, hourly and millisecondly fact of life.
Submitted by Bo Peng
Market Price Is An Illusion
You need to carry some rocks and the only thing you have is a screen sieve. But it's a fine screen. So as long as it's strong enough, the bottom is as good as a solid one. Millions of years pass, the screen sieve has always worked and gradually people forget about the holes on the bottom. But as the rocks get weathered over time, they become smaller and smaller, eventually smaller than the screen holes. Now, all of a sudden, "It's broken!" people gasp.
It's always broken. It's just that how it's broken hasn't been a problem before.
This is, in short, the origin of recent flash crashes with alarming frequencies and reach. The screen holes are the time interval between quotes. The size of rocks is the reaction time of market participants (traders) executing trades.
During the vacuum between two consecutive quotes, the notion of "market price" is undefined. It could be anything from 0 to infinity. But this is quite ugly and inconvenient. So we assume, driven by our evolutionarily honed instinct of linear interpolation, there still MUST be a market price during the vacuum and it SHOULD be somewhere close to the last quote. I call this the "Continuous Price Assumption"
This seems quite logical, and has always worked ok during the days of human traders. Human traders, or particularly human market makers, have limited reaction speed, say in the 10's of milliseconds range. Quotes pour in from all sources, faster than human traders can keep up, leaving them no time to see the vacuum. Even if conceptually they are aware of the discontinuous nature, they have little facility to exploit it. Rocks are big. Screen sieve has a rock solid bottom.
Enter GHz computers. The time between two quotes 1 millisecond apart is eternity. During this time the CPUs can scan all internet connections, check for content updates, display a few frames in three video windows, overlay their audio, refresh all the window frames with updated smeared version of the wallpaper for no logical reason, handle 271 senseless events, and then take a good nap, but not forgetting to update the "System Idle Process" CPU utilization percentage during the nap, which should be logically forbidden. It can scan all the ECNs and put out quotes, even execute trades, multiple times during the void. The rocks have become sand. The fundamental flaw in Continuous Price Assumption is no longer just theoretical, it has resulted in the invalidation of the very notion of market price.
This, I think, deserves a line by itself: The notion of market price is never what we assumed it to be. It's not continuous. It jumps all the time. And except for the singular points of quotes appearing, which has a mathematic measure of precisely 0 (a set of points on a presumed line), it doesn't even exist.
And I think this deserves repeating: The probability of hitting a quote is mathematically zero.
The market should never have worked at all. It has worked only because somebody can make money by letting you hit a quote; they artificially extend the lifespan of the last quote, to keep the appearance of a functioning market and to make money in return for this vital service. If they deem it unfavorable to extend the lifespan of the last quote, they will offer a new quote that's favorable to them. It's always been this way. Nothing has changed except the player's reaction speed.
The approach of treating "price curve" as fractals is not new. But it's been mostly a fancy word to be thrown around geek cocktail parties in hope of catching some girl's attention for a fractal second. Now, with high frequency trading playing a significant role in various markets, the fractal nature of "price curve" has become a very real feature with huge practical implications.
For those of you not familiar with fractals, it's a curve that's discontinuous everywhere, with its value undefined everywhere. The best you can do is to come up with a notion of range and probability of its value at any given point, but the range and probability distribution depend on the specific problem at hand and generally can vary greatly in time (or whatever the X-axis is) for the same system.
Back in June I wrote "The Market Is Never Right" and a commenter joked I should come up with a Peng Uncertainty Principle. Now here it is.
The Peng Uncertainty Principle
The Market Price cannot be determined unless with a trade, which will inevitably change the state of the presumed market and is by definition always in the past. To be precise, Market Price cannot be defined except in the posteriori sense.
The very notion of "current market price" is an illusion. It doesn't exist. It's a total farce, always has been, always will be.
Let this sink in for a moment.
