Doug Kass: Kill the Quants & Their Technology Before They Kill Us

CrownThomas's picture

In light of yet another tech driven blowup yesterday at Knight Capital, perhaps someone, anyone, outside of ZH and Themis should look into this nonsense.

Here is a clip from yesterday where Doug Kass, of Seabreeze Partners, tells it like it is: Kill the quants and their technology before they kill us.

An attempt is made by Tommy 2x to explain why HFT is beneficial, but what he fails to realize is that if technology "glitches" wipe out all shareholder wealth, there won't be anyone left to take advantage of those "lower transaction fees"

 

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Blopper's picture

I have a gut feeling that HFT is here to stay.

Blopper's picture

"Ino... ino... ino... ino... innovation..."

"Speed... speed... speed... speed..."

Now that's "HFT".

 

Those benefiting from HFT will always defend it.

Until one day, the cost of running a HFT system becomes so darn cheap that everyone is doing it, that these HFT defenders we keep hearing these days will start to sweat and reverse their stance.

 

Today, these HFT defenders make money by stealing liquidity.

Tomorrow, they will have no liquidity to steal when HFT becomes too cheap for everyone to exploit.

When that time comes, making money will no longer be about stealing from liquidity that these assholes are so "good" at doing today.

Then something will happen...

When money can no longer be made by these HFT assholes, those asshole politicians will change the rules making HFT somewhat illegal.

Jim B's picture

Based on the comments, we all know the HFT people are full of Sh@t! Skimming the market 

q99x2's picture

They are probably feeding on each other at this point. You would think some really big and powerful company would hire Blackwater and correct the situation before long.

Arnold Ziffel's picture

How do you pronounce 'qunts"...oh, wait, I forgot the 'a'.

Waterfallsparkles's picture

Really, this was a problem in 2008 and it is still a problem.  SEC did nothing to stop it.

Biggest problem is sub penny trading.

Why should computers be able to front run trades and catch them before they hit the bid by 10ths of a penny?  Is that fair to the people that have an order in already.  So they do not get a fill.

Now after 4 years of nothing from the SEC actual traders on Wall Street are getting upset.  They sould be upset as now Retail traders have pulled their money knowing it is nothing less than electronic online Gambling with a rigged Computer.  Where you lose every dime you put into it.

chirobliss's picture

Tommy 2x, hilarious!! "Bedee, bedee, bedee, that's not all folks..."

Literally a character out of Looney Toons living and breathing on national television!

 

http://www.youtube.com/watch?v=gBzJGckMYO4

Conax's picture

15 years ago I tried my hand at an online multiplayer game involving WWII aircraft in dogfights and such.

It had a problem, whoever had the best computer and the fastest connection could swoop in and shoot you down while you never even saw them or knew they were there.

It degenerated into a farce, with fast computer guys circling the airstrip where new players and planes were spawned, and they would blast you out within a few seconds of starting it up.

See any parallels? Whoever has the T1 line is the 'best' investor.

Outlaw HFT, make it a market again.

 

saturn's picture

And how do you intend to get rid of the goverment intervention, which causes the greatest market distortion? I could use a good laugh.

booboo's picture

Such horseshit from the mouth of the blonde, "falling asleep at the wheel" Shit, at that speed looking down to pull some gum off your shoe may miss 3 million cumulative trades roll by. They can speed fuck each other for all I care, it ain't gonna stop until it does and when it does the momentum is going to send their sorry screaming ass right through the firewall and into the radiator.

Waterfallsparkles's picture

The thing is there needs to be a speed limit.  Just like cars if you are driving at 250 miles an hour then you should not fall asleep at the wheel.

Yet, there would not be a catastrophe if there was say a 60 mile and hour speed limit.  HFT's are just going to fast (like 250 miles an hour) trying to navigate around all of the other traders traveling at 25 miles an hour.

orangedrinkandchips's picture

Tommy 2X......gotta get the papers, the papers......

 

good one!

Tippoo Sultan's picture

"As far back as I can remember, I've always wanted to be a gangster."

