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Where Was Goldman's Supplementary Liquidity Provider Team Yesterday? A Recap Of Goldman's Program Trading Monopoly

Tyler Durden's picture




 

In addition to having said many things about HFT in general in the last year, over the past 12 months Zero Hedge has focused a lot of attention specifically on Goldman's dominance of the NYSE's Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity (more on this below), and generating who knows what other possible front market-looking, flow-prop integration (presumably legal) benefits. Yesterday, Goldman's SLP function was non-existent. One wonders - was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse. We are confident the SEC will aggressively pursue this line of questioning as they attempt to justify their $1 billion porn download budget. We are also confident, that should the SEC truly take its role of protectors of investor interest seriously for once, it will uncover such criminality and corruption at the level of trading integration of open exchange and ATS venues (and the "but it's so complicated - let's just leave it untouched because nobody understands it" excuse is not flying any more), that it will make Goldman's CDO criminal and civil case seems like a dimestore misdemeanor. We have written about 1,000 posts about this. Readers are welcome to go back through our archives and acquaint themselves with the NYSE's SLP program, with Goldman's domination of program trading, with Goldman's domination of dark trading venues via the Sigma X suite, with Goldman's domination of flow trading via Redi X, and with Goldman's domination of virtually every vertical of the capital markets, which would be terrific if monopolies were encouraged in the US. Alas (last time we checked with the DOJ), they are not. Which is why we ask, for the nth time, when will the anti-trust division of the DOJ finally dismantle the biggest market monopolist in the history of capital markets.

First, as a reminder, here is the most recently disclosed NYSE program trading data:

What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm's own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.

We have long claimed that Goldman is the de facto monopolist of the NYSE's program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday's crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.

We will gladly work with any Attorney General to provide them all the critical data and questions they need to build a criminal case, or in the DOJ's case, an anti-trust case.

And there is lots of data. For those unfamiliar with the NYSE's SLP operation (which was supposed to be long-extinct, yet continue pluhging along in good times, but disappearing in bad), and Goldman's domination of program trading, we republish in its entirey a post we wrote in May of 2009, titled Observations on NYSE Program Trading.

 


Recently, there has been quite a bit of discussion of Goldman Sachs'
principal program trading dominance in the NYSE, culminating with none
other than Goldman Sachs themselves providing their perspective on the
matter, via spokesman Ed Canaday:

 

The NYSE report that Zero
Hedge discussed shows Goldman Sachs trading over 1 billion shares in
the principal program trading category. What the table doesn’t show,
but a deeper look at the numbers reveals is that the vast majority of
this total is trades by our quantitative trading desk. This desk is
participating in a relatively new NYSE program
called Supplemental Liquidity Providers. The NYSE started the program
to attract liquidity to the exchange. As an SLP, this the desk makes
markets in NYSE stocks. They often do high-frequency trading (which is
simply auto-quote market making) where they send out hundreds of
“baskets” of stocks at one time. Program trading, as defined by the
NYSE report is any strategy that sends out a “basket” of 15+stocks at
one time. I am happy to discuss this with you if that description
doesn’t make sense.

In order to dig deeper into Canaday's
statement, Zero Hedge performed a historical analysis of NYSE Program
Trading (PT) data (which is public) and came up with some curious
observations. But before I get into the results, it makes sense to
evaluate the facts behind Goldman's retort and in order to do that,
let's first observe just what this Supplemental Liquidity Provider
program is.

The NYSE's most recent classification of the three main market participants is as follows:

Designated Market Makers

Designated
Market Makers (DMMs) are at the center of the NYSE market and are the
only participants in any market who have true accountability for
maintaining a fair and orderly market. DMMs:

  • Convene both a
    physical auction convened by DMMs and a completely automated auction
    that includes algorithmic quotes from DMMs and other market
    participants;
  • Have the obligation to maintain an
    orderly market in their stocks, quote at the national best bid or offer
    a specified percentage of the time, and facilitate price discovery at
    the open, close and in periods of significant imbalances;
  • Provide
    price improvement and match incoming orders based on a pre-programmed
    Capital Commitment Schedule, which has been added to the NYSE Display
    Book, minimizing order latency. DMMs and their algorithms do not
    receive a “look” at incoming orders. This ensures that an intermediary
    does not see orders first, and that DMMs compete as a market
    participant;
  • Are on parity with quotes from floor
    brokers and those on the Display Book, encouraging DMM participation
    and higher market quality.

Trading Floor Brokers

Brokers
on the NYSE Trading Floor leverage their physical point-of
sale-presence with information technologies and algorithmic tools to
offer customers the benefits of flexibility, judgment, automation and
anonymity with minimal market impact. Trading Floor Brokers:

  • Have
    parity with DMMs and the NYSE Display Book, no matter whether the
    Broker’s order is represented physically or via an algorithm or
    e-Quote. That is, they can join the first displayed quote on the Book,
    and split stock with that order.
  • Have the ability to
    route all or part of a customer order to an external algo engine from
    their handheld order-management device. These algorithms offer Floor
    Brokers the ability to provide customers with additional execution
    capabilities in an environment that offers a balanced combination of
    technology for fast, automated and anonymous order execution; and a
    physical marketplace for discovering block-sized liquidity and
    improving prices.
  • Can utilize a technology feature
    called Block Talk to more efficiently locate deep liquidity. Block Talk
    is designed allow Floor Brokers to broadcast and subscribe to specific
    stocks they have an interest in, creating an opportunity to trade
    block-sized liquidity that is not accessible electronically. Since the
    messages contain no specific order information, customers benefit from
    a discovery process in a secure environment free of impact, information
    leakage or intermediation.
  • Also have the ability to
    identify via their hand-held order-management system the last five
    buyers and sellers in a stock by badge number. They can message a
    specific member that they are in touch with the contra side. This is
    valuable information for pricing blocks, as it is about real buyers and
    sellers, not indications of interest.
  • Have a special
    feature with their reserve orders: when the displayed amount is
    exhausted, reserve interest replenishes on parity. In contrast, the
    “upstairs” reserve order functions as it does in an electronic market:
    replenishing at the back of the queue.
  • Are positioned
    to act on the expanded imbalance and indication information at the open
    and close of the market. They can participate as agent, or convey
    insight into the open or close for customers’ decision making.

And most relevantly, Supplemental Liquidity Providers

Supplemental Liquidity Providers (SLPs) are upstairs, electronic, high-volume members incented to add liquidity on the NYSE.

  • The pilot SLP program rewards aggressive liquidity suppliers, who complement and add competition to existing quote providers.
  • SLPs
    are obligated to maintain a bid or offer at the National Best Bid or
    Offer (NBBO) in each assigned security at least 5 percent of the
    trading day.
  • The NYSE pays a financial rebate to the SLP when the SLP posts liquidity in an assigned security that executes against incoming orders. This generates more quoting activity, leading to tighter spreads and greater liquidity at each price level.
  • SLPs trade only for their proprietary accounts, not for public customers or on an agency basis.
  • An NYSE staff committee assigns each SLP a cross section of NYSE-listed securities. Multiple SLPs may be assigned to each issue.
  • A member organization cannot act as a Designated Market Maker and SLP in the same security.
  • SLPs have the same publicly available trading information and market data that all other NYSE customers have available to them.

It
is important to note that the SLP rebate is $0.0015, usually less than
half of the rebate plain vanilla Designated Market Makers receive,
which is between $0.0030 and $0.0035,
and
as the NYSE plainly says, a member organization cannot act as a DMM and
SLP in the same security. Obviously based on the rebate structure and
the mutual exclus
ion,
it would make much more sense to trade as a DMM as opposed to an SLP,
not in the least since SLPs (at least according to currently available
information) are very limited in terms of which securities they can
actually trade for supplemental liquidity provision. Quoting Robert Airo, VP of relationship
management and sales at NYSE Euronext, from late October 2008:

"We’re
rolling [the SLP pilot program] out in the 500 most active names where
we believe incenting SLPs by compensating them to provide liquidity
will supplement all of the other initiatives that we’ve put in place to
build the NYSE book."

The SLP program was developed in the days after the Lehman collapse
when market volatility spiked and major questions about liquidity
premia emerged, resulting in program roll out on October 29 of 2008.
The full SEC filing describing the minutae of the program is presented
below:

SEC Filing

In late November Canaday is quoted as follows:

"SLP
quoting will provide more liquidity and should make the NYSE more
competitive. We have begun to see significant shifts in terms of the
frequency with which the NYSE is at the NBBO, and we expect increases
in volume and market share to follow."

With a mere 500
securities to work with, especially being excluded from being a DMM in
SLP names, maybe Canaday can explain the economics to GS' program
trading desk from participating in the SLP?

Another relevant
question is just who are the current SLPs? It seems the answer is
difficult to pin point. It is known for a fact that Goldman Sachs and
Spear, Leeds and Kellogg (owned by GS) are currently definitive SLPs,
with Knight Trading and Barclays also presumably becoming SLPs as well,
but there has been no confirmation either way, potentially implying
that Goldman could have a monopoly in liquidity provisioning. If the
program is truly as attractive as GS' spokesman makes it seem, why are
other major equity players not clamoring to participate in it? After
all, the benefits to SLPs are "obvious."