The genie is out of the bottle. Love it or hate it, HFT is here to stay and it is the future. In the meanwhile, the flash crash must be stopped. With the insight of the Peng Uncertainty Principle, we can see that HFT itself is not the root cause. It's just a new tool that happens to reveal a fundamental flaw that's always been in the system. The right solution is not to banish HFT. It lies in attacking the root cause.
For the market to maintain a minimal measure of sanity, the inherent, unbound fractal nature of the price curve must be artificially eliminated.
Sounds impressive? Well here's a more readable version. Forbid quotes x% away from the last trade or NBBO within y milliseconds.
Why milliseconds? Why not femtoseconds? It is admittedly arbitrary. But the point is that pursuit of speed should not become a goal by itself. There's a point beyond which the pretence of price discovery no longer has value to the general population of market participants. If it's really essential for a market to move 10% in one millisecond in order to assure its functioning, then that market should not be functioning.
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Were it not for corruption this whole mess would be easily solved. All bids once entered must persist for 1 minute and if the bid or offer are taken the underlying shares must be transferred. That would solve the whole mess. But no we have to put up with inane discussions like this one. Solve the political corruption solve the problem.
No one would trade in your market. Even a transaction tax would be less 'damaging' than what you've proposed.
I would. In fact, I do it all the time. I place limit orders to buy and sell either at or a few pennies outside the NBBO and wait to get filled. After the market first knee jerks and seems to run from my price, I usually get filled within a few minutes. But, who am I to say what makes sense. I’m just a lowly individual investor, like the millions of other pawns in our markets, who collectively represent 75% of the market cap, until we get fed up and leave. If anybody cares, I'm headed for the exit now because of the way things are.
You're in a zodiak amongst aircraft carriers; you've been leaving for almost 6 months straight.
"No one would trade in your market."
Said just like a man with other options. What would you do instead? Go become a butcher, baker or candestick maker? Work with your hands perhaps? People with a sense of entitlement make me laugh. Whores always do what they are told. You would have no choice.
ouch
Of course I have other options, I can actually make things that quite literally millions of people worldwide enjoy on a daily basis (and from the comfort of my home).
Unlike financial whores, such as yourself, I will not be the least bit put out by the end of this 3-ring as I have no stocks (only some token strategic shorts), plenty of physical metal, and have POMO'd all but one bundle of TIPS which mature shortly before what I reckon will be financial armageddon.
http://www.youtube.com/watch?v=7TuqrEcf4tw
Underwater?
"Unlike financial whores, such as yourself"
Actually I got out of the markets between February 3, 2000, and March 1, 2000 and have not been back in since in any kind of material way. I did take one chance on a development company and as they explicitly warn against, lost my entire investment. I actually do productive work now. I'm almost completely rehabilitated.
Providing liquidity and helping to create a market IS productive work, baby... whether it's securities, real estate, or any widget. It's the bedrock of capitalism.
But YOU did no such thing. You were nothing more than a losing gambler. So your area of expertise is degenerate gambling. I'm happy you got some help, baby.
AHMEN brother!!!!!
As I've posted before, the simplest solution is simply to coordinate exchanges to trade on minimum tick intervals (1/?? second). This change in and of itself would resolve the key issues.
There is also likely a far deeper relationship between markets and physical phenomena.
$s = Energy
Mass = EV
Bid/Ask = Uncertainty Principle
Non-Public Companies = Dark Matter
HFT = Quantum Foam (Vacuum Energy)
TBTF Bank = Black Hole?
Universal Expansion = Fed Money Printing (unless you believe it will actually take its balance sheet down one day) = Monetary Inflation?
Universal Inflation = Symmetry Breaking (delinking Fed balance sheet, debt/equity) = Monetary Hyperinflation?
Dark Energy = Fractional Reserve Thermodynamics?
Government = Parallel Universe or perhaps Not-So-Intelligent Design, heh.
Complex Derivatives = Debt Supersaturation (please don't shake the beaker)
Absolutely correct, but why stop there?
People should be able to put their shares in limbo with a sale price over current market price and when the market moves up, these trades would be triggered before any others. Same, in reverse, can be done for buying and the person trading can determine for how long this trade should be in limbo - one minute in your case!