-- Henry Hill
"Goodfellas"

MrBoompi's picture

OK I don't know who that gal is on the video, but she obviously doesn't care when HFT is USED AS ITS DESIGNED, to fill the HFTs with freshly-scalped cash.  It's not just a problem when the these fuckers lose money, you stupidass!

 

 

DavidC's picture

here's the Saluzzi clip with Aldridge - she was irritating then, she's irritating now.

http://www.youtube.com/watch?v=_A28Zy9vR_A

DavidC

ShankyS's picture

Yo bro  - good post. Simple and concise (i could learn somethig from this). Funny you pull about the only thing DK has said that is ensible in the last decade out of the closet. 

strannick's picture

Of course its the 'Professor' defending the quants, for the theoretical benefits they bring.

Jim B's picture

He is Krugman's twin!

DavidC's picture

strannick,
See my comment above - if he tried trading his own money for a week he might change his mind.

DavidC

DavidC's picture

I seem to remember Joe Saluzzi being on a programme with that muppet Aldridge - she didn't end up the winner. Her arguments are facile.

I also wonder if Chester (s)Prat(t) was told to trade his own money for a week might change his mind.

Themis and Nanex have shown that spreads have NOT decreased since RegNMS. I think (if I recall correctly) that they have also shown liquidity has NOT increased across the board, only for those large stocks like BAC.

There are so many holes in the arguments of those proponents and so many good points made by the opponents in that clip.

DavidC

Just found the clip
http://www.youtube.com/watch?v=_A28Zy9vR_A

tu-ne-cede-malis's picture

Someone gag this HFT-shill bitch.  My god.  I thought I'd hear "liquidity" about 100x more in this.  Guess they've moved on from that excuse to reduced spread cost...

chirobliss's picture

 

The cloth-eared bint rabbitting on "come and do my course on HFT... blah blah blah", was strangely comforting to me. She apparently has similar confidence in her ability to shut her system off as Knight did. Yeah, the whole trading room at Knight were asleep for 45 minutes and didn't know it was happening! Right.

The problem was, as everyone who received notices not to route through Knight from their own broker and from Knight, was that they couldn't shut the damn thing off!!

Clearly she has the same confidence in her systems as Knight had when they hit the on switch on Wednesday morning. Good... because now that the NYSE has decided that these monkeys will be responsible for the havoc they cause... any day now you're gonna see this cloth-eared bint driving down the I-5 in a beat-up Trabant, wondering what the hell just happened.

Market forces work when you let them. Knight, killed by market forces, August 2012.

Let's line up the next HFT house. This is gonna be fun, I'm gettin' some popcorn!!

 

GFKjunior's picture

I still don't get it. Why are quants "evil"? They are just making money their way. If you're dumb enough to partcipate in the market maybe you deserve it.

 

Suggesting the outlawing or banning of quant/hft trading certainly goes against everything Mises/Rothbard ever stood for right? Free market, progess is eliminating laws not creating them and all that?

Bob's picture

"Fairness" is only bad when it's labor crying for protection, perhaps? 

Or does that mythical "public interest" suddenly exist. 

bank guy in Brussels's picture

Smash the corporate computers

Back to nature

All women should be hippie chicks

Bunga Bunga's picture

All traders should be trading naked only.

OpenThePodBayDoorHAL's picture

long straight dirty blonde hair, low-slung hip hugger jeans and no bra

ZerOhead's picture

But still shave their legs and pits...

viahj's picture

and use soap, must use soap.

NotApplicable's picture

But not that patchouli shit.

Popo's picture

And no fatties. It's never ok. Ever.

Axenolith's picture

C'mon PoPo, you know you're lusting for the harpoon scarred, tent wearing, patchouli oil soaked earth mother to smother your head between her sweaty thighs... ARF!

OpenThePodBayDoorHAL's picture

yeah, that's always the adjective I would use to describe my favorite women: "cetacean"

ugh..."harpoon-scarred". Ruined my day with that one...