Following up on that,
has there been an extension of the SLP program recently? Zero Hedge has
not heard of one. The SLP, which was approved in late October (see
above) was supposed to terminate on April 30,
this last Thursday: "The proposed pilot program will commence on the
date upon which the SEC will approve the New Market Model and will
continue for six months thereafter ending on April 30, 2009." If the
SLP is now over, should one expect GS's principal volume trading to
drop dramatically, if, as Canaday says, the volume is mostly SLP
driven? Also, does that mean volatility in the market is about to spike
as there are no entities (well, one entity) providing NBB and NBOs?

Indeed,
many questions arise when one digs into the nebulous world of NYSE
liquidity providers, many more than there are clear cut answers to.
Perhaps it is time for Mr. Canaday to address as many of these
questions as possible head on. Zero Hedge would be happy to provide him
with a forum for clarification.

In the meantime, here are the facts, courtesy of the NYSE's public record keeping system.

The
first chart below demonstrates total program trading in the NYSE since
mid August, a month before the Lehman bankruptcy. The black line
demonstrates total indicated program trading, which absent volatility,
has remained relatively stable, averaging roughly 4 billion shares
weekly. And while most other NYSE member firms have seen their PT
volumes stay relatively flat as well, GS has seen a dramatic ramp up,
controlling about 15% of PT in Q3 of 2008 which has risen to almost a
quarter of all NYSE PT over the past quarter.

But
while total Program Trading includes Principal trading (i.e., trading
not on behalf of its clients but for its own benefit; this is the
category where SLP would also fall in under NYSE guidelines), as well
as Facilitation and Agency trades, the big surprise arises when one
looks at a historical analysis of merely Principal trading. The chart
below pulls only the Principal trading data for the top 10 NYSE
members. And like before, while the total amount of total Principal
trading as a portion of NYSE PT has stayed relatively flat, at about
half of total PT volumes, Goldman's share has exploded over the past six months: while GS was responsible for around 27% of Principal NYSE stock trading in Q3 and most of Q4, that number has risen to the low 50% range over the past 3 months.

The
last two charts demonstrate the divergence of Principal trading as a
fraction of total PT by any given broker. It is obvious that while the
majority of top NYSE member firms have had Principal trades stay around
40% of their total PT volume, Goldman has seen its share of Principal
trading go from 60% all the way into 90%: a vast majority of all its
trades are merely for its own benefit (and potentially as an SLP
funnel).

And
lastly, demonstrating Non-Principal trading indicates, as expected, a
trend where GS' client have taken a progressively smaller relative role
as part of its total PT, and currently GS Agency volume as a % of Total
PT is the lowest of all top NYSE brokers, with total NYSE Agency volume remaining relatively stable.

So
what is really going on here? Connecting the dots is difficult with so
little freely available information, and the NYSE seems to be keeping
mum on disclosing anything above the absolute minimum when it comes to
the SLP, and brokers' participation in it.

My interest was
piqued by one of the points Canaday brought up: "What the table doesn’t
show, but a deeper look at the numbers reveals is that the vast
majority of this total is trades by our quantitative trading desk."
Maybe Canaday can expand on this a little more, as it is public
knowledge that recently the heads of GSAM and Goldman Global Alpha left
the company: Ray Iwanowski and Mark Carhart, who ran the quant
operation, and Giorgio De Santis who ran research, are no longer at the company.
Their departures in themselves are not surprising considering Global
Alpha lost over 80% of assets or roughly $10 billion in the course of
2008 (precipitated by the quant shakeout of August 2007).
But is there something else going on here? Their departures occurred at
the end of March, just as Goldman's Principal % of total NYSE trades
had peaked at almost 55%, yet when they departed, this number dropped
by a not insignificant 12% to 43%, only to rebound promptly thereafter.
Is there more here than meets the eye?

As regular readers of
Zero Hedge know, the topic of market liquidity has been a major one
over the past 3 weeks, and I have demonstrated that traditional market
neutral, high-frequency quants, aka independent liquidity providers
have not only suffered significant P&L losses in
April, but have deleveraged to a point where their presence in the
market is negligible, resulting in dramatic volatility spikes on low
volume. Could it be that Goldman is singlehandedly benefitting from
being the liquidity provider of last resort, even more so as there are
virtually no other participants in the SLP program? And, as is
expected, with a liquidity "monopoly", come unprecedented opportunities
to take advantage of this, depending on one's view of the market. Of
course, Zero Hedge is not suggesting Goldman has done this, but in a
world where so little transparency exists into the core workings of the
equity market, which most market traders have been clamoring has a
"very fishy feel" about it, with Hard To Borrow notices appearing for
such major index hedging securities as the SPY and IWR, it is no wonder
that explanations are being sought.

In order to provide some
much needed visibility, Zero Hedge, as noted above, is hoping Mr.
Canaday will approach Zero Hedge and give a more elaborate explanation
of what is really happing, and why GS is dominating NYSE program
trading, which lately has become a major percentage of total NYSE
volume. It is easy to see why market participants could be concerned
about this particular breed of opacity. In the meantime, I will
continue presenting NYSE program data, as it is everybody's right to be
caught up with all the facts.

 

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Fri, 05/07/2010 - 14:25 | 337009 nope-1004
nope-1004's picture

Goldman is the gov't and the gov't is Goldman.  This casino version of crony capitalism is corrupt to the core.

That's why Timmay, Ben, and Osama (oops... made a keyboard entry error, I work at Shitigroup!) need to be put in prison.

 

 

Fri, 05/07/2010 - 16:30 | 337120 cossack55
cossack55's picture

I assume you mean the "fat finger" was the middle one.

Sat, 05/08/2010 - 07:51 | 337811 jeff montanye
jeff montanye's picture

note that the second ranking trader of principal shares, wedbush, was convicted of securities fraud last year.

Sun, 08/14/2011 - 13:51 | 1559146 saima
saima's picture

I highly appreciate your post. This is what I am looking for to supply my next presentation with more information. Online Shopping Australia

Fri, 05/07/2010 - 17:08 | 337202 SteveNYC
SteveNYC's picture

Fuckin A!

Fri, 05/07/2010 - 18:24 | 337347 dark pools of soros
dark pools of soros's picture

when is ZH going to enter the political realm?  All these current players have their pawns in the game so all the brilliant spotlighting research isn't going to enact anyone in power to do anything since they already have their marching orders.

And what would the agenda be? What is a 'free' market?  The muscle enforces (or ignores) the rules... its all brains here so recording history is all that is going on..  and we all know which history eventually gets printed anyway

Fri, 05/07/2010 - 19:50 | 337454 Duuude
Fri, 05/07/2010 - 21:09 | 337531 dcb
dcb's picture

does anyone find this information inetersting in light of the fact that while the senate was denating too big to fail we had our meltdown and as far as I know only one firm has a program that can be used to manipulate the market according to a united states attorney general.

Same firm would be broken up, and same firm has a vitual trading monopoly on the NYSE

Fri, 05/07/2010 - 23:39 | 337650 pan-the-ist
pan-the-ist's picture

Someone else brought up that the last time there was an 800 point drop they were debating TARP.  The banksters are rubbing our fucking noses in it.

Fri, 05/07/2010 - 23:52 | 337667 Selah
Selah's picture

What about that program that was stolen from GS?

The one that could be used to manipulate markets in "unfair ways"

http://www.bloomberg.com/apps/news?pid=20601087&sid=axYw_ykTBokE

 

 

Fri, 05/07/2010 - 20:55 | 337520 Cheeky Bastard
Cheeky Bastard's picture

OT


Leaders of the eurozone finally agreed Friday night to activate the project for financial assistance worth 110 billion euros to Greece for a period of three years and declared ready in principle to "strengthen" the financial discipline, according to a European diplomatic source.

"The Heads of State and Government approved the project loan to Greece, this was not the problem," said the source.

Source: http://www.kathimerini.gr/4dcgi/_w_articles_kathremote_1_07/05/2010_336462

Party on bitches, party like its 1999 and you got  free blowjobs from all 1998 Playmates.

Markets up 999900009% Monday morning ...

Fri, 05/07/2010 - 23:11 | 337623 Crab Cake
Crab Cake's picture

additional source

Eurozone leaders approve Greece aid package

http://news.bbc.co.uk/2/hi/business/8669488.stm

Greece is saved.  Next country please.

Fri, 05/07/2010 - 23:24 | 337635 nope-1004
nope-1004's picture

For now.

Extend and pretend is the new norm.