Simple. Will they do it? No. Why? Because it is too transparent and honest.
This peng principle is no different than quantum physics which says that you can't measure the position of a subatomic particle because once you go to measure it, the act of measuring it has changed its position and that measurement will always be in the past. And of course you can't measure it, unless you try to measure. Thus, his principle that you can't know a market price until you make a bid and that bid changes the market price by virtue of being made and this market price is always in the past is more or less the same thing. He should credit the founders of quantum physics. It is obvious that we are now beginning to live in a subatomic world in every way. The Chinese were aware of this world centuries ago when they formulated Taoism. As were the pre Platonic Greeks. What is the solution. Don't try to measure the energy waves but vibrate at a high enough level that you actually vibrate with these subatomic energy waves in a conscious way. In other words, become one with energy and all that entails. If you can do that, you might be able to move into other dimensions where different realities exist. It won't make you any money but you will be one with the Tao and won't be worrying about making a lot of money. The infinity of all that is will be open to you. Who cares about money at that point.
I think the credit is implied...everybody knows he is jokingly substituting his name for Heisenburg...duh.
There are a number of principles:
You can know the position or the velocity of a particle at any point in time but you can't know both simultaneously.
Particles can exist simultaneously at 2 points in space at exactly the same time.
You can act on one particle, separated by a universe, from its twin and effect the twin instantaneously (Einsteins "spooky action at a distance).
I'm not sure drawing quantum mechanics into this applies.
I think the Chaos theory fits better. Simply explained as the predictability of the cigarete smoke, absent a draft, will go straight up until some point. After that, there is no way to predict its direction as it could be influenced by a million different factors.
Human behavior creates that many factors influenced by intuition, misinterpretation of events, trends, heard mentality and the like. Thus, creating uncertainty and unpredictability.
Talking to hear himself speak gobbledygook.
Trading can move markets. This has always been so. It's still so, but in a different way.
The markets move instantly in response to news. It's not always up. News programmed to be bad will move the market downwards. Such news has been rare lately. It will require some large downward earnings evidence to do this and in a world with a destroyed dollar and the help that gives US companies that export, that will remain rare.
Until it's not. Until other countries refuse to allow that advantage and smash their own currency -- which they must.
These algos are currency trading, even if they trade the S&P.
The assumption of price continuity is perfectly valid in market with sufficient liquidity.
Diagnose the real problem, not the knock-on effects.
Blah blah blah. Insert: Market irrational longer you solvent, blah blah blah.
For fuck's sake, give it a rest. As long as Bernanke and the Pigmen have a permanent bid under the market, you and your analysis are less rational than pissing in the wind. You're starting to behave like the Japanese soldier, still fighting the war when found in an island cave in 1973. The Pigmen won. Get over it and move on. The same goes for you, Tyler. You should consider putting your considerable talents to something more useful, perhaps a book detailing the strategies and nuances of contract bridge.
On this day: 24 October 1929: The Wall Street Crash begins in New York with Black Thursday. It causes a worldwide economic depression
Happy 81st Birthday!
Mervyn King, the Bank of England governor, argued this week in a speech to business people in Wolverhampton that a deal to rebalance trade surpluses and currency values was necessary for a sustained global recovery. He said he regretted that talk among G20 leaders in 2009 to refashion the world financial system had "ebbed away".
King said unless the need to act in the collective interest was recognised "it will be only a matter of time before one or more countries resort to trade protectionism as the only domestic instrument to support a necessary rebalancing" of economies.
"That could, as it did in the 1930s, lead to a disastrous collapse in activity. Every country would suffer ruinous consequences – including our own."
http://www.guardian.co.uk/business/2010/oct/22/geithner-trade-surplus-cap-call
this article is superficial.
while it is true that in between the time a bid gets filled and another bid comes to replace it, there is a space where there is "no bid" (assuming there is no B/A ladder), the HFTs are actively walking the B/A ladder DOWN to objectively ABSURD levels.
