• Phoenix Capital...
    10/01/2014 - 11:24
    We have the very makings of a Crash. If stocks breakdown from this line and cannot reclaim it, we could easily wipe out all of the gains going back to 2013.

Michael Lewis

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How Goldman Controls The New York Fed: 47.5 Hours Of "The Secret Goldman Sachs Tapes" Explain





I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:

  1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.
  2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.

So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.

 
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Presenting The Two-Tier Market: Mapping Europe's Microwave Tower Network





The image below is a screen capture of the Google Earth map file which will be released officially tomorrow on his blog, with public documents linking each tower to its owner. The creator of the map thinks that it "should make some noise," although considering the vast financial resources and power over politicians the HFT lobby has, we wouldn't be surprised if, quite quickly, this latest story is promptly disappeared. After all, the last thing retail investors need to be reminder of every day, is that there is a rigged market for frontrunning, predator HFTs, and then a market for everyone else, i.e., the prey.

 
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Flash Boys' Katsuyama Blasts Back At Ex-CFTC Chilton's "Incorrect Claims"





On July 7, Bart Chilton, a former commissioner of the Commodity Futures Trading Commission, wrote an article about high-frequency trading for the New York Times's DealBook. He argued, in effect, that because high-frequency trading has become so central to the stock market, it must be serving some necessary purpose. This is false...

 
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Market Rigging Explained





Michael Lewis probably said it best when he told 60 minutes that the stock market is rigged. To the fantastic claims made by HFT that they provide liquidity, perhaps we should ask, what kind of liquidity? To the now obviously ludicrous claim that "everyone's order uses the same tools that HFT uses", we'll just say, the data shows otherwise. ... What is shown here is as close to automatic pilfering as one can get. It probably results in a few firms showing spectacularly perfect trading records; it definitely results in people believing the market is unfair and corrupt.

 
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Top 5 Surprises For 2014





The last six months have not run according to anyone’s plan.  Who would have thought that equity market structure would yield a best-selling book, after all?  As ConvergEx's Nick Colas notes, on the fundamental side of things, interest rates across the developed world are lower, not higher – counter to the consensus view just 180 days ago. Mutual fund investors first bought U.S. equities earlier in the year, then in the last 6 weeks have begun to liquidate in earnest. Exchange Traded Fund investors are buying more fixed income products than those dedicated to U.S. stocks. Large cap stocks are trouncing small caps in terms of performance. And as for volatility – well, Elvis has clearly left the building on that one. So which of these surprises has staying power into the back half of 2014?

 
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FINRA Unleashes Dark Pool Fury On Goldman Next With Whopping $800,000 Fine





In case there is still any confusion on whose behalf the US regulators work when they "fine" banks, the latest announcement from Finra should make it all clear. Recall the spectacle full of pomp and circumstance surrounding NY AG Scheinderman's demolition of Barclays after it was announced that the bank had lied to its customers to drive more traffic to Barclays LX, its dark pool, and allow HFT algos to frontrun buyside traffic. Yes, it was warranted, and the immediate result was the complete collapse in all buyside  Barclays dark pool volume, meaning predatory HFT algos would have to find some other dark pool where to frontrun order flow. Such as Goldman's Sigma X. Which brings us to, well, Goldman's Sigma X, which moments ago, in a far less pompous presentation, was fined - not by the AG, not by the SEC, but by lowly Finra - for "Failing to Prevent Trade-Throughs in its Alternative Trading System."  The impact: "In connection with the approximately 395,000 trade-throughs, Goldman Sachs returned $1.67 million to disadvantaged customers." The punchline, or rather, the "fine": $800,000.

 
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Famous "Big Tobacco" Lawyer Launches Class Action Lawsuit Against HFT





In 1994 a lawyer did what most thought was impossible: he took on big tobacco on behalf of the state of Mississippi and won a record $368.5 billion judgment paid out by the 13 biggest tobacco companies to cover the cost of treating illnesses related to smoking. 20 years later he is trying the impossible again, this time launching a class action lawsuit against High Frequency Traders, and specifically 13 stock exchanges and subsidiaries on behalf of Harold Lanier "individually, and on behalf of all others similarly situated". Ironically, the lawyer behind the lawsuit is also named Michael Lewis, no relation to the famous author whose book simplifying just how rigged the market has become as a result of HFT (and of course the Fed, but that is the topic of the forthcoming "Liberty 33 Boys").