Sat, 05/08/2010 - 02:57 | 337744 CD
CD's picture

Another wild-eyed, utterly lunatic idea:

Cast your minds and charts back to late February, 2009. BO just sworn in, markets in controlled fall, US financials in near-free fall. 2/20 is the specific day I have in mind, as I was stopped out of a (admittedly dumb) position in BAC as the share price executed a maneuver eerily similar to yesterday's action -- went down to $2, then spiked right back up in minutes. I tuned out of the market for a few weeks after that, so don't remember how many other such occasions happened. Not long after, fearless leader, the Oracle and others subtly and not so subtly suggest that buying stocks may once again be a good idea. Then, on 3/9/09 the market begins its magical meltup. Now:

-midterms are a short 6 mos. away -- no catastrophic failure allowed until then

-Greece bailed out, ECB to begin its own version of QE, didn't BOJ also throw a few more logs onto the fire?

-Serious, meaningful regulation of financial industry more or less off the table in US

-QE2 has never gone away as the next (necessary) step to prevent the dreaded 'double dip'

The big boys have the playbook (ARE the playbook). While yesterday's events are by no means random or 'accidental', the feline has many a coat of fur. There may be/are several concurrent reasons to 'neglect to prevent' downspikes like the one we just saw.

Cheeky may be more right than I dare contemplate. If any of the above is anywhere near true and the model we saw last spring is reused, maybe another 100 pt drop in the S&P later, we could witness the astounding resilience of the US economy (and financial innovation, don't forget that) with the next leg up towards Dow 36K. Bring on the broads and the blow...

Sat, 05/08/2010 - 04:45 | 337785 i.knoknot
i.knoknot's picture

March 3, 2009: The oracle (not the omaha one...)

http://www.cbsnews.com/8301-503544_162-4840788-503544.html

just an amazingly prescient fellow, i guess...

Sat, 05/08/2010 - 05:52 | 337752 AnAnonymous
AnAnonymous's picture

Mrs. Merkel also declared that new this economic situation should lead to modifications in treaties.

People betting on a demise on the Euro should never forget the stake:

euro collapse vs a furthering of the EU.

Sat, 05/08/2010 - 03:44 | 337775 Spartacus
Spartacus's picture

What I do know about the crash at this point is by having read a book of the "memoirs" of a turn of the Century trader, in which he details exactly how to accomplish that in the market. Basically the crash was engineered. you get a lot of money (in this case I believe $16B). you have not made a whole lot since 2008, and the market is bullish and oversold. Then you wait for an uncertain day that starts as a sideways downward move (in this case of about 200 points), you wait for the 2:30 pm when the circuit breakers are off. You go leisurely preparing short positions on weak instruments all over the place: options, futures, etc. Then wait for a news, any news and start a system shock by shorting one single (or a couple) of low volume weak stocks. The market will start rapidly to move down and as it does, catches in the way all those programs and stoplosses in an seemly infinite move, Stop introducing money because your job is done. Wait until the drop made significant profit and start to cover your position. thats what makes a beautiful v shape we saw yesterda

Fri, 08/19/2011 - 11:13 | 1577378 saima
saima's picture

Nice story. I write stories myself when I got free time. Last spring break I wrote several stories and next spring break 2012 i will present them to some influential people hoping to get a contract for publishing. Free Games Online

Fri, 05/07/2010 - 14:28 | 337010 Gubbmint Cheese
Gubbmint Cheese's picture

brain... hurts... too much information... I find it far easier to believe in the V shaped recovery.

there's no place like home.. there's no place like home..

 

/friday afternoon snark

Fri, 05/07/2010 - 18:23 | 337346 Problem Is
Problem Is's picture

Cheesy... We ain't in Kansas anymore...

It Will Never Be:
Same as it ever was... Your climbing home value
Same as it ever was... Your climbing 401k
Same as it ever was... Ever increasing HELCO limit...
Same as it ever was... A new deadman lease on an SUV every year

Same as it ever was...
As desperately as the Amerikan middle class want it to be...

Fri, 05/07/2010 - 23:41 | 337653 pan-the-ist
pan-the-ist's picture

I read that in tune with this song:

http://www.youtube.com/watch?v=fkuOAY-S6OY

RATM killing in the name of!

Fri, 05/07/2010 - 23:42 | 337656 pan-the-ist
Fri, 05/07/2010 - 14:34 | 337019 Robert J Moran
Robert J Moran's picture

You are asking Osymandias to dismantle itself... I think 'self-dismantling' (if there is such a word) would NOT take place without a fight, or a collapse and rebuild by different 'interested parties' (that would be the rest of us) Soldier on Zero Hedge! Please, soldier on!

Fri, 05/07/2010 - 20:49 | 337513 Crab Cake
Crab Cake's picture

Ozymandias

I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
`My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!'
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away".

-Percy Bysshe Shelly

Fri, 05/07/2010 - 20:56 | 337522 velobabe
velobabe's picture

your cool!

ZH member's, are VB's new textbooks of learning.

i swear, i have my dictionary and wikipedia as close as any gun would be.

Fri, 05/07/2010 - 21:46 | 337529 Crab Cake
Crab Cake's picture

I like his wife better.

Wait, that sounded bad....

She did write Frankenstein though, Mary Shelly that is.

Believe it or not she would sit in on informal book club/brainstorming sessions with her husband, and a group of people that included Lord Byron; that's where she developed the idea for the book. 

If you are looking for some other great poetry...

My favorite of all time is, The Rime of the Ancient Mariner by ST Coleridge.

Do Not Go Gently Into That Good Night - Dylan Thomas... Gives me faith that I will have the courage to die well.  Fantastic.

Poe is awesome, and William Blake is pretty kick ass too. 

Wow. I'm so not ZeroHedge material.  How did I end up in here?

Fuck you Fed/oligarchs/corrupt government/corporations for making me learn/making important this boring crap! Bless you Tyler for your bringing light into the darkness on a daily basis, and having/allowing the space for a great group of eclectic people to interact and learn.  I remember when I first started researching and reading (blogspot ghost), I drooled on the keyboard a few times, but I haven't given up.  It's too important. I came only armed with basic university economics mac/mic, stats, retirement investment training, and NOW... I'm a man. :) Thanks ZeroHedge. 

Sat, 05/08/2010 - 00:06 | 337672 chindit13
chindit13's picture

Actually, you ARE Zerohedge material. 

What I find most interesting about this community is that it is largely a collection of people who do read and are well informed.  They're folks not just looking for soundbites, but who will pour through TD or Marla's long pieces, or CogDis' long missives (here's a pot calling a kettle...) out of a desire to learn.  When Cheeky isn't ranting, he lets on that he is quite the educated soul and a fountain of knowledge.  Hephas seems to be a bio-engineer.  There's plenty of traders, both equity and fixed income, and a seeming abundance of code writers.  Read the posts of those who write and little snippets come out about who everyone is.  I would guess the demographics on this site are very advertiser friendly, though I also suspect many of us have long ago sworn off the world of perpetual consumption (but we'll click on the ads!).

So go ahead and quote Yeats or Byron or any Bloomsbury type, or Aristophanes for that matter, and I'm guessing you'll have an audience.

Sat, 05/08/2010 - 00:40 | 337701 Janice
Janice's picture

Dang, I just quote Popeye.  I must be CNBC material.

Sat, 05/08/2010 - 04:51 | 337786 i.knoknot
i.knoknot's picture

it's all about the context. there's wisdom in popeye - you jest gotta know where it be hiddens...

Fri, 05/07/2010 - 14:34 | 337020 jkruffin
jkruffin's picture

Bank stocks lead the collapse next week guaranteed!!  They have been lagging the fallout this week, but not next week.

Fri, 05/07/2010 - 15:40 | 337054 Cleanclog
Cleanclog's picture

I agree that bank stock collapse next week has high likelihood, especially if some hedge funds bust and everyone becomes wary of exposure and banks lending to each other (already in play in Europe where most banks are lending to each other through the ECB so no counterparty risk).

Also, with actions in Gold and Oil and currencies and jumpy equities, another algo trigger could go crazy any time.  No curbs to prevent.  No more throttles than yesterday.

Fri, 05/07/2010 - 15:22 | 337035 AR
AR's picture

UPDATE  /  Entitled:  There is NO MARKET  ----------------------------

 

We aren’t the smartest guys, but, we do have some 30+ years of experience in the business and were around in 1987 when similar markets exerted themselves. Back on February 22nd, we submitted a posting on ZH (see below).  For those who missed it, ignored it, or would like to refresh their thoughts, we again copied the post below.  Good luck everyone…

 

No Change In The Regime: Volume Dismal In Yet Another Green Day

 

LINK:               http://www.zerohedge.com/article/no-change-regime-volume-dismal-yet-another-green-day#comment-240616

 

 

by AR
Posted originally on Mon, 02/22/2010 - 16:35
#240616

It's slow today, so I'll add to your comment. I've repeated this story over the last 6 months from time to time, and I'll do so again here. Back in June 2009, a colleague of ours (a $5+ Billion dollar hedge fund) traveled to Europe on a meet-n-greet, money raising campaign. At the time, he returned and said "there is 50% LESS MONEY out there to invest." I presumed his observation was due to lost investments, the meltdown, margin calls, etc..  Then, a month later (keep in mind they are large) he told us, "...there is no market..."  I said, what do you mean there is "no market?" He literally said, there is no market. What he meant was, they could not find market participants to take the other side of their trades -- literally. Bid/Ask spreads were huge, and there was no liquidity anymore for them initiate trades as they’ve done in the past (or, much less).

