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Lies, Damn Lies and Rigged Markets
Lies, Damn Lies and Rigged Markets
By
Cognitive Dissonance
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It has been fascinating to watch Michael Lewis and the Flash Boys spread the shocking truth that the stock markets are rigged……rigged I tell you. One need only watch the video of author Michael Lewis’s, IEX’s Brad Katsuyama’s and BATS Global Markets President William O’Brien’s recent CNBC Wrestlemania 666 to witness the hilarity as certain vested interests, such as the mainstream financial media and the BATS exchange, defend the indefensible all in the pursuit of the almighty buck.
And who could forget the cheers erupting from the NYSE floor as each ‘point’ was scored. I could almost hear Howard Cosell calling the blow by blow on national pay-per-view TV. “Down goes Frazier, down goes Frazier, down goes Frazier.” One always knows the position one will take when our paycheck and/or livelihood depends upon our position. Though in some cases we can signal otherwise, such as the floor traders cheering the ‘news’ even though they feed off the same money teat.
I like to play a game with my fellow shoppers while walking the aisles of our local grocery store. Mrs. Cog, at times a reluctant, at times an enthusiastic participant, usually plays the straight man in the verbal exchange. We roll up to a spot and either Mrs. Cog or I will grab an item off the shelf, always near someone else who is shopping or possibly an employee who is stocking shelves, and express shock at the high price. In my very loud out-loud voice I will proclaim, “But honey, the government says there is no inflation” making sure the sarcasm is dripping off every word.
Almost always there is some type of reaction, be it verbal such as a snort, a sigh, a chuckle or outright laugh. Or maybe something more subtle, such as a shift in their body language, a tilt of the head, the sideways movement of the body or the shifting of weight from one foot to the other. I usually take any and all of these clues as a sign to engage them in some sort of conversation. Rarely are Mrs. Cog and I surprised by what we hear from our hooked fish. It is nearly universally agreed upon that of course there is inflation, lots of inflation, and naturally the government is lying about it. It seems that nearly all the people we talk to hold a view very different from that of the supreme monetary authorities. When venturing into other subjects we discover similar results.
So why then are we so surprised when we are ‘informed’ of something we already know? Clearly most participants in the stock market suspect something is very wrong, though they might not know exactly what. The average ‘investor’ who has not already removed themselves from the market ‘playing field’ still play the field with the hope they might pick up some profitable crumbs. Many veterans already ‘play’ the waves in the market when the big boys jump in and splash about; picking up leftovers and spillage from the trough when the pigs have had their fill, plucking dimes from in front of the steamroller.
The answer for this behavior is so simple that many will be outraged by the answer in the same manner the BATS Global Markets President William O’Brien was outraged that someone would yell fire in the burning movie theater before he could extract his last pound of IPO flesh. We all participate in the collective lies because we all perceive we have something to gain in not fighting the collective lie. And that something might just be to avoid scrutiny and stay under cover while the wolves circle the flock looking for the injured and newly aware to pick off for a snack or early supper.
Bottom line…the more dependent we are upon something, anything, the more likely we are to enable and support that ‘thing’ regardless of the fact that it might no longer be supporting us in the manner it previously did and might actually be killing us. Once this realization is fully denied, usually by never acknowledging its existence as it applies to us personally, we can then all go about our life laughing or mocking whatever ‘it’ is because ‘it’ is no longer, or never was, perceived as directly harmful to us.
Thus the collective lie is seen for what it really is; a lie, while still being promoted and enabled by all of us as truth. When ‘the’ truth is finally spoken about the lie, we are all personally attacked because we enabled, no…we embodied the lie and thus we must all act in mock surprise and horror that we were lied to. The result is monumental hypocrisy by all parties involved, even the so called innocent bystanders and spectators, on par with the outrage expressed that there was actual gambling going on in Casablanca. The games people play.