 
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The Purchase Of Our Republic





The massive consolidation of wealth, combined with the removal of any limits on money in campaigns, has allowed for the purchase of our government. Americans know that something is wrong, deeply wrong. They see signs of the problem everywhere: income inequality, growing concentration and power of mega corporations, political donations/corruption, the absence of jobs with decent salaries, the explosion of the US prison population, healthcare costs, student loan debt, homelessness, etc. etc. However, the true causes and benefactors behind these problems are purposely hidden from view. What Americans see is Kabuki Theater of a functioning form of capitalism and democracy, but beyond this veneer our country has devolved into the exact opposite.

 
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Kyle Bass On China's "Contraction" And "The Fed's Worst Nightmare"





With the Fed tapering and both China “I don't think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.

 
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Equity Market Structure "Minefields" - The Ultimate Survivor's Guide





Be afraid... be very afraid. This is not your father's - or even your older brother's equity market. As we have discussed for over 5 years and Michael Lewis dragged kicking-and-screaming into the world's eyeballs, there is something very different about the world's capital markets than ever before. ConvergEx's all-encompassing "Traders Guide to Global Equity Markets" is, simply put, everything you wanted to know (and perhaps did not) about the world's stock markets but were afraid to ask. The subtle title they chose to explain the various order types and market structure dynamics - "Trading Minefields" - you can't avoid them unless you know where they are.

 

 
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Wall Street Has Always Been Corrupt Or About To Be Corrupted





When obnoxiously wealthy pricks with the ability to bribe stock exchanges to place their trading computers on the floor of the exchange and financially induce the Wall Street banks to funnel trades through their dark pools in order to know what is happening a nanosecond before everyone else, and use this information to front run unknowing investors to generate risk free profits, it’s wrong. It really is black and white. I don’t care that it is supposedly “legal”.  By complying with Regulation NMS the smart order routers of institutional investor firms like Vanguard, Fidelity and Schwab simply funneled naïve investors into various snares laid for them by the unscrupulous high frequency traders. The bad guys always win and the good guys always lose on Wall Street. And no one does anything because they are all on the take. Lewis puts it in terms the average person can understand.

 
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Furious Selling Slam Sends Silver Red For 2014: No Limits Triggered





With gold holding gains over 6% year-to-date (and the best performing asset-class), this morning's silver slamdown has taken the precious metal notably into the red for 2014 (-2%) and makes it the worst performing asset-class. Silver is back under $19 and near its lowest price since July 2013. Of course, it all started with the futures market where the sudden fiduciary need to dump over 2000 contracts 0505ET sent the complex collapsing, sending the gold-to-silver ratio to its highest since 2010.

 
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Citadel Blasts Lewis' Flash Boys; Says "Small Investors Have Never Been So Fortunate"





Citadel's head of Execution Services (cough HFT cough) Jamil Nazarali, proclaimed Monday that small investors have never been so fortunate and said, with regard to Michael Lewis' now infamous book Flash Boys, "The most important thing that the market can do is stop... pointing fingers at everyone else." Citadel, who allegedly provides the NY Fed's VIX trading capabilities, are among the very largest high-frequency traders in the market (and the most levered), so one would surely expect that Citadel would like us all to stop pointing fingers at them. As Bloomberg reports, Nazarali said yesterday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California, "things are much better today than they were 10 to 15 years ago." For him, yeah.

 
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Relax! SEC's Mary Jo White Says "Markets Are Not Rigged" - Live Feed





During her testimomy to the House Financial Services Committee, SEC's Mary Jo White confidently proclaimed (despite her questioner doubting her beliefs):

US SEC CHAIR MARY JO WHITE RESPONDS TO MICHAEL LEWIS BOOK IN TESTIMONY, TELLS CONGRESS "THE MARKETS ARE NOT RIGGED"

"Investors should be protected from shisters," blasted the committee member, as he took White to task..

 
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