Since then (the last 4-6 months) all of us, have now discovered, exactly what he was talking about. There is NO MARKET (period). Volume is gone. Government, computers, quants, algos, HFT's -- whatever you want to label them – now are said to dominate 70% of all volume today. Thus, keep in mind too, that they dominate 70% of "today's volume" (which on the above premise, is 50% LESS than the real volume the market traded before the credit crisis).

So, think about all this. One, there is 50% less real volume. 70% of the existing (50%) volume is computer led. Thus leaving, theoretically, only 15% of the actual volume in today's markets being "true or real volume" (when compared to volume prior to the crisis).  Only 15%.  So... now we see the problem with the market's today. This is a huge structural shift (and problem). We don't see it getting better in the short-term.  Interesting dilemma. Good luck everyone... 

-----------------------------------------

 

PS:  Finally, to DeadHead… If you happen to read this, one, you’ll know what I’m talking about. And two, I sent you an email a couple of weeks ago to your Gmail address.  Try picking up the email and respond accordingly. I hope you’re well buddy. Good luck DH.

Fri, 05/07/2010 - 16:48 | 337155 i.knoknot
i.knoknot's picture

+100

except the schmucks throwing that 'top-of-the-market' hot-potato back and forth, for 40 +points a day, nobody wants anything to do with any of this market.

so, you are spot-on in the *effectively* 'no market' assertion, but i would argue that there is a *dangerous* pseudo-market using what's left of those FED MBS purchases and weekly american 401K auto-deposits, taking advantage of the low volume, to prop/prop/prop up the market for the bailout masters upstairs.

witness yesterday... there are effectively *no* limit-buy orders under the top right now. *no* support. hell, there's no resistance. they don't dare take anything off the table, because to sell means one of the potato players stopped buying. ask any market-maker how many limit buys are "waiting for deals" 7-10% under current prices. functionally none. a few day/swing traders, maybe.

what's a 'good deal' mean anyway? find some FA that supports current prices. find a correlation that holds for more than a week. find a TA graph (fibs, etc.) that actually hasn't been distorted to meaningless given there are only 7 players and none of them are responding to value, but rather politics.

"no market" is an understatement. the PTB bet is that they can inspire enough confidence to support their propped up market *after* they've moved the market up on low volume, making some pennies on every front-run transaction. then they can pay off their nasty mark-to-myth before it gets called by the real market. problem is, it's their only bet, and it's a bet against the intelligence of those with money to protect - *not* the masses at large. i believe they will lose that bet in the ugliest of ways. and we may go down with them. this sucks.

america is simply loaning/trusting the various defaulted banks (treserve, etc.) some interest-free time to get their sh#t together... too bad most americans don't realize that the banks will never get it together - the math says "no". worse, most americans don't even know they're even making that loan. kinda like SS, but the fuse on this one is much closer, and the bomb, much bigger.

there *is* a market, one that no thinking person should be anywhere near. it's not 'if', it's 'when' it will collapse. and that's not a wish, it's math.

Fri, 05/07/2010 - 17:34 | 337251 walküre
walküre's picture

I agree.

But to say there's no support or resistance is wrong.

Support for PG was at $39 which is *only* 35% below trading value. LOL

If the market went down 35%, I'd go in both feet. My money is on the side and I'd think that there are many others waiting for the drop to get in.

 

Fri, 05/07/2010 - 18:29 | 337276 i.knoknot
i.knoknot's picture

you are ultimately correct. i say that in a very loose manner, in the broader context of my point.

e.g. any company who goes below 'book' is a target for me, so i believe in resistance/support - in a natural market.

but - re:PG, i don't believe *anything* we saw yesterday had to do with natural market valuation. really. it wasn't 'resistance-in-waiting' that stopped that collapse, it was somebody finally getting to that 'red-button' that poured a zillion buy @ market orders into the system.

god, i would have loved to have seen the faces and heard the phone calls that led to that moment.

unless... they did it on purpose. resistance doesn't count then either... 998 - just under 1000...

the current market has just enough familiarity to fool us into believe in it... but it is truly broken behind the veneer.

bernie madoff had a nice office in a nice building... visitors believed what they saw.

PG is still a good company... we just can't tell how good the markets really believe it is right now.

(edits for rephrasing)

Sat, 05/08/2010 - 00:24 | 337686 chindit13
chindit13's picture

"there are no bids"

That is a key point.  I dislike the man and hate to use his phrase, but when the tide went out Thursday the market could see the buy side was naked.

I may have suspected as much before, but now when I look at the bid/ask at various prices on the screen, I know it's a mirage.  There are no real bids, or precious few.  Everyone who wants to be long is long.

Take a wildly long market, no real bids, and a slew of computers all running the exact same algo, and the recipe exists for a forty percent down week.

It is hard to believe that the major players may not be cognizant of that fact, but if they let the VIX drop to 16 like it did a few weeks ago, it seems even the big players fail to grasp the possibilities.  It is either that or else they have been told by Bernanke that he's got the downside.

When I look at the coordinated nature of how all the markets in just about every asset class started tanking at the same time on Thursday, I cannot help but think that maybe one of the more mercenary hedge funds was doing a test run of a Doomsday Machine, knowing that aggressive selling in a world with no buyers could take out 20-30% across the board across the world.

Fri, 05/07/2010 - 17:20 | 337222 ayanni
ayanni's picture

What happened to DeadHead?  Anyone know?

Sat, 05/08/2010 - 03:29 | 337758 CD
CD's picture

[nevermind] see AR's comment above

Sat, 05/08/2010 - 17:06 | 338305 Common_Cents22
Common_Cents22's picture

Yep, you have a few experienced poker players that know each other sitting at a table.  When they run out of new fresh meat to rip off they will have to play with themselves.  If they can't entice any new idiot, they will eventually turn on each other.  If you sit down to a poker table, look around and don't see the idiot, you are it.

Fri, 05/07/2010 - 15:36 | 337049 JuicyTheAnimal
JuicyTheAnimal's picture

This market is like a poker table, everyone is a cheater with cards up their sleeves, Goldman has the aces and all of them have guns pointed at eachother under the table.  Scene ends like Inglorious bastards and we are collateral casulties.  

Fri, 05/07/2010 - 15:37 | 337050 Marley
Marley's picture

Anyone come up the thought that perhaps HALs circuit breaker openned for 25 minutes yesterday?  Perhaps what we saw for 25 minutes was reality.

Fri, 05/07/2010 - 16:13 | 337100 faustian bargain
faustian bargain's picture

That's my theory.

 

**edit: or rather, the first half of that 25min was reality. The second half was reality getting the heave-ho.

Fri, 05/07/2010 - 16:49 | 337156 ZerOhead
ZerOhead's picture

I agree... someone was sending a message here... the message is that without them there is nothing underneath this market but air...

http://kellycordes.files.wordpress.com/2010/03/wile_e_coyote_gravity.jpg

Just don't look down!

Fri, 05/07/2010 - 18:01 | 337300 Marley
Marley's picture

When, if ever, has the DOW, in it's history, dropped 10% in 25 minutes?

Sat, 05/08/2010 - 00:24 | 337685 A Nanny Moose
A Nanny Moose's picture

Does May 6th 2010 count as history yet?

Fri, 05/07/2010 - 18:04 | 337304 Iguanadon
Iguanadon's picture

My baseless theory is that with the 10% circuit breakers in place to shut down the markets, someone programmed the robots to start buying at the 9% mark and see if it keeps the markets afloat.  If not, bail quickly and let the circuit breakers do their thing.

Fri, 05/07/2010 - 20:32 | 337494 A_MacLaren
A_MacLaren's picture

Except there are no circuit breakers after 2:30 PM ET, until the loss is 20%

http://www.nyse.com/press/circuit_breakers.html

The halt for a 10% decline would be one hour if it occurred before 2 p.m., and for 30 minutes if it occurred between 2 and 2:30, but would not halt trading at all after 2:30. The halt for a 20% decline would be two hours if it occurred before 1 p.m., and between 1 p.m. and 2 p.m. for one hour, and close the market for the rest of the day after 2 p.m. If the market declined by 30%, at any time, trading would be halted for the remainder of the day.

Fri, 05/07/2010 - 18:39 | 337369 Fraud-Esq
Fraud-Esq's picture

absolutely. Timmy was in a hearing too, kept looking down at Blackberry. We've seen a glimpse of reality twice, 08 drop and yesterday. No underlying bid.  

Fri, 05/07/2010 - 23:33 | 337645 nope-1004
nope-1004's picture

That's the story, that he looked down at his BlackBerry and said "That can't be right".

My question would be:  What makes a no volume melt-up "right", yet a correction not right?

Timmay.... you're up!

Please explain... what is so unnatural about the force of gravity bringing something or someone on cloud 9 back down to earth?