This is how we all arrive at the theatre of the absurd, the CNBC Wrestlemania episode where everyone has a dog in the hunt and all are expressing their own conflicted point of view defined by their own set of standards and parameters. The apoplectic BATS O’Brien was in a near panic because someone with credibility had declared the market ‘rigged’. He was obsessed with the word ‘rigged’, as if to imply that any other word, such as damaged, faulty, glitchy, prone to errors, den of thieves, clusterf**k, anything would have been more acceptable than ‘rigged’. My God, to expose the market to be anything other than fair and balanced might just spook the sheep before they are fully fleeced.
There was the CNBC crew who, while anxiously trying to show they could remain impartial and ask reasonable and fair questions, were also as desperate as William O’Brien was to pull the wool back over the eyes of the un-sheared sheep. After all, if the markets were actually rigged where the hell has CNBC been all these years? Wasn’t their job supposed to be business reporters as opposed to what they have become, corporate PR repeaters and CON drum beaters? Sadly their credibility rested upon O’Brien’s shoulders and O’Brien was withering fast under the hot spot lights, spittle spouting from his Hollywood white teeth.
Then there was author Michael Lewis, who has single handedly slain many an ugly giant and was once again riding his prancing white horse to the rescue of us poor peons and wage slaves. Just buy the book Damnit, it’s all in there. While he pulls off in a convincing manner that he is genuinely and deeply concerned that the markets are rigged, something he didn’t fully understand until he researched the book, his mission now was to sell the book. Just buy the book Damnit. What I find so laughable is that the vast majority of people, including the people at Wrestlemania, have not read the damn book, yet everyone is arguing about its contents including me. Pure unadulterated absolute insanity.
Then we have IEX’s Brad Katsuyama, clearly scripted to be the ‘good’ guy here. After all he gave up a lucrative J.O.B. that paid him millions each year to win at playing the market. Don’t even think about losing in this rigged market when the algos know only one way…..up, for now at least. He left it all behind in order to strike out on his own and slay those big bad HFT algos.
Or at least to devise a work around, then gather capital and create his own exchange where those who want honest execution of their trades can bring their business to him. And doesn’t everyone want honest execution of their trades? Of course they do. Next problem…..carefully explain to EVERYONE that their trades aren’t being honestly executed where they presently trade. While he may be speaking truth, he was just as conflicted as everyone else in the room…..floor…..building……island.
While Brad also appeared sincere in his pronouncement that the markets were rigged, it was precisely this rigging that would enable his new exchange to be profitable. Without the general belief that the markets were rigged his exchange would be just like every other exchange out there. Actually it would be worse because his gizmo setup prevented him from charging the HFT crews for privileged access to front run the order flow if all else failed. Meaning that while he was calling the kettle black, his pot would not be the white knight if not for the black market. Be careful Brad, the FBI HFT investigation just might ruin your coming out party.
I suppose the cheers and chuckles coming from the NYSE exchange floor peanut gallery during this wrestling match were the most hypocritical of the bunch on a multiple of fronts. Most market ‘insiders’ are now aware that the NYSE exchange ‘floor’ is about as relevant as teats on a bull and remains a fixture of the ‘market’ for the same reason banks still retain brick and mortar store fronts for the public.
The floor brokers are there solely to provide the illusion that humans are still riding shotgun over the HFT herd, thus maintaining some sort of CONfidence that the market is still ‘there’ and not actually residing in some random access memory chip in a server farm in East Whateverford, NJ. I always laugh when I see the NASDAQ ‘market’ site located in Times Square, NY. It reminds me of those flashing lights placed on computers in movies since the 50’s. They help you to think there is humanlike activity going on in there. The comparison to WOPR of WarGames is too close for my comfort. Shall we play a game?
The NYSE understands the value of human capital grazing the ‘trading’ floor where floor brokers hurriedly poke at hand held computer devices as if executing critical trades that might just be my 6 shares of IBM crossing the tape now. All the while the HFT algos have scalped them six ways to Sunday on every frigging execution. Those good ole boys down there know their days are numbered and anything that can stave off the culling of the floor herd until early retirement kicks in is AOK by them.
I guess you could say they are the most honest amongst the bunch. They know where their bread is buttered and it sure isn’t in a ‘market’ server farm providing so called ‘liquidity’ and a natural human pause in the middle of market insanity. In an admittedly imperfect market system of yesteryear, the floor brokers were there to push back on market runs and to be a buyer or seller of last resort when no one else would stand up. You know, true liquidity as opposed to the fantasy HFT liquidity that amounts to a mere drop in the bucket when it’s really needed.