This is why the exchanges are DKing the trades, because they are MALFUNCTIONS. We see real companies with real value get walked to freaking ZERO and TRADED there. This is NOT an artifact of the "space in between bids," it's a manifestation of algorithms operating whose purpose is NOT for what we would call ordinary market participation except at high speed.
Right regarding the B/A side of the books, but i don't see how the hell a desk that emphasizes their market-making ability in particular company XYZ pulls the plug on their algo causing the lowest GTC bids to be filled. Any decent shop should constantly check and tweak the DMM to ensure it doesn't have an imbalance causing it to incorrectly shift to solely one side of the book.
Way too logical.
I think prices are only the external expression of a thing that must have an external expression because it cannot be apprehended directly. So, to say market price is an illusion would be correct, since it is not the thing, but the externalization of the thing. What is the "price" of a sack of potatoes resting in a grocery store bin? What is the "price" of my car when I am driving it to work? What is the "price" of a security between quotes.
Now, all you need to explain is price itself. To say it doesn't exist for most of the time does not explain why it does when it does, i.e., why the thing expressed as "price" exists, and why it must take the form of "price".
This is not even wrong, it's not sensible. Execution prices are in the past. Bid and Ask prices are in the future. So what? What's causing HFT flash crashes is bid and ask prices being posted with no intention that they ever be executed, only to fool another HFT.
There is no need to bound price changes and have a regulator "unwind" transactions at the end of the day. This only destroys what's left of confidence in the markets. We can end all the flash crash bull-shit today. Here's the new rule: any bid or ask order that is entered is good for at least 10 seconds or until it is exercised. No revocations or modification for 10 seconds. Simple. If you can't make a decision on the economic value of a security valid for the next 10 seconds you have no business trading it.
You have not answered his point: Price does not exist for most of the time. The whole of the market is governed by something that only exists infrequently; namely, the transacted price. In all other cases price is either historical data or "ideal price" (bid/ask prices). There is, therefore, the possibility inherent in price that it disappears once and for all over any reasonable period, since it is not itself inherent in securities or anything else but external to them.
I don't agree. Price does exist now: bid price and ask price. What the HFT's are doing is posting false bid and ask prices. We solve that by making them commit to their print.
What, if not price through supply and demand would you have us go on? Follow the short sellers:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=972620
I agree with a number of other comments that this article is hardly ground breaking - particularly because I'd thought of it and I'm no rocket scientist. If you want to see how a market works in a similar manner, watch the electricity market. It's a system that has to be balanced minute to minute, hour to hour physically. This financial fun with numbers stuff is nothing.
Gann said that the two most important things for the market are price and time - and the most important is time. The only lesson attributable to this article is that you need to know the timeframe you are trading in and stick to it.
I'll just add that the only way to correct the market is to let it run its course. All this cancelling trades is b.s. The machines will eventually blow themselves up and then no one will allocate capital to them again. HFT doesn't make the implicit value of gold zero and the implicit value of GE $1 mill per share. Forcing those who trade there to wear those positions at those prices will rectify the system in short order in my opinion.
HFT is easily solved by SEC ordering all cancels to be run through a PC-XT connected to the NBBO by a 28.8 modem. Since the HFT is the cure for the FED flash crash cash and PPT smokescreen, we can safely ignore that fix as unworkable.
I don't think you can really get rid of the "fractal nature of markets", if you did it wouldn't be a market. The problem is the limited variability that endogenously arises out of these fractal structures in financial markets. HFT is simply an extension of the decades-long speculative credit-complexity bubble that has made markets extremely vulnerable to external/internal shocks. Of course much of this has already been documented by ZH before, especially in Sornette's report.
Here is a piece discussing the similar complex dynamics between biological and financial systems. Specifically it focuses on chaotic variability as an indicator of health in the human heart and the stock market. It's pretty short and not nearly as technical/boring as it may sound.
http://peakcomplexity.blogspot.com/2010/10/fingerprint-of-instability-in-biology.html
"It's always broken. It's just that how it's broken hasn't been a problem before."