 

 

Fri, 05/07/2010 - 18:43 | 337375 Strider52
Strider52's picture

HAL had to reboot due to a "Critical Windows Update". It was down for a few minutes, and the matrix collapsed into reality. I bet they are paying an engineer buku bux to make it triple-redundant, with a load-share and a UPS (not the shipping company, an Uninterruptable Power Supply) battery / generator.

  After all I've read here, I'm sure it was a computer F-UP.

Fri, 05/07/2010 - 15:42 | 337056 George Costanza
George Costanza's picture

remember Wall Street loves volatility.  With the VIX at 16, even with a slow melt up, it was hard to the Banksters to make excessive money.  They need volatility.

Fri, 05/07/2010 - 17:15 | 337213 Howard_Beale
Howard_Beale's picture

Good Stuff!

Fri, 05/07/2010 - 21:14 | 337534 Cistercian
Cistercian's picture

 Excellent.As a boy, I got to play at a card punch station at IBM.A little older, and I saw the 3 card monte guys on the sidewalk.

 Thanks for the memories, and the sadly accurate portrayal of today's market reality!

Fri, 05/07/2010 - 23:28 | 337642 DaveyJones
DaveyJones's picture

nice

Fri, 05/07/2010 - 16:00 | 337077 Crab Cake
Crab Cake's picture

Goldman's dominance of the NYSE's Program Trading platform...

They say jump, you say how high.

Just victims of the in-house drive by.

Bullet In Your Head - Rage Against the Machine

http://www.youtube.com/watch?v=o_-QGNUYL5g

I give a shout out to the living dead
Who stood and watched at the feds cold centralized
So serene on the screen
You was mesmerized
Cellular phones soundin' a death tone
Corporations cold
Turn ya to stone before you realize

They load the clip in omnicolor
They pack the 9, they fire it at prime time
Sleeping gas, every home was like Alcatraz
And mutha fuckas lost their minds

Just victims of the in-house drive-by
They say jump, you say how high

Fri, 05/07/2010 - 19:45 | 337448 Rick64
Rick64's picture

RATM has some kick ass political messages.

Fri, 05/07/2010 - 23:46 | 337660 pan-the-ist
pan-the-ist's picture

Wack. We were both thinkin' about rage after we read this article.

Fri, 05/07/2010 - 16:14 | 337089 Dr Hackenbush
Dr Hackenbush's picture

it's called organized crime in 2010. 

liquidity providers = insiders

fat fingers = blackmail

In order to understand this market one must only  study the Capone gang! 

Fri, 05/07/2010 - 16:07 | 337091 Howard_Beale
Howard_Beale's picture

New to the Zazzle ZH Fundraiser store, and thanks to all for your support, a shirt commemorating Tyler's Post last night on being vindicated. Mug coming in minutes...check it out!

http://www.zazzle.com/zero_hedge_is_vindicated_tshirt-235161197128908385

 

Fri, 05/07/2010 - 16:29 | 337118 Crab Cake
Crab Cake's picture

Howard,

Can you do polo's?  I would like something to wear on casual days at work, but I can't get away with a tee. 

Do that, and I'm in. 

Fri, 05/07/2010 - 17:33 | 337225 Howard_Beale
Howard_Beale's picture

I sure can. Which image are you interested in and I will make some polos! Happy to create whatever you want.

www.zazzle.com/Howard_Beale

Fri, 05/07/2010 - 16:37 | 337134 cossack55
cossack55's picture

Market tip:  Can you do NyGlo flags either 3'x5' or 4'x6'?  A cool stylized ZH logo perhaps.  Or a nice anarch-capitalist statement.

Fri, 05/07/2010 - 17:32 | 337246 Howard_Beale
Howard_Beale's picture

Can't do flags... :(

Fri, 05/07/2010 - 18:14 | 337332 Marley
Marley's picture

So a flag with this picture is out of the question?

http://www.goofball.com/cartoons/bird_finger_The_Last_Act_Of_Defiance

Fri, 05/07/2010 - 18:44 | 337377 Howard_Beale
Howard_Beale's picture

LMAO

Fri, 05/07/2010 - 23:48 | 337661 pan-the-ist
pan-the-ist's picture

If the Euro keeps dropping I might be able to afford an official t-shirt.

Fri, 05/07/2010 - 16:16 | 337096 John McCloy
John McCloy's picture

   If the government is planning a move on Goldman after they engaged in financial warfare of the United States of America they need to consider charges of treason. If I were the FBI/DOJ/SEC I would be drawing up secretive strategies to seize GS on the weekend and have in place some form of containment measures regarding liquidity and the slow liquidation of their assets. GS shareholders can no longer claim they were taken by surprise. We have seen them hit with both civil charges from the SEC & Criminal charges with them making it very clear, "We are looking into Goldman for numerous other illegal activities".

We have some very intelligent people in this country along with the FBI/CIA and they have a strong love for this nation. If you think for a moment they intend on allowing domestic terrorism to from a bunch of cowboys who are placing the national security of this nation in jeopardy well prepare for a lesson that will make the entire industry have a moment of pause. You guys actually believe they are going to allow you to dictate legislation under market threats by turning off the HFT computers. It may have achieved the  desired result they want in the near term but if they did not have a reason to believe GS orhcestrated the collapse of the markets with Lehman, BSC while naked shorting them and AIG in order to force a payout along with the TARP March crash well then two things were confirmed yesterday:

1) Goldman caused caused the crash for their own gain

2) Those who view GS as a threat to the nation are now aware that they need to act sooner rather than later.

We are a land of laws..not of men.

Fri, 05/07/2010 - 16:16 | 337107 Dr Hackenbush
Dr Hackenbush's picture

Hear, hear!!

Fri, 05/07/2010 - 21:21 | 337539 Cistercian
Cistercian's picture

 I have said for a long time now that GS et al are a clear and present danger to the security of the United States.They need to be prosecuted and broken up now, before it is too late.

  Actually enforcing the law should be sufficient.The obvious market manipulation for profit has to stop.NOW.

Fri, 05/07/2010 - 16:19 | 337112 faustian bargain
faustian bargain's picture

I'm afraid we stopped being a land of laws a long time ago. I hope we can go back to that, but I fear it won't happen until after some very bad events.

Fri, 05/07/2010 - 16:32 | 337122 Crab Cake
Crab Cake's picture

We are a land of laws, it's just that they only apply to the bottom 90%.

Fri, 05/07/2010 - 16:35 | 337123 DaveyJones
DaveyJones's picture

exactly, we would not have got here if we were and unfortunately the bad things will happen to the good men first.  

Fri, 05/07/2010 - 16:30 | 337119 walküre
walküre's picture

What are you smoking?

"to from a bunch of cowboys who are placing the national security of this nation in jeopardy well prepare for a lesson that will make the entire industry have a moment of pause"

You still don't get it.

The national security risk is you and everyone else who wants to take down GS or JPM for doing exactly what the American national fundraiser branch has been doing for the last decades.

Exploit the world and exploit Americans to fund the American Dream for a few.

Is that so hard to understand?

The conspiracy is your government.

Euro down, UST up. Stocks down, UST up. Algo trading warfare, UST up. Market makers at GS are equivalent to stealth bombers. Figure it out.

Fri, 05/07/2010 - 17:32 | 337245 velobabe
velobabe's picture

hey be nice, he is innocent. he is young and just graduating college. trying to make sense. kinda like me. this young person spoke to a lot of us back on the Senate Rejects Brown-Kaufman Proposal To Break Up Largest Banks Tyler Durden

broke my heart actually with his thoughts.

Fri, 05/07/2010 - 18:15 | 337325 Crab Cake
Crab Cake's picture

Thanks Velo, I needed a good heart break.... I'm literally sitting on my patio blubbering with a beer in my hand, fuck. 

Procol Harum - A Whiter Shade of Pale

http://www.youtube.com/watch?v=PbWULu5_nXI

 

Fri, 05/07/2010 - 19:27 | 337415 Amish Hacker
Amish Hacker's picture

Set down the beer for a minute and do cartwheels cross the floor...

Fri, 05/07/2010 - 20:37 | 337497 velobabe
velobabe's picture

now i realize why i am so damn dumb. skipped my early learning years and college and was on the road across the USA watching all these great music groups of the 60's 70's. groupie. saw all the best 3 or 4 times over. just call me penny lane, from almost famous†

Fri, 05/07/2010 - 21:46 | 337557 Bolweevil
Bolweevil's picture

I saw Primus 26 times (once in Tiajuana, is that international?).

Fri, 05/07/2010 - 18:10 | 337320 i.knoknot
i.knoknot's picture

i think he's agreeing more than disagreeing.

transparency and accountability - different phrasing, but same goal.

only difference is he wants to fix the government, and it sounds to you like fixing the cancer tumor, rather than cutting it out completely.

we need more discourse and "laws vs men" messages getting out there. differing tones capture differing ears. feel free to correct but don't lambast the well-intended (and well-written, in this case)

we know vegas is rigged and we still go. it's ok because we know.

they keep claiming the banks and markets are fair.

ZH exists because we don't believe it. and it pisses us off.