That is so old school in this brave new world. So when they were cheering on the idiocy of BATS O’Brien they were cheering their own book and being honest about it. You’ve got to love old school greed and conflict of interest worn right out in the open and on your sleeve. The buggy whip makers are pleading for a reprieve, or at least to be dealt back into the game for one more hand. And they might just get something out of this latest public ‘scandal’ unless the US government rushes in and throws a TARP over the entire mess under the cover of national security.
There are lies, there are damn lies and then there are rigged markets. I would suggest that there always were rigged markets….but at least it was Spy vs. Spy, human against human and the Earthlings had a fighting chance to steal with the best of them. Now with Artificial Intelligence (is it really artificial if it’s intelligent?) almost upon us we puny humans are just worried we might be dealt completely out of the hand. It’s the end of the world as we know it and I’m just fine. Cue the Terminating autonomous killer robots in 3……2…..1….
04-03-2014
Cognitive Dissonance
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So, take a story, add quips and quotes and refer to popular media, like Wrestlemania. Pretty soon you have too many parts and the actual story drifts further back, back, your eyes are getting heavy, sleep, child, sleep. The Oligarchs will kill you softly, with their song.
Wrestlemania?
Comparing the financial world to professional wrestling:
http://en.wikipedia.org/wiki/Kayfabe
In professional wrestling, kayfabe is the portrayal of staged events within the industry as "real" or "true," specifically the portrayal of competition, rivalries, and relationships between participants as being genuine and not of a staged or pre-determined nature. Kayfabe has also evolved to become a code word of sorts for maintaining this "reality" within the realm of the general public. Kayfabe was long held as a closely guarded secret within the professional wrestling industry; however, with the advent of the Internet, it has evolved into an open secret in the industry that is generally only adhered to during shows.
Kayfabe is often seen as the suspension of disbelief that is used to create the non-wrestling aspects of promotions, such as feuds, angles, and gimmicks, in a manner similar to other forms of fictional entertainment. In relative terms, a wrestler breaking kayfabe during a show would be likened to an actor breaking character on camera. ...
It was commonplace for wrestlers to adhere to kayfabe in public, even when outside the ring and off-camera, in order to preserve the illusion that the competition in pro wrestling was not staged. This was due in no small part to feuds between wrestlers sometimes lasting for years, and which could be utterly destroyed in seconds if they were shown associating as friends in public, and thus potentially affect ticket revenue.
With the advent of the Internet wrestling community, as well as the sports entertainment movement, the pro wrestling industry has become less concerned with protecting so-called backstage secrets and typically maintains kayfabe only during performances.
It is interesting how the Internet forced a transformation of the degree of kayfabe that could still be maintained. It is an open question whether our civilization will survive long enough for the "Internet Reformation" to enable its potential, like the invention of the printing press (only more so), to more fully develop? Way more people, because of their use of the Internet, are becoming aware of the degree of kayfabe in the financial world!
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http://www.edge.org/response-detail/11783
Kayfabe
By Eric R. Weinstein
The sophisticated "scientific concept" with the greatest potential to enhance human understanding may be argued to come not from the halls of academe, but rather from the unlikely research environment of professional wrestling.
Evolutionary biologists Richard Alexander and Robert Trivers have recently emphasized that it is deception rather than information that often plays the decisive role in systems of selective pressures. Yet most of our thinking continues to treat deception as something of a perturbation on the exchange of pure information, leaving us unprepared to contemplate a world in which fakery may reliably crowd out the genuine. In particular, humanity's future selective pressures appear likely to remain tied to economic theory which currently uses as its central construct a market model based on assumptions of perfect information.
If we are to take selection more seriously within humans, we may fairly ask what rigorous system would be capable of tying together an altered reality of layered falsehoods in which absolutely nothing can be assumed to be as it appears. Such a system, in continuous development for more than a century, is known to exist and now supports an intricate multi-billion dollar business empire of pure hokum. It is known to wrestling's insiders as "Kayfabe".
