Guest Post: The "Matrix" Market: Effects Of Quantitative Easing, High Frequency Trading

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Tue, 02/08/2011 - 12:03 | 942965 Alcoholic Nativ...
Alcoholic Native American's picture


Tue, 02/08/2011 - 12:55 | 943035 cougar_w
cougar_w's picture

Uh. Yeah. Whoa.

There. Is. No. Spoon.

Tue, 02/08/2011 - 12:03 | 942969 The Count
The Count's picture

Hmmm. I have news for us all. What exactly do you think the brain dead TV we are being fed is supposed to achieve? All those totally idiotic reality shows, background music whereever we go (dentist, supermarket, waiting room, etc). It's all designed to keep us from actually thinking about anything of importance. The movie Matrix is much closer to reality than most of us care to believe.

Tue, 02/08/2011 - 12:04 | 942977 system failure
system failure's picture

They are not getting my body heat for free.....

Tue, 02/08/2011 - 12:09 | 942992 InconvenientCou...
InconvenientCounterParty's picture

they'll need to pay me to urinate on their flaming epidermi.

Tue, 02/08/2011 - 12:08 | 942986 SayTabserb
SayTabserb's picture

But can QE really end while the govt. is running at least $1.5 trillion deficits (check Denninger out today, where he forecasts a $2 trillion calendar deficit prompted by a very weak January tax haul, a month which is supposed to be good). I don't see how the Fed can ever exit the program now. Can the Treasury really assumed that the "indirects" are going to take up the massive slack if the Fed quits buying Treasuries? Makes no sense, based on recent history. The goosing of the market may be a convenient cover story for the Fed's real purpose of avoiding failed auctions, the real Doomsday scenario.

Tue, 02/08/2011 - 12:12 | 943006 Alcoholic Nativ...
Alcoholic Native American's picture

You haven't heard? Deficits and tax revenues don't matter.

Tue, 02/08/2011 - 12:14 | 943016 Tyler Durden
Tyler Durden's picture

Treasury took in $152 billion in individual income taxes in January 2011 compared to $140 billion last year.

Tue, 02/08/2011 - 13:56 | 943387 Thinking Bulldog
Thinking Bulldog's picture

The delay in processing itemized returns might have something to do with that.  I for instance got my taxes done and am due several thousand dollars of refund (poor planning on my part, I know), but the IRS won't even accept 1040s with itemized deductions until February 15, so I get to enjoy my interest-free loan to Uncle Sam for several more weeks.

Tue, 02/08/2011 - 12:32 | 943075 SheepDog-One
SheepDog-One's picture

QE cant go on, and it also cant stop...nice job chairsatan!

Tue, 02/08/2011 - 12:58 | 943181 cougar_w
cougar_w's picture

Irresistible force meets an immovable object.

This is how a vise works. I've got one in my garage that I use to crush metal tubing for building bike frames. Whatever ends up in the middle gets twisted, doesn't matter what it is.

America. In the middle.

Tue, 02/08/2011 - 12:14 | 943011 alien-IQ
alien-IQ's picture

"Have you ever stood and stared at it, marveled at its beauty, its genius? Billions of people just living out their lives, oblivious."

Agent Smith

Tue, 02/08/2011 - 12:19 | 943032 serotonindumptruck
serotonindumptruck's picture

An appropriate quote, to be sure.

Tue, 02/08/2011 - 12:50 | 943159 Rainman
Rainman's picture


Tue, 02/08/2011 - 12:14 | 943013 RobotTrader
RobotTrader's picture

Right now, with financial stocks leading, there is no clear sign of the market stopping yet.

No way I would consider going short with these type of stocks going ballistic.

Tue, 02/08/2011 - 12:18 | 943030 alien-IQ
alien-IQ's picture

Why short? NFLX hasn't hit $500 yet. Plenty of upside still left right? After all...we are in a "strong recovery"...or whatever.