6 billion sheeple have no idea.

 

Fri, 05/07/2010 - 18:39 | 337370 Pure Evil
Pure Evil's picture

That may have been the status quo before, but now that they have used their nuclear option everone is pretty much aware of the awesome power held by a few on Wall Street.

On May 6 only a quaint few actually saw the bomb being dropped but everyone saw the flash, a good number were either destroyed or burned by the blast, and now the rest of us will be dealing with the fallout for quite some time.

It was pretty easy dismissing a few cackling hens in the blogosphere about their criminal enterprise, but now that they've shown their hand, in effect like a couple of petulent children throwing tantrums trying to show that they were more powerful than even the Federal Government, they will have a difficult time hiding behind the facade they have built up for years.

IMHO, I don't believe that the majority of the Senate really wanted the type of reform requested by Ron Paul or Senators Kaufman or Warner. But, now that the destruction of May 6 has been broadcast for all to see it will be rather difficult to stop any type of investigation and new reforms with the usual bribes, contributions, and good-ole-boy deals.

Fri, 05/07/2010 - 16:40 | 337141 cossack55
cossack55's picture

Good fictional reading to take the mind off:

"Daemon" and sequel "Freedom" by Daniel Suarez.

Maybe not fiction.

Fri, 05/07/2010 - 16:50 | 337165 Crab Cake
Crab Cake's picture

"We have some very intelligent people in this country along with the FBI/CIA and they have a strong love for this nation."

John, I like you, I like your sentiment, and lord knows I hope you are right. 

However, show me the fucking pudding!

My people need, not want, action; now.  If these hallowed institutions, and these fine fellows, you have so much faith in will not act then it is inherent, and incumbent, that the citizenry act by militia and revolutionary action (not necessarily violent) to restore government by and for the People by any means necessary.

Let's see the FBI, CIA, and law enforcement in general stand at the god damned plate and take a swing already.

Let's see them keep waiting... Then the criminals families get kidnapped, their houses get burned, they will get street jacked and beat to death, and criminals will end up giving confessions on youtube and executed.

This is not the America that I want to see.  So let's see who the cops are, and who's working for the financial terrorists.

Their choice.  These are not suggestions, these are not my plans; as I'll be holed up somewhere listening to the radio and fishing. Nope. These are realities, and Greece is coming stateside in an American way soon; believe that. 

It's time for them to do their jobs.  They're either with us or against us, it's time to get down or lay down. 

Fri, 05/07/2010 - 17:25 | 337235 Howard_Beale
Howard_Beale's picture

I can do Polo's (I responded above) so let me know what you like on it!

Fri, 05/07/2010 - 17:37 | 337254 Crab Cake
Crab Cake's picture

I have to be subtle.  I work at TBTF.  I'm thinking QEII, as big as possible, on the back center, on a white polo.  Too much to ask? 

You're the man, btw.  Long live the 'Hedge. 

Howard Beale said it all, my favorite avatar, FWIW.  That rant puts chills up my spine everytime.

I'm mad as hell, and I'm not going to take it anymore! 

Fri, 05/07/2010 - 20:05 | 337382 Howard_Beale
Howard_Beale's picture

Not too much to ask at all. I will post the link when it is done.

Here it is with the movie poster edition:

http://www.zazzle.com/qe_ii_polo_shirt-235940768556699968

Here it is with the just the earth:

http://www.zazzle.com/qe_ii_tshirt-235878027074687794

Had to find one big ass high res photo of the earth in case that it what you wanted and remake it! Hopefully others will enjoy as well...

Fri, 05/07/2010 - 21:26 | 337544 Crab Cake
Crab Cake's picture

Sweet.  I will have one, purchased on by the end of the weekend.  The second one is spot on.  Thanks HB.

Fri, 05/07/2010 - 17:43 | 337267 Duuude
Duuude's picture

John

If /as all of this is known by the folks who oughta be able to do somefucking thing about it I am concerned that nothing has been done.

Treason it is and has been for a while, but I ask how deeep does it go?

May not matter we're all scroomed mathematically anyway, there is too much debt everygoddamnedwhere.

Fri, 05/07/2010 - 18:26 | 337351 Fraud-Esq
Fraud-Esq's picture

Well, John, it's not impossible, just unlikely frankly because most people don't understand this stuff. The FBI did, however, put an end to the neocons under George Bush without hardly anyone knowing it. The institutions in Washington often go to war with each other (and civil war). The FBI went to war against the neocons in the Pentagon with help at State. So, what you're saying is not OUT OF THE QUESTION. It just takes the right people hitting a point or developing a grudge.  

Fri, 05/07/2010 - 20:44 | 337503 Magat Guru
Magat Guru's picture

Tell us more -- I must not be hardly anyone, as this is news to me!

Please, some links where I can read-up on this development (FBI deals w/ neocons in pentagon).

Fri, 05/07/2010 - 20:54 | 337518 Fraud-Esq
Fraud-Esq's picture

 The FBI was shadowing the Pentagon (office of special plans specifically) in the heyday of Iraq war. No doubt the FBI was working with flag rank others in the Pentagon. They were pissed that Feith was playing toy soldier and cooking the books. Check up on the "Lawrence Franklin" indictment, worked under Doug Feith and Wolfowitz. AIPAC used this arrest to go on the counteroffensive accusing the FBI of being anti-semetic, as two AIPAC employees were also arrested. But, the damage was done and Feith and the rest ended up knowing the deal and leaving. Some might say big oil and the State Dept was behind it too because OPS and State had the opposite post war plans.  

Sat, 05/08/2010 - 00:40 | 337699 chindit13
chindit13's picture

I have this recurring dream where I am involved in the rendition of Doug Feith to Fallujah, where he is left unclothed in the Shi'ite part of town with an autographed copy of Salman Rushdie's "Satanic Verses", a birthday card from a famous Danish newspaper cartoonist, and a DVD of Theo van Gogh's movies.

As my Blackhawk lifts off and the dust swirls around a fat and naked Feith, I tell him I'll look forward to watching him on the internet.

Sat, 05/08/2010 - 01:58 | 337721 Fraud-Esq
Fraud-Esq's picture

So, you like Doug Feith huh?

Sat, 05/08/2010 - 02:34 | 337726 chindit13
chindit13's picture

He is an unctious piece of rotting garbage and the consummate chickenhawk, an absolute coward intent on starting a war that other people would have to fight, and totally lacking in even the slightest bit of compassion for the untold suffering he was wont to cause among both Iraqi civilians and US Forces.  That's the long answer to your question.

The short answer:  NO. 

Sat, 05/08/2010 - 03:33 | 337763 Fraud-Esq
Fraud-Esq's picture

not to mention he's dumb, dumb, dumb. One of those stunningly stupid guys that hides it behind his academia and zealousness.  

Sat, 05/08/2010 - 05:03 | 337788 i.knoknot
i.knoknot's picture

bookmarked that one. coulda' come right out of a middle-eastern 'apocalypse now'

brilliant.

Sat, 05/08/2010 - 03:19 | 337756 CD
CD's picture

For an amusing, but at the same time deeply depressing retort, take a look at an article by Mark Ames, posted on another ZH thread by a reader:

http://exiledonline.com/confessions-of-a-wall-st-nihilist-forget-about-g...

The guy is either an utter and complete genius, or he really does have a buddy who thinks/talks like that -- but the logic is incredibly internally consistent:

 

“Let’s say the government decides one day, ‘You know, we oughta listen to Che here, let’s throw the book at every firm and every executive that our people can make a case against. Because you know, gosh, it’s all about rule of law and blind justice, just like Che says.’ OK, so now this means indicting just about every serious player in finance, so they take down Goldman Sachs, they take down Citigroup, JP Morgan, BofA… and they also serve all the big funds who are at least as guilty, if not more. So they shut down Pimco, Blackrock, Citadel… maybe they indict Geithner and Summers, haul in some of Bush’s crooks… right?”

“Too bad they don’t serve popcorn here, this is getting good.”

“OK, now guess what you’ve just done? You’ve just caused the markets to completely tank. Remember what happened after the Lehman collapse? Remember how popular that made every politician in Washington? Still wondering why they coughed up a trillion bucks? They were scared for their lives; that’s why they voted for that bailout. You’d have done the same goddamn thing. But if we go after everyone guilty of fraud and theft, the market crash this country would see would make 2008 look like Sesame Street. Open that can of worms labeled ‘Fraud’ and the whole fucking economy collapses. You may as well prosecute people for masturbating. No one will know where the fraud investigation stops and who will be charged next—everyone will try to cash out, and the markets will tank to zero. And guess what happens when the markets tank to zero? Every fucking American with a retirement plan, or an investment portfolio, or a 401k—every state pension plan in the country, every teacher’s pension fund, every fireman’s pension—every last one of them will be wiped out. That’s what the Lehman collapse taught us.”

 

Sat, 05/08/2010 - 09:26 | 337847 Hulk
Hulk's picture

Agree with Ames, he is stating the obvious. What  the Lehman collapse should have taught us is you better have some fucking PM's. Everything else is just a midsummer night's dream...

