Michael Lewis

October 15^th, 2014 wasn`t a market crash!

"One day while Sarao is busy trying to trick the U.S. stock market into falling, the market collapses, more sensationally than it has ever collapsed. And instead of digging some hole in Hounslow in which he might hide for a decade or so, or fleeing to Anguilla, where he has squirreled away his profits, he stays in his parents’ home and keeps right on spoofing the U.S. stock market -- and then is shocked when people turn up to accuse him of wrongdoing. He’s not some kind of exception to the standard operating procedure in finance. He’s a parody of it."

It has begun...

One of America’s biggest banks is going to be protested by an unlikely group today: its employees. As The Guardian reports, Wells Fargo bankers are protesting the bank’s alleged predatory practices – mainly the sales quotas imposed on some of its workers (which have led to at least 30 employees opening duplicate accounts, sometimes without customers’ knowledge, in order to inflate their sales numbers). One worker warns, “it is not in Wells Fargo’s best interest for customers to purchase products and services they don’t use or need.” Now where have we seen this kind of activity before? Wells Fargo bank workers are not the only ones struggling to make ends meet without breaking ethical standards as bank tellers have collected as much as $105m in food stamps.

GE stock is down almost 13% over the last 7 years, and this is with record shares being taken off the market.  However, Jeff Immelt thinks he has a solution for this problem after 15 years at the helm of GE. 

Huxley’s words describe a psychological condition termed cognitive dissonance. According to the American Psychological Association, cognitive dissonance is induced when a person holds two contradictory beliefs, or when a belief is incongruent with an action that the person has chosen freely to perform. Cognitive dissonance is on full display today in the financial markets. The U.S. economy has been supported for seven years by a zero interest rate policy, record fiscal deficits and unprecedented surges in the money supply. Despite all of the stimuli, the economy is slogging along well below trend. The actions taken by the Federal Reserve, federal government and governments around the world are unprecedented. In a normally functioning economy such actions would generate massive growth and inflation. Since growth has been tepid and inflation benign, there is obviously something amiss.

Correlation is not causation but the plunge began just as The SEC voted in favor of high-speed trading firms being registered with FINRA...

Back in 2009, when aside from a few insiders, nobody had heard of HFT, Zero Hedge launched its crusade to expose the algorithmic scourge that has since then caused an equity, treasury and now US Dollar flash crash, and has been the subject of a Michael Lewis bestseller and resulted in countless market halts and failures. More importantly, there is now roughly 50 pages of just bibliography citing the evidence-based, academic research that has shown just how pervsavibely, maliciously and premeditatedly HFTs manipulate, destabilize, impair and otherwise destroy every single market in which they participate.

I would say Apple is the most dangerous holding on the street right now for portfolio managers.

Suddenly the narrative that “everything is awesome” is showing to not be as “awesome” as it was first proclaimed. Merely a few months have passed since the ending of QE and praises of awesomeness everywhere are morphing into questions more akin to “Oh no: not again!” And with that we are now watching those who pushed, pulled, and levitated that narrative scramble desperately to push another narrative back onto the stage that worked so many times before: “Every sell off over the last 6 years has shown to be a profitable buying opportunity.” i.e., Just buy the dip (JBTFD). Yet it would seem these dips; are far different.

The beginning of the end of high frequency trading has arrived, and it has done so in a most unexpected fashion: with an HFT turning on other HFTs and revealing on the record, for the entire world to see, just how truly parasitic, manipulative and "market-rigging" the algorithms truly are.

Now this is just the tip of the iceberg when it comes to market manipulation, I thought I would just provide a concrete example of the kind of funny business that goes on every day in financial markets.

As HFT shops begin to turn on each other, it seems appropriate to reflect on the impact that Michael Lewis' Flash Boys book had on exposing the ugly truth that many have been discussing for years in US (and international) equity (and non-equity) markets. As Lewis concludes, after explaining the attacks he has suffered from the HFT industry, "If I didn't do more to distinguish 'good' H.F.T. from 'bad' H.F.T., it was because I saw, early on, that there was no practical way for me or anyone else... to do it. ...  The big banks and the exchanges [have] been paid to compromise investors’ interests while pretending to guard those interests. I was surprised more people weren’t angry with them."

Over the weekend Barron's engaged in another attempt by the pro-HFT media lobby to make it seem that frontrunning HFT parasites (now available on a laser near you) are good for the "little guy." An attempt which fails when one actually scratches the surface even by the smallest amount.

Over the past few weeks, a new piece of equipment has been spotted hanging off the NYSE primary microwave tower. Here it is...