Because professional wrestling is a simulated sport, all competitors who face each other in the ring are actually close collaborators who must form a closed system (called "a promotion") sealed against outsiders. With external competitors generally excluded, antagonists are chosen from within the promotion and their ritualized battles are largely negotiated, choreographed, and rehearsed at a significantly decreased risk of injury or death. With outcomes predetermined under Kayfabe, betrayal in wrestling comes not from engaging in unsportsmanlike conduct, but by the surprise appearance of actual sporting behavior. Such unwelcome sportsmanship which "breaks Kayfabe" is called "shooting" to distinguish it from the expected scripted deception called "working".
Were Kayfabe to become part of our toolkit for the twenty-first century, we would undoubtedly have an easier time understanding a world in which investigative journalism seems to have vanished and bitter corporate rivals cooperate on everything from joint ventures to lobbying efforts. Perhaps confusing battles between "freshwater" Chicago macro economists and Ivy league "Saltwater" theorists could be best understood as happening within a single "orthodox promotion" given that both groups suffered no injury from failing (equally) to predict the recent financial crisis. The decades old battle in theoretical physics over bragging rights between the "string" and "loop" camps would seem to be an even more significant example within the hard sciences of a collaborative intra-promotion rivalry given the apparent failure of both groups to produce a quantum theory of gravity.
What makes Kayfabe remarkable is that it gives us potentially the most complete example of the general process by which a wide class of important endeavors transition from failed reality to successful fakery. While most modern sports enthusiasts are aware of wrestling's status as a pseudo sport, what few alive today remember is that it evolved out of a failed real sport (known as "catch" wrestling) which held its last honest title match early in the 20th century. Typical matches could last hours with no satisfying action, or end suddenly with crippling injuries to a promising athlete in whom much had been invested. This highlighted the close relationship between two paradoxical risks which define the category of activity which wrestling shares with other human spheres:
Occasional but Extreme Peril for the participants.
General Monotony for both audience & participants.
Kayfabrication (the process of transition from reality towards Kayfabe) arises out of attempts to deliver a dependably engaging product for a mass audience while removing the unpredictable upheavals that imperil participants. As such Kayfabrication is a dependable feature of many of our most important systems which share the above two characteristics such as war, finance, love, politics and science.
Importantly, Kayfabe also seems to have discovered the limits of how much disbelief the human mind is capable of successfully suspending before fantasy and reality become fully conflated. Wrestling's system of lies has recently become so intricate that wrestlers have occasionally found themselves engaging in real life adultery following exactly behind the introduction of a fictitious adulterous plot twist in a Kayfabe back-story. Eventually, even Kayfabe itself became a victim of its own success as it grew to a level of deceit that could not be maintained when the wrestling world collided with outside regulators exercising oversight over major sporting events.
At the point Kayfabe was forced to own up to the fact that professional wrestling contained no sport whatsoever, it did more than avoid being regulated and taxed into oblivion. Wrestling discovered the unthinkable: its audience did not seem to require even a thin veneer of realism. Professional wrestling had come full circle from its honest origins by at last moving the responsibility for deception off of the shoulders of the performers and into the willing minds of the audience.
_________________________________
Many ideas about money systems assert:
"It is deception rather than information that
often plays decisive roles in systems
of selective pressures."
Kayfabrications became the most
triumphant cognitive dissonance.
"It is deception rather than information that often plays decisive roles in systems of selective pressures."
I fully agree. But let's not allow the so-called 'deceived' completely off the hook here. We believe what we want to believe and most deceptions (aka the confidence game) are designed to enable and encourage us to believe what we want to believe.
I look out the window and see a landscape dominated by ... church spires. They are there to impress the power of communal lies. It works. Paper money works. Illegitimate exponentially expanding debt works. Utilitarian arguments for official policy work even if the policies accomplish the opposite. Every official meme works to some extent. Even after being shown as a total actual failure, the meme is repeated indefinitely, it is true if it is believed. The scientific method is great if it tells you what you need to hear, and sacrilegious denial if it doesn't. People want and need to believe comforting lies and alarming lies that let them release their thirst for blood or envious destruction and control over whoever is hated this week. Truth is irrelevant. Facts don't matter and aren't related to the truth until you're bleeding, but that doesn't bother anyone else in the least. They ignore you if you're bleeding, so you don't exist.