Fri, 05/07/2010 - 16:16 | 337106 RockyRacoon
RockyRacoon's picture

There is a field of science devoted to the breakdown of complex systems.   Meshing the post with this science is out of my area of expertise but I'd love to read a qualified person's analysis of this correlation.  That would make a great topic for a separate post.

Fri, 05/07/2010 - 16:39 | 337137 sysin3
sysin3's picture

Just so, Cheeky.  Or, hell, just plain old entropy would do it ;-)

Fri, 05/07/2010 - 16:44 | 337154 Cheeky Bastard
Cheeky Bastard's picture

Entropy in systems is what category theory is to mathematics; an abstract generalization very much not applicable in studying particular parts of the whole. Rarely if ever can entropy be utilized in such a manner that it would provide a complete solution to the specified problem. Its much better to use discrete specialized methods when it comes to distinctive problem which are part of some generality.

Fri, 05/07/2010 - 16:53 | 337174 sysin3
sysin3's picture

I love it when you talk sexy ;-)

Actually, I meant it in the "things all fly apart and go to shit" sense.

i.e. a doctrine of inevitable social decline and degeneration.

Or, as all programmers and space shuttle designers realize, complex systems tend to fail catastrophically.

 

.

Fri, 05/07/2010 - 20:58 | 337524 SloSquez
SloSquez's picture

You've been CB'd.  Dude, CB knows math and can drop his intellect to help you understand - truly talented - CB is!  Rock on CB!

Sat, 05/08/2010 - 10:04 | 337874 Hansel
Hansel's picture

I don't want to argue, but all the equations of physics can be rewritten, replacing time with entropy.  Time is a manmade construct.  Also, the application of entropy most often requires discrete solutions.  I don't understand, or don't agree with, what you're getting at.

Sat, 05/08/2010 - 11:54 | 337946 Cheeky Bastard
Cheeky Bastard's picture

Alright. You sort of read my post wrong. I approached the matter from a strictly mathematical position, not from position of physics. You are true about what you say about time, Einstein itself disregarded the construct of time and replaced it with the notion of an event [which itself had dual origination being that it was ascribed coordinates of space and time]. Entropy can thus be defined as a string of events and if methods allows us those events can be quantized and given frequency. But than again you get something which is similar to Time but not dependent on space and speed but occurrence. Duration is still there, but is not externally relevant. Therefore time in such a system is not an equation of space and speed, but frequency of events. The problem is you then have a definition of time which is liquid and it changes whenever and event occurs. You can see where the problem lies with that approach. So it is true, what we perceive as time is nothing but a chain of events on all scales and of all durations. Chaos is an axiomatic description of the empirical. Now from a mathematicians point of view methodology of approach to a problem is more important than a solution to that problem and mathematics has thrown away or meta-narratives when the ground for the possibility of construction of new algebras was introduced following Seki, Leibnitz and Cramers eventual departure into abstract algebras. That was OT, sorry. What that did contribute to the study of mathematics is that it has began to crumble into various fields which could not correspond to one another and hence Cantor found Set Theory to give mathematics its ground into a new generality, that is grouping of mathematical objects according to their similarity and introducing corresponding operators in goal of correspondence between notations of identity, equality etc etc. Eilenberg and MacLane took the same idea and introduced category theory which uses abstract morphologies in order to study correspondence between two or more narrations of mathematical structures and finds relations by introducing morphological composition via functors. What im trying to tell you is that entropy is fantastic if you want to study the underlying principles of the totality but it is useless in studying sub-sets. You need a non fluid measurement of time, something entropy is and will forever be unable to provide. Do you see where im going with this or do i need to explain it further.

Fri, 05/07/2010 - 16:41 | 337143 cossack55
cossack55's picture

Try "entropy" or "chaos theory"

Fri, 05/07/2010 - 19:12 | 337402 faustian bargain
faustian bargain's picture

"Things fall apart. It's scientific."

--Talking Heads

Fri, 05/07/2010 - 16:42 | 337148 Gen X Gen Y Hybrid
Gen X Gen Y Hybrid's picture

Wasn't there a post last week or so about Goldman taking huge short positions in S&P futures?  Very strange if they really are responsible for pulling the rug out yesterday and were the only ones able to cover shorts....

Fri, 05/07/2010 - 17:30 | 337241 ZerOhead
ZerOhead's picture

Yup... I remember that post too.

But with the usual 'marks' pretty much leaving the market to the rampaging predatory Algo's... the only way to generate those well deserved bonuses is through the introduction of a little more volatility... Squid style!

Fri, 05/07/2010 - 21:07 | 337530 Rick64
Rick64's picture

That would be a good topic for a post.

Fri, 05/07/2010 - 18:28 | 337152 FranSix
FranSix's picture

Its relatively simple to point out what's going on if you're willing to accept they change the trading  algorithms daily to suit their own purpose, regardless of the fundamentals.

What's going on is a decline in the discount rate causing havoc in valuations.  Nobody can forsee a decline in these rates unless you are looking at monthly charts.  Nobody looks at these any more.  They are, at best, an arcane dissociation from the heat of the present moment.  So, if you're believing in higher interest rates, and couldn't possibly go lower, this is reflected in the 'garbage in garbage out' results.

http://improbable.com/2010/05/05/garbage-in-garbaged-out-presaged/

But its abundantly clear from the weekly chart that a decline in the discount rate is continuing which started in 2007.  I presume that nobody will even consider negative integers on the discount rate.

Down 30% one day, up 20% the next, but down overall.

Pretty much fits with the picture.

(stockcharts.com may require membership to view)

http://stockcharts.com/h-sc/ui?s=$IRX&p=D&b=5&g=0&id=p97076364269&a=191209925&listNum=2&listNum=2

Set improbability drive to embostic eradicator.

 

-F6

Fri, 05/07/2010 - 16:54 | 337164 mynhair
mynhair's picture

Need a date on that first report.  Isn't it almost ayear old, seeing as how the data is no longer released? Can I sue GS for my major SRS losses?

Acountabiltity is just another name for canceling trades...

Fri, 05/07/2010 - 17:40 | 337260 i.knoknot
i.knoknot's picture

u n me both

Fri, 05/07/2010 - 16:58 | 337186 mynhair
mynhair's picture

HarryWanker!

Found a deal on depends---contact me.

Fri, 05/07/2010 - 18:04 | 337308 dcb
dcb's picture

classic ZH work. I am adding it to my file aling with the ever classic: why isn't goldmans trades raising any red flags.

It is my view that as a regular service you should publish all this data. I will say that I have used your data to convinice a major financial journalist of Goldman's manipulations. alas, I can't say who, and the publication he works for isn't going to release this kind of data.

Fri, 05/07/2010 - 18:13 | 337328 Euro Dude
Euro Dude's picture

GS a monopolist? Hardly. Powerful certainly but where is the evidence of monopolistic behavior? The NYSE program trading numbers don't suggest anything particularly sinister going on.

 

Fri, 05/07/2010 - 18:15 | 337333 Fraud-Esq
Fraud-Esq's picture

QUESTION FOR TRADERS and smart people alike....

"GAME THEORY"

Could yesterday have been planned to make money in some other way, off VXX, metals or the like? Could yesterday have been planned by a foreign government or other entity for a any profitable, currency, or other particular purpose?

How much in losses would you have to suffer to have CAUSED yesterday by hammering one weighted stock (or whatever they're claiming)?

Could you have made MORE than you lost causing it?

Would there be any other non-obvious bookkeeping or accounting reasons to have those anomalies print?

I'm not a trader. THANKS

 

Fri, 05/07/2010 - 19:05 | 337393 exportbank
exportbank's picture

You have to be delusional to think there will always be liquidity on a rapidly down day.. Who in their right mind will buy a stock that's falling a dollar a second - they'll just turn off their computers (that's what they did) and you can keep the share. There is no gaurantee that you can sell the second you want. Remember, it's a casino not a church.

Fri, 05/07/2010 - 19:22 | 337410 Number 156
Number 156's picture

Totally Awesome! What better way to celebrate your vindication by watching it unfold before your eyes.

http://www.breitbart.tv/stock-market-webinar-leader-goes-nuts-during-the...

Fri, 05/07/2010 - 22:26 | 337586 Bolweevil
Bolweevil's picture

priceless

Fri, 05/07/2010 - 23:07 | 337618 nuinut
nuinut's picture

nice

Fri, 05/07/2010 - 19:51 | 337455 SloSquez
SloSquez's picture

Taker's for sure if that is the question.  Tyler, keep pushin...it will move, I promise.  Your insight is astounding and...well...astounding.

Fri, 05/07/2010 - 20:00 | 337470 lucky 81
lucky 81's picture

someone said,"lets show what can happen if you audit the fed, pick a number. ok lets say 1000. now watch".