Devil’s Advocate?
Stable... circuit breakers? for outside powers forcing a move in the market? could be stopped? not that, that is at the fore front of the anti-sub-penny... 100th or milli... trading / price check / front running.
So... the "New Normal" as I see it... and please this is just one of my gripes... so add or stay focused or bang out your own idea. If we have changed to a Global Foot Print? "The U.S. can no longer be the engine that drives the Worlds Economy." http://www.cnsnews.com/news/article/68617 forgive the source if you dont like it.. *****top of the google search you anal freaks...***** and we are moving into a Global Equities Market? BRIC's want control... not really, but thats a whole nother issue.
We are in the middle ground of a Global transformation... I could go on and fucking on about how Oil... is $300bbl... NOT! $50 - $70...
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/20/AR2010102006518.html
Anyone that cannot understand that last sentence stop reading... please, you will just hurt your head.
So, Middle ground of the "New Normal"... with the Euro and Dollar down... along with all the other currencies that we would run to... with some amount of comfort... and the 3rd World being elevated... it will at the end of the day look like a fair / even playing field? So the best argument for proof positive of the "New Normal" being an energy price re-set / level the playing field... strategy?
We are part of the World we can no longer ignore that America is not part of the larger world? argument... going back to the fucking 80's? or when / what-ever date suits you... has firmly grasped the world in total, our world. The Leader NOT! of the free world, but of the WORLD! has decided (some time ago) that "We the People" must suffer for the greater good... looking forward.
They use rampant greed as the cause... the American People... over extended... based on a contraction of our economy... so as to level the playing field...
People spend, people pay down and then people save... consider it an age cycle thing... so "We the People" would have been fine... minus one of the legs of the table being removed. The new mentality, drilled into the American Public is? Real Estate is bad... and that will last how many generations going forward?
Sub-Second Trading and Safeties? for the "New World"?
Who here thinks that you still need a Tank to take over a Country? or a Standing Army?
Why can't you just de-stabilize the currencies? and buy the debt? "We the People" could have purchased Greece at a discount... CDS, leveraged purchase? and "We the People" would not need to send anyone (Marines) to make sure our monies kept coming back...
Ok, "THE GREEKS!" would / will / have rioted! over such a thing... and people get tiered and got the fuck home... because fucking their wife is more fun than standing on a hot street getting tear gassed... so, save it.
Why, or how many Equity Funds would it take to de-stabilize our market? if our Corporations cannot afford to bribe our Congressmen / women... they will be forced to go where the money is. They cant help themselves.
If our Corporations... to be CLEAR! Corporations with no soul... Google has a soul, the controlling interest is held by real people. GMAC, has no soul and only wants to make money on a short term horizon... thusly the Country is never taken into account or what long term works for the betterment of all.. because GMAC has to compete against the other soulless Corps... thusly downward we all fucking go. "We the People" are financing our own deterioration, continued deterioration... http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
Corporate (soulless Corporate) America owns, lobbies more... spends more real dollar bills than any other group... by multiples... http://www.google.com/#hl=en&expIds=17259,24550,24815,26637,26992,27059,27095,27178&sugexp=ldymls&xhr=t&q=corporate+contributions+to+political+campaigns&cp=24&pf=p&sclient=psy&aq=f&aqi=g4g-o1&aql=&oq=corporate+contributions+&gs_rfai=&pbx=1&fp=1fcdface22984313
These soulless fucking companies do NOT care what happens beyond the 2 year bonus horizon... https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf HARP / HAMP which is the new acro to confuse the idiot sheepeople...
If the powers that be, the people that "We the People" are paying, funding to buy off Congress and the Senate... only are interested in their bonus monies? who is looking at the long term concerns?
The quality of life here, for the middle and upper middle and Corporate upper... the "Absolute Return" groups... are screwed again? some more?