As for me, I declare "Fuck Santa Claus".
Back on topic, CG, one irony you might have pointed out is that ... all the furor is being caused by an obsolete technology. A printed book. LOL.
PS -- thank you for your writing.
Hah! Here's another one who gets it.
And you would be really surprised at the number of things that when you poke them turn out not to exist at all.
Very nice comment. Bravo!
"Back on topic, CG, one irony you might have pointed out is that ... all the furor is being caused by an obsolete technology. A printed book. LOL."
Yes....LOL.......but I still purchase printed books because.......I like the feel in my hand, the smell of the paper and ink, the ability to dog ear or bookmark a page and return quickly to where I last dreamed, the 'realness' in my hands.
And to have something when the world goes dark and my damn iPhone and computer, where I store all my 'knowledge', won't work anymore.
Old school bitches. :)
I like printed books because the information does not change once printed, unlike how anything online can change at anytime, or go 404.
For example, in older books, what most of us know as the Department of Defense was more correctly called the Department of War.
No truer words have been written.....
Read on.....
https://www.facebook.com/notes/heritage-society-of-franklin-county-nc/timeline-of-the-destruction-of-100-year-old-franklin-county-nc-records/554910501264078
EXCELLENT POINT!
Me too. Bookcases ...
Tangent: Orwell's memory hole is realized explicitly by electronic storage and amplified to real-time by 'social media' in which thoughts are scrolled off the consciousness within hours. A book has the potential to save worthwhile information for a long, long time, and while it can only be passed on personally to one person at a time, its effects endure. The greatest thinkers in past centuries if they were alive today might be engaged in flame wars on the internet ... the removal of barriers to information dissemination is a great thing, but blogs and books will always be just as important as ever to worthwhile content and those who value it. Social media is 'useful' for bringing attention to those, and of course only those who can comprehend the content will be interested -- a few of us. (I see you already recognized that).
Thanks for the flowers. Now I'm going to go do some work so I can afford to support your blog.
"Rigged Thinking" is the only problem, and sadly ZH is one of those most responsible for this type of thinking.
The fact is HFT, aka 'computerized trading' is as old as computer themselves, and certainly before HITLER bought IBM hollerith cards and machines for his New World Order in 1936, long before that Wall Street was jusing computer's also to trade and track and price stocks.
So now everyone is in a conniption about 'computerized trading'. The problem is THINKING.
The problem is that the USD is MURDER-INCORPORATED, the problem is that the WALL-STREET Casino is now just a large machine for laundering FREE-FED-FIAT and cleansing that FIAT, and passing it on to the CLUB, of which you all are not a part.
CO-LOCATION has always had its avantages.
When you see an orchestra, look for a CONDUCTOR.
The world is burning, and the CIA is taking out CHINESE CITIZENS starting WW3, and the so called Unicorn-Geeks of ZH, are all consumed about something as nebulous as HFT ( computerized trading ), the public no longer even trades, its a NON-ISSUE.
At best IEX is a NSA company, as they so far are the only solution to the "RIGGED PROBLEM".
I think ZH has covered the 'burning world' quite well. Far better than most, if you have been paying any attention. In fact, the false flag war possibilities have been explored every time a major event takes place that remotely sounds like a whistle for the dogs of war.
The point that it is not the fault of computers, but the fault of the computer users and the regulators has also been well presented.
Just because there is some conjecture that IEX brings it's own set of challenges does not mean that the HFT plundering shouild be allowed to continue unabated, for many reasons, again well covered here if you choose to dig in.
"The world is burning, and the CIA is taking out CHINESE CITIZENS starting WW3" - Really, and you criticize ZH? Some people just should never be given a tin foil hat...
tell me lies. tell me sweet little lies
https://www.youtube.com/watch?v=UiGjxxytLy8
scarey, those shadowy figures in the aisle...
I am shocked, shocked to hear that there is criminal activity going on in this den of thieves.