Tue, 02/08/2011 - 12:34 | 943087 SheepDog-One
SheepDog-One's picture

But hows your gold short doing? Hard to figure out these guys like Robo, rear view mirror traders, no matter what happens they find some stock thats up and make believe thats what theyve been talking about all along.

Tue, 02/08/2011 - 12:43 | 943126 lieutenantjohnchard
lieutenantjohnchard's picture

hahaha! another knee slapping, laugh out loud post from the old catfish mouth robo uber bull bear wanna be.

remember it was barely 7 trading days ago when he/she was lamenting the market top in a saturday post. before that he/she was mocking eric king and gentleman jim sinclair re: gold & silver. now yesterday we find the old catfish mouth taking - get ready for it - the exact position (long gold and silver) as gentleman jim sinclair and eric king. and today he's long stocks - er ... at least with 30% of his money.

ya gotta hand it to the old catfish. he's certainly not afraid to mock himself.

Tue, 02/08/2011 - 12:17 | 943021 Bluntly Put
Bluntly Put's picture

But isn't the entire debt based monetary system an illusion? Governments and central banks conspire to weave an elaborate illusion of the future (growth) to sell debt which supposedly will be paid off with interest in current purchasing power based on the illusory growth of the system. In a free market that means if those estimates were incorrect the people/investors who purchased the debt would take a loss since they didn't access the risk. But now, the treasury issues debt with these prognostications into the market and if these bonds won't perform or the underlying economy cannot service them then the fed comes back and monetizes the debt, withdrawing all the expectations of the future and no one in mainstream economics seems to blink an eye.

In this twisted incestuous relationship between governments and central banks the public is duped by the Charlatans. Credit is not the same as wealth generated from past productivity, but it spends the same in the eCONomy.

Tue, 02/08/2011 - 12:34 | 943085 kridkrid
kridkrid's picture

Back when Mako used to post here, someone (I forget who) summarized his position this way... I copied it down... best explanation I've seen.  Echos what you say here:

The bottom line is that if humanity chooses to utilize a credit system in which to facilitate economic production, then production growth MUST exceed credit growth.

If production growth does not exceed credit growth, then the compounding principle+interest of the debt must, at some point, necessarily exceed the carrying capacity of the underlying economy.

Typically, over the long-term, productive growth never exceeds credit growth, because humanity continually realizes that the same credit facility can be used for current consumption. Hence, the illusion of prosperity as we pull forward future demand.

Once the credit system reaches terminal velocity, the system implodes on itself since there isn't sufficient new credit being generated to pay off (ie roll forward) older debts coming due with attached interest coupons.

This cycle of typically runs in 50-60 year increments; we were due back in 2000. The Fed knew it, but chose the real estate bubble as a temporary out.

What Mako is saying is that if we collectively choose to dance with the Devil, don't complain when the bill comes due. He gets annoyed, because here at ZH of all places, many people still do not understand the nature of our credit-money system.

Absent some really game changing event in the energy arena, there isn't any way out - the system must and WILL crash. No political party has any answers to solving our problems; if the TPs think it can be reformed, they are sadly mistaken.

What any anti-incumbent movement will do (as the far right & far left unite), however, is bring on the crash, either intentionally or unintentionally, which can get us going again after the slate is cleaned. At that point, hopefully mankind will have a good chance to contemplate exactly what type of system we need to move forward.

If the cabal of private money changers retain control, then the cycle will just be re-visited in another couple of generations.

Tue, 02/08/2011 - 12:59 | 943184 B9K9
B9K9's picture

I seem to recall posting that back in 2010. Of course, that was before Denninger calculated that the US has been incurring debt in excess of production for the entire post-WWII period.

IOW, for the last 50-60 years, we have never lived within our means. Our 'economic growth' has always been an illusion.

So now it comes time to pay the piper. Yet like any organism, the US does not want its system to die, so it will increasingly do anything in order to survive. We are only just beginning our slow descent into hell.