Thats my Sunday Morning Rant... sorry for those that dont get it.. or dont like it.. for the record... if you couldnt tell from my tone here.. I dont like it either...
How do we, effect a better outcome as the few critical thinkers that give a shit enough to confront some of the issues? how do we effect change... Vote for the Guy that has Change in his slogan again.. this time its the Rep's?
Vote for the NEW, NEW Change we can believe in? and the masses will vote some NEW, NEW idiot in… or leave the bought and paid for Lobby whore in office.. either way… the masses will speak their thur their vote and we all will suffer the ignorance provided from no child left behind… teachers get paid shit because they do a shitty job… that’s why, and if they are any good… which is few and far between.. like anyone with a public tax tit job…
We are all fucked, because we let the masses be stupid and / or dumbed down… and we deserve what we get. We knew, we all knew and we let it happen anyway.
Ladies and Gentlemen, welcome to the concept of Maya, one long familiar to India.
It's always been a game. The game has sped up. Human limits were reached. Machines took over. Now machine limits are being tested. Victim? Price discovery.
Actually, the value-price disconnect plays right along with this nano-second order theme.
"The fundamental flaw in Continuous Price Assumption is no longer just theoretical, it has resulted in the invalidation of the very notion of market price."
Awesome sentence. Sums it all up neatly.
Get out while the getting out is good. Unless you ARE the house.
ORI
http://aadivaahan.wordpress.com
These things are an evasion of the purpose of markets. Markets are supposed to be a convenience to traders, no a source of pure imagined risk, acted upon as a coy means of pretending to have an air of legitimacy.
The Flash crashes have already proven that these HFT exchanges can cause stocks to crash when absolutely nothing real has happened--or is realistically anticipated.
It has the effect of chilling the bids, driving bidders from the markets because they no longer trust the markets. This assures a crash of some sort, as prices are generally confirmed by volumes rather than single trades--and right now, we can have a crash occur in less than 5 seconds. As bidder refuse to participate in these rigged up markets, the likelihood that a $40 stock will be sold for 40 cents--or 4 cents-- one fine day is near certain.
And while clever Quants may wish to borrow concepts from Quantum Physics to justify the manipulation tricks they wish to pull, those borrowed concepts are not market concepts.
If the Robber Barrons had been allowed to do just anything they wanted to do, they wouldn't have been mere Robber Barrons, they would have become our feudal masters and the population wouldn't have even owned their own souls.
I'm saying you might need aspirin (and some honest politicians), they say you need a lobotomy and you must decide this without thinking. Markets convey OWNERSHIP. Do you wish to think or just do as you are told by some machine executing. Decide if you wish to be a slave. The quickest way to get there is to become very obedient, when you should be objecting.
I can't help but think of Charles Stross' book "Accelerando" when discussing High Frequency Trading.
Reference: http://manybooks.net/titles/strosscother05accelerando-txt.html
Written in 2005, a series of stories set in a pre and then post-singularity event.
See if these jump out at you:
Hmm, seems familiar eh? The relentless march of progress and technology changing the face of the markets.
And the system cannibalizes itself, after competing directly with massively networked 'thinking matter'. Evolution of competing trading strategies comes to mind.
The frail human mind, even with their fast interfaces and direct-to-the-market connections are completely outmatched by pure automatons. Even though the previous quote is referencing people who have uploaded into a virtual simulation, I can't help but think of the collective bags-of-mostly-water traders out there trying to make a buck against the machines.
And, one final excerpt - if only the system could reset itself as efficiently:
“The only lesson attributable to this article is that you need to know the timeframe you are trading in .....”
the “lesson.“ learn how to trade.
my trading buddy. hi.five.oh.
a retail trader trading from a bedroom trading room started in 1993 with $50,000 went up to $6,000,000, down to $600,000, up to $10,000,000, now at $5,000,000.
time frames. hft. price continuity. trade speed. “a theoretical thought experiment on the discontinuity of security prices” ...
the excuses are there are NO EXCUSES.
givens. flash crash. rigged market. insider trading. market manipulation. front running ...
a trader trading a complete trading plan will continuously make more money than one loses.
a trader is at the mercy of one’s own ignorance.
naive: deficient in worldly wisdom or informed judgment.
whose game does a trader play?
learn to trade.
twittering as stocktradr
This is not a problem of prices but that of mathematics. Prices are priorities could be expressed only by ordinal numbers. Traditional mathematics uses cardinal numbers and as such improper for the problem. However, do not have false expectations. Neither mathematics are valid for predicting the future.