Fri, 05/07/2010 - 20:17 | 337481 Rick64
Rick64's picture

 GS a market maker, investment bank, conventional bank, stock trader, derivatives creators, lobbyists ; do the conflicts of interest ever end?  This is an engineered fall with multiple objectives. Who would make the most money on a fast huge fall and rebound like this. The need for investors in treasuries and bonds thus the market scare. ( if that market fails then it will be more devastating than a stock market failure ). A sign to the hypocriticians that they (banks & FED) will write the financial reform legislation.

 Remember these are the same politicians that refused to regulate derivatives 10 yrs. ago. Let Sec. of the Treasury Paulson collude with GS on the solution for our financial recovery. Vote for their own raises. ( WTF ) . Refuses to outlaw insider trading for lawmakers.

They are guilty of treason.

Fri, 05/07/2010 - 20:31 | 337492 Boxed Merlot
Boxed Merlot's picture

Remember, it's a casino not a church.

Classic. 

I love the sentiments expressed by the youthful FBI/CIA remark above.  Every time I think of their blind eye law enforcement image, I am reminded of those stacks of files that our secretary of state could never recall seeing or knowing anything about in her earlier days in pseudo public "service."

Fri, 05/07/2010 - 20:40 | 337501 lawton
lawton's picture

European leaders committed themselves on Friday night to a stricter collective effort at fiscal discipline and called for rapid approval of draft laws aimed at tightening financial market regulation.

Fri, 05/07/2010 - 23:05 | 337614 i.knoknot
i.knoknot's picture

preceded last week by by 7, preceded by 8, preceded by ...

or was that the week Puerto Rico's 3 biggies tanked... ah, no matter...

are we at 70 yet this year?

Sat, 05/08/2010 - 08:12 | 337814 assumptionblindness
assumptionblindness's picture

Things are obviously improving...another green shoot! 

Thu, 03/17/2011 - 07:47 | 1065868 rubsgen12
rubsgen12's picture

This is a great post it was very informative. I look forward in reading more of your work. Also, I made sure to bookmark your website so I can come back later. I enjoyed every moment of reading it.
Ruby Genders,
traders insurance

Fri, 05/07/2010 - 20:51 | 337514 jules from aus
jules from aus's picture

it may sound like nonesense to suggest, but it must be said again...

- are many senior managers and appointments of the Administration, SEC and DOJ in some way, somehow, on the payroll of the likes of GS?

it has been now how long since the GFC bit down on everybodies livelihoods, with the banks and the banks only turning perverse profits quarter after quarter after quarter...

the SEC and DOJ have always had the requisite authority to look at anything even marginally suspicious, yet despite a vanilla civil suit against GS for a very small amount of fraud, nothing credible within their spheres of authority has been initiated

the problem therefore is not a systemically flawed market structure, it is the systemic corruption that makes it all possible

that widespread and broad corruption seems impossible to comprehend as plausible makes that very corruption so very efficient, where people simply give-up the suggestion... as being too hard to believe

and that dear reader is the perfect structure for corruption - so wide spread that The Street can't imagine it as possible, while the structure being so corrupt, means it keeps itself in-check from being uncovered from within - and that is your very real problem... - how do you expect to get any action on your calls to investigate corrutption, when those who should be investigating are participants themselves...

america is, it seems, caught between a rock and a hard place

until the present regime dies away or retires in sufficient numbers, there will be no clean new blood to take-point on any investigation that trully seeks to uncover the truths

so just to recap: america's greater problem is first systemic corruption - everything about a flawed and corrupt market structure is secondary and incapable of reform let alone investigqation, until first you uncover and sweep away the corrupt elements

 

good luck

 

Fri, 05/07/2010 - 21:31 | 337548 lizzy36
lizzy36's picture

Over the past couple of days many people are realizing what an invaluable service ZH has been providing to us all. 

Many have been frustrated by the inability of the site to keep up with the traffic. 

With 600,000 page hits yesterday and more today (about 3x normal volume) the current bandwidth is unable to keep up with demand. Given what many people are only now discovering about this site, I expect these numbers to grow. 

The quality of financial reporting on this site is unparalleled in the MSM and the blogosphere. This quality, (to say nothing of maintaining the site and servers) does not come cheap. Many people work 100 hours weeks, and have no clue what the word vacation means.  And for this service, for the priveledge of reading their wise and always amusing words, we pay nothing.

Please, if you are able DONATE. We all want to ensure that the veracity of this site and everything it stands for not only survives but thrives. 

Tonight, Politico is reporting something that Tyler Durden has been posting about for the last 18 months.  Of course who would have thought a fringe blogger, whom everyone mocked (while secretly reading), would have been so correct? 

Feds trace flash crash to Chicago

According to the government official, investigators have traced the calamity back to the trades in Chicago, which were picked up by automated trading computers in New York. The New York computers in turn issued a series of sell orders, which had a cascading effect on the Dow as even more programs picked up on the trading and issued their own sell orders.

When the New York Stock Exchange slowed down its computerized trading in response to the sell-off, sellers turned to other exchanges. That increased volatility in the markets was in turn picked up by computerized algorithms, which executed even more sell orders.

Read more: http://www.politico.com/news/stories/0510/36946.html#ixzz0nINOlNEV

Fri, 05/07/2010 - 22:31 | 337589 Bolweevil
Bolweevil's picture

It was Jana! (kidding)

Sat, 05/08/2010 - 01:56 | 337720 Boxed Merlot
Boxed Merlot's picture

Feds trace flash crash to Chicago...

 

Not to worry.

They already had their conclusion before this information was dispersed. 

Chicago, huh? As in pork belly futures, Ms sec of st?

Are these the same fed investigators with files on Mena, AK?

Don't you love a good conspiracy?

Too bad, this is neither good nor conspiratorial.

It's just another day in the office.

Lay low, put in your time and collect that federal pension.



Fri, 05/07/2010 - 21:37 | 337551 Hulk
Hulk's picture

Bank failure friday. 4 so far

Ca, Mn, Az, Fl

Don't know the hit to the DIF yet

Fri, 05/07/2010 - 22:41 | 337598 SilverIsKing
SilverIsKing's picture

Only $213.7 million although we know that these figures are always lowballed.

Fri, 05/07/2010 - 23:09 | 337620 mogul rider
mogul rider's picture

Did you guys know Mary was a godl bitch? God I could do her.

 

ZH the blood sucker cometh to wreak havok on all those MF'ers who doubt it's omnipotence. You are truly awesome to stand up to those fuckin bitches (not that it's a problem or anything soem of my bestest friends are.....).

I mean those weiners were the dorks we used fuckup bad in school. Remember?

Maybe it's time to fuck em up again. Locker games anyone?

 

Fri, 05/07/2010 - 23:10 | 337622 mogul rider
mogul rider's picture

my precious !!!!!!!!!!!!!!!!!!!!!!

my precious!!!!!!!!!!!!!!!!!!!!!!!!!!

Fri, 05/07/2010 - 23:16 | 337628 mogul rider
mogul rider's picture

I appeal to those mid managers and above at the government agencies CIA, FBI, SEC and any others who have the balls to take these MF'ers on and bring us back formt he brink by doing these f"ers bad.

Stand up for your country for christ sakes, you'll take out a schmuck from Latin America who sells drugs to our kids but won't fuckup these bastards who are wiping families and cities!

Do the right thing here - you know who to go to.

Make it happen people - stand up. If your boss is on the take like most of them are them are then report them.

Let's take this goddamn country back from the PIGS. There was a time when we made money honestly. Let go back to that time.

This is horseshit

Fri, 05/07/2010 - 23:16 | 337629 Illya Kuryakin
Illya Kuryakin's picture

Eric Holder you are such a fucking useless tool. Useful to GS though I bet.

Fri, 05/07/2010 - 23:38 | 337648 Crab Cake
Crab Cake's picture

Oh he's doing a fine job on the retard terrorist, who basically caught himself, locked his keys in his car, and failed to blow up the barbecue grill he rigged with firecrackers.

Financial terrorists?  Ummm.... Not so much.  They're so difficult to catch, when they're handing you and your boss so much money though, you know?  Besides, do you know what the banksters will do if we actually hold them accountable?  No?  I'm told bad things.

Fri, 05/07/2010 - 23:18 | 337630 Jim in MN
Jim in MN's picture

Crash! Smash! Smashcrash! Flashcrash!

.........nocash........

Sat, 05/08/2010 - 00:14 | 337678 pan-the-ist
pan-the-ist's picture

Did you get any snow Jim?  We got about 3 inches up here.

Sat, 05/08/2010 - 23:13 | 338656 Jim in MN
Jim in MN's picture

Bunch south of Duluth... now the freeze may hurt the fruit trees.  Nothing in the Cities.

Fri, 05/07/2010 - 23:21 | 337632 Jim in MN
Jim in MN's picture

And when these algos make some no-nos using paygo with their momos, this is what we call

An algo momo paygo (Toto!) nono.

Sat, 05/08/2010 - 00:46 | 337705 ShankyS
ShankyS's picture

Marla - I want radio ZERO back. like now please.

Sat, 05/08/2010 - 00:46 | 337706 jory
jory's picture

Play the game Losers instead of complaining about it.  Too many Losers on this blog.

 

 

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