Tue, 02/08/2011 - 13:19 | 943241 kridkrid
kridkrid's picture

But when money itself is an interest bearing debt instrument, won't debt always grow in excess of production?  I think that's the point.  We have chosen a monetary system to support our economic growth that requires the constant expansion of debt until it reaches a point where it simply can grow no longer and them implodes.  There is nothing that can be done about it.  QE is what is "needed" to keep the current system from imploding, but it requires the next round of QE be larger than the one before it (or... in its place... we would need something around which additional debt can be levered up... which is what housing did for the "system" starting in the early '00s). 

Actually, this is the one positive contribution Krugman made to my understanding of the system.  He basically called it... that this is what the fed was trying to do... blow up a housing buble to avoid the greater recession that was due.

Tue, 02/08/2011 - 13:07 | 943201 cougar_w
cougar_w's picture

Everyone has a vested interest in seeing the wheel go around one more time. They saw that old guy get rich, money for nothing, and everyone wants to be "that old guy" the next time.

The problem is not that it is a cycle. Cycles are everywhere, we live by them, they even give us comfort and hope. The problem is that unnatural cycles swing with increasing velocity with every iteration. Harmonics set in. At some point it does not come around again, it just breaks, and that old guy who got rich last time turns out to be the last of the old rich guys.

Past performance is not a good indication of future returns.

After this there will be no more rich old guys.

But there will be a lot of meat.

Wed, 02/09/2011 - 00:24 | 945441 StychoKiller
StychoKiller's picture

Kinda gets a Cougar to salivatin', ne? :>D

Tue, 02/08/2011 - 12:18 | 943027 tellsometruth
tellsometruth's picture

just enter your zip


Patriot Act extension vote TODAY

Tue, 02/08/2011 - 12:22 | 943043 serotonindumptruck
serotonindumptruck's picture

No, thanks.

I suspect that my Homeland Security file is already thick enough. There's no doubt in my mind that the Thought Police know where to find me.

Tue, 02/08/2011 - 14:04 | 943411 tellsometruth
tellsometruth's picture

Pu$$Y!  I just called mine and gave first and last name



Tue, 02/08/2011 - 14:17 | 943464 SteveNYC
SteveNYC's picture

What an astonishing name "serotonindumptruck". I'd love to know what you were thinking when you came up with that one.....


Tue, 02/08/2011 - 14:27 | 943498 serotonindumptruck
serotonindumptruck's picture

I can neither confirm nor deny any experimentation with 3,4-Methylenedioxymethamphetamine in my youth.

I used to drive a dump truck.

Tue, 02/08/2011 - 12:19 | 943037 chistletoe
chistletoe's picture

Did you forget Dorothy's field of poppies?


Follow the yellow brick road ...and don't stray from the path!

Tue, 02/08/2011 - 12:31 | 943068 buzzsaw99
buzzsaw99's picture

pay no attention to the bernank behind the curtain.

Tue, 02/08/2011 - 12:30 | 943065 cocoablini
cocoablini's picture

The problem for the stock market is that it needs to appear like a longterm investment even though it has been losing money for the last 15 years or so( inflation adjusted and so on.) its just a bad deal. Mish did a good article on PEs. Basically, until PEs get to sub 10, its not worth looking at. Or the markt in general- there are going to have to be new companies that are excellent investments- overall garden variety companies have jumped the shark years ago. They have no growth story and just fiddle the books and offshore labor to make a better margin.
The stock market is a shitty deal- stuff is overpriced- and the banksters who are supporting the hologram of + 25 PEs are just trying to create a buying panic for suc,ers. BUT, God bless em, the retailers are not buying but extracting. Unemployment is also forcing people to eat into their 401ks.
The market gets manipulated higher, and people still leave. So now its NOBODY versus NOBODY on the exchanges.
Is this what the FED wanted? A dead free market and command control asset system?
Didn't Obama opine that he wished the stock market just went up slowly over time and everyone made money on stocks like a savings account?
Well,they killed it

Tue, 02/08/2011 - 13:28 | 943264 thepigman
thepigman's picture

I've come to the same conclusion. The shitty economy we will have for the forseeable future is worth a 10 p/e at the most. These idiots have ramped it to a 28 p/e or the scale for shitty economies, historically. What this really means is they've KILLED the market for the duration. QE did the same thing in Japan which is why even after the Nikkei was crushed, the Japanese STILL don't invest in it, leaving it to be batted around by offshore speculators.