By the way, you shouldn't use the term illusion for market prices. This just feeds the socialists even if, may be unintentionally, your article provides a proof of the impossibility of central planning.
LONG LIVE MISES!!! You just gave a proof of his genius!
Thinking about HFT madness these past few months and watching flash crashes and smashes, I had a thought.
The flash/smash syndrome is just the random "runaway" reactions before critical mass is reached. I'm sure the programs do a fantastic "retro-active" job of holding the flash/smash within some limits, but the machine might just have been set up to explode.
Like everything else in life, infinite growth would be just wrong, yes? A quick peek at market valuations tell the story. No such thing as infinite growth. Especially when the basis is finite.
By the way, folks here familiar with the overstock.com CEO's expose of the DTC? Heck of a story, one I knew of from 2003ish maybe. Or 04. Stunning. I'll dig out and share something I read, blew my mind. The world of high and low finance is a viper pit.
ORI
http://aadivaahan.wordpress.com
Ok...
So even if I rent in Jersey... and have a cluster $16k SLC SSD's... over fiber... I / We will still be lagged out of the money by new york... every time.
The gate keeper / market maker / house... always wins, no fucking exceptions... start there and work it backwards... how many running days of not a losing day trading by all the Gate Keepers? its a lag thing baby!
If the idea that there is no such thing as objective value in the market comes as shock, you should immediately close all your trading accounts and back away from your computer, cause your gonna end up getting hurt.
I agree all value assigned by humans is inherently subjective. Its why people who think the only thing gold is good for is industrial uses are constantly confused by its price. However, the article talks a lot about computers. So, if there is no objective price, and computers are by their very nature unable to be subjective - is not the market now totally arbitrary?
Yes and No, depends on your perspective. Yes, individually the prices do seem to be arbitrary (and have been for as long as I can remember), but what about the bigger picture? And from that perspective, No, I don't think there is anything arbitrary about them at all, the market is serving it's purpose for those who are controlling it. What purpose? How about crowd control? Can't have everyone realizing that their paper profits are worthless. Keep the numbers up and the butts on the couch!
The bankers and elites are going to do what is best for them, if you tag along and happen to be on the sell side and make a profit today, don't worry they'll get it back eventually, one way or another. This is their game and the game pieces they let you borrow for a while will always have a string attached to them.
Thanks for depressing me, lol
I need more silver and gold now plz
"Wait...if I could only stay on the air, I'd have 100% of the audience."
"Think of the ratings!!!"
Herschel Shmoikel Pinkus Yerucham Krustofski
Using raw data from here
http://www.realtor.org/research/research/ehsdata
I noticed an interesting trend -- the rich get richer, the middle class and poor get chased out of their houses at low prices.
The richest home buyers were the only segment that saw year over year gains. The rich get richer. Are they smart? Locking their money into hard "assets", or just stupid because they don't see just how bad things are? Time will tell, but in reality a house is a highly illiquid investment that could easily fall 50% from here.
Check it out - orig chart by Hawaii Trading
http://oahutrading.blogspot.com/
Try convincing a zealot, a cult member, that their belief in the cult leader is mistaken.
They will produce rationalizations and denial of reality in increasing proportions relational to the amount of truth they are confronted with.
There are too many accolytes and zealots who believe in Wall Street regardless of the facts or the lack of morality and ethics.
CEO of Goldman Sachs Lloyd Blankfein: "I'm doing God's work".
Self-delusion is the keystone of the cult.