Tue, 02/08/2011 - 12:32 | 943072 Hedgetard55
Hedgetard55's picture

The machines probably used more energy in maintaining the humans than they ever harvested from their "body heat". Stupid machines!

Tue, 02/08/2011 - 12:38 | 943113 serotonindumptruck
serotonindumptruck's picture

Yes, it's doubtful that the movie's writers performed EROEI analysis on the basic premise, although perhaps no energy sink would exist if given sufficient population-derived orders of magnitude.

Wed, 02/09/2011 - 00:28 | 945448 StychoKiller
StychoKiller's picture

It wasn't just body heat, the Human body also generates electrical fields.

Just add "Tasty Wheat!"  (That's goood eatin'!) :>D

Tue, 02/08/2011 - 12:33 | 943076 Reptil
Reptil's picture

Check out this EXCELLENT docu; the introduction is in dutch, but the (imporant) interviews are all in english.

It identifies the SEC as obscuring the truth; that they know very well who was responsible for the 2010 flash crash.

Well worth watching. (there's an iPad download of it, and yes, this was aired on dutch TV ;-P)

Tue, 02/08/2011 - 12:34 | 943084 tellsometruth
tellsometruth's picture

30 plus silver spot right now woooohooo

Tue, 02/08/2011 - 13:07 | 943199 Jonathan North
Jonathan North's picture

I've got my stash and it just keeps appreciating.  Wo Hoo is right my freind.

Tue, 02/08/2011 - 12:35 | 943099 gwar5
gwar5's picture

I'm partial to "DUNE" and the tale of the empowering seduction of the "Spice" on said planet.

Of course, the coveted spice was just the poop of giant worms that crawled through the planet's subsurface

Much like our oversized nematode in charge, Bernanke, who is also producing the spice to supply the planet


Tue, 02/08/2011 - 12:50 | 943153 Hedgetard55
Hedgetard55's picture

Don't forget "Shoreleave", that episode of Star Trek where all sorts of things from their past came alive to entertain them. Kirk gets to pop Finnigan, the dude who tormnted him at the Academy, Sulu becomes a swordsman (ironic).

Tue, 02/08/2011 - 13:03 | 943190 Reptil
Reptil's picture

poop and worms

I like it. ;-P

Tue, 02/08/2011 - 13:53 | 943372 serotonindumptruck
serotonindumptruck's picture

"The Spice must flow." -- 3rd Stage Guild Navigator

"He who controls the Spice controls the universe...!" -- Baron Vladimir Harkonnen

Wed, 02/09/2011 - 00:30 | 945453 StychoKiller
StychoKiller's picture

"He who has the power to destroy a thing, controls a thing." -- Paul Atreides

Wed, 02/09/2011 - 03:45 | 945740 serotonindumptruck
serotonindumptruck's picture

"It is by will alone I set my mind in motion. It is by the juice of Sapho that thoughts acquire speed, the lips acquire stains, stains become a warning. It is by will alone I set my mind in motion." -- Mentat Piter de Vries

Tue, 02/08/2011 - 12:39 | 943118 system failure
system failure's picture

What kills me with lower value POMO days such as today, the $USD drops more so than on higher value POMO days. If the R2K suffers to much, just glance at the $USD and watch the ratcheting down to maintain their key support levels. It's comical.....

Tue, 02/08/2011 - 12:44 | 943133 ak_khanna
ak_khanna's picture

The speculators who are in control of the markets have reduced the commodity, stock and currency exchanges to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls


When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.


Tue, 02/08/2011 - 12:53 | 943167 Hedgetard55
Hedgetard55's picture

Yes, the banksters will be like the Krel, destroyed by the machine that was supposed to make them like Gods.

Do NOT follow this link or you will be banned from the site!