I'm telling you, the insanity won't end until there is blood in the streets.
Flash crash pricing needs to be enforced. That will stop people from putting themselves in positions where they are causing or participating in one. They cannot keep cancelling the trades of the stupid. If there is no penalty from the market for using a algo that dumps a $60 stock at 1 cent, then the algos that do this will continue to operate.
And BTW, this is the kind of unfinished, broken and unfixable software you get when you outsource your IT jobs to places where people are raised in mud huts and then go to a gov subsidized IT tech school for 2 years.
I agree, we keep seeing the result of somebody QA-ing their software on a production system. Unintended consequences abound.
Seems like there is always a healthy number of "resilient consumer" stocks which are always in an uptrend. In fact, they alway seem to "flash crash" up on earnings news. Surprises always occur on the upside.
Unlike stocks tied to gold, oil, or other "hard assets" which seem to be u-turned and bombed after breakouts, and always seem to be victims of forced margin selling, panic Algo/Robo unwinding, or other assorted market maladies.
For the most part, many stocks I've scanned the last few days show heathly, normal uptrends where occasional pullbacks or conslidations don't even faze the intermediate trend traders.
Whole Foods is an example.
So I guess if there are "machines" trading the markets, they are buying Fed-approved, government-sponsored, PigMen favored consumer stocks, and they trash any stock that provides warning flags of excess money printing.
Just the way it goes in today's market. Just as manipulated as it was 50 years ago.
Nothing ever changes. Same old "Wash/Rinse/Repeat" nonsense.
Wall St. Fat Cats get richer, and the proles pile into bonds or money markets out of fear and derision, missing out on the fantastic gains made by the Pig Prop Desks gunning these high-beta consumer plays.
Seeking Beta, POMO.... IPO's? lol sorry Robo had to do it Bro.
The money pouring out of the market... $100 billion plus ytd... dumb money, 401k managers... are all into ETF's now... we have a 12 month on etf's yet? so that we can start pushing the absolute return etf vanilla paper? Oops, thats already being done...
Who is next to get hit? where's the money? ETF's... so who will be bombed? ETF's.
Market Faked Up! ETF's to pay for the faked market play...
Apologies to Douglas Adams, RIP.
"Markets are an illusion, the SEC doubly so."
I must say that a lot of the essay smacked of hooey, malarkey, baloney, and other members of the same food group. A lot of sophistry layered with sesquipedalianism. (A little irony there.)
The analogy would be more apt like this:
You need to carry some rocks and the only thing you have is a screen sieve. Then the HFTs pick up the rocks and bash in the heads of the slower traders. It's called evolution. Pick up a bigger rock, run away, or die.
Or kill the corrupt market makers.
on Sun, 10/24/2010 - 12:29
#673719
Using raw data from here
http://www.realtor.org/research/research/ehsdata
I noticed an interesting trend -- the rich get richer, the middle class and poor get chased out of their houses at low prices.
The richest home buyers were the only segment that saw year over year gains. The rich get richer.
The people who went through the GD 1.0 and WWII had a saying: "Them that has, gets. " Nothing has changed.
Self-delusion is the keystone of the cult.
I'm telling you, the insanity won't end until there is blood in the streets. @ ebworthen 13:15
The streets are symbolically and practically irrelevant. Take a page from the masters of 9/11.
Blood in the Boardrooms. It's catchy, it's relevant, it's practical.
I say bravo! There is a speed at which price is not real, just a construct from an era where things moved more slowly. The same is true of the entire school of economics. Politcal and governance methods also show similar discontinuities at today's speeds.
-profd
Liked the Peng Uncertainty Principle and, for me, it is similar with quantum psisics. People should be able to put their shares in limbo with a sale price over current market price and when the market moves up, these trades would be triggered before any others. To change the curent situation, hmm I'am not I'll know form where to start.
http://www.eastcomfort.net/index.ro.html
Trading an asset more frequently adds minimal value.
Posting false bid and ask prices even more frequently adds zero value.