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Broken Markets (by Intervention and Manipulation)
By thetrader.se
It was a “strange” Friday session. European Trading started off in a quite no volume HFT manner, as is usual during these days. As news flow started increasing during the course of the day, investors had to digest news of Stark resigning, Greece going bust, Trichet’s confusing conference from Thursday, Italian banks halted, renewed spikes in European CDS prices etc. Suddenly the boring session turned into mini Flash Crashes across Assets. As the Euro started sliding, the DAX accelerated the fall, JPY began trading very flashy, while safe heaven Gold lost 50 USD in 5 minutes.
The Market is starting to show some very “disturbing” patterns. Manipulation and Intervention is causing an ever increased volatility in the Market, and risks bringing the system down. With correlations at historical highs, highest correlation levels in the SPX since the crash of 87, all moves are even more exaggerated by the HFT Community. The Market Microstructure is broken by the multiple interventions and manipulations of Assets. We are risking the big breakdown as resonance in the Market increases.
“After rallying nearly 100 USD last week from 1795 to 1895 with demand coming from the official sector and some leveraged players rebuilding length following the severe prior correction we traded to new all time highs of 1922 on Tuesday shortly before the Swiss Franc intervention.
The immediate aftermath was in complete contradiction to prior recent episodes of intervention and what anyone would have expected. Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven “currencies” we saw a 50 USD collapse in minutes.
The source of this flow seems hard to pin down with some speculating over whether “authorities” were concerned about the signals of an accelerating gold price and its impact on other fragile markets. Soon after, much of the losses were recovered but the psychological damage had been done and there followed a series of liquidations from within the leverage space with gold closing down 50 USD on the day. This was then exacerbated by a near 60 USD flash crash within 2 minutes during the Asian session.”
Goldman Sachs
The first of several min Flash Crashes in the DAX on Friday.
Late into the European Trading session, the JPY started the Flashy behavior.
If the above mentioned is due to Interventions and/or (lack of) Manipulations we don’t know, but these patterns are not good for trying to create a stable environment for investors. We can’t but agree with Jessie, the Market is run by Psychopaths among Us. We are rather concerned with the big Black Swan event around the corner, which will be magnified by the HFT Community, and ultimately create the big Panic. This market has recently started bringing down even the highly experienced Traders.
Let’s see what next week has to offer.
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Important is to understand the mechanisms behind.
Where do the profits from the investment banks actualy come from? Not from normal lending, not from IPOs, not from financing mergers and takeovers, not from mortgages or any other normal banking business.
The profits come only from speculation and high volatility is needed to create the possibilities of short term profits. So these banks have a big interest in high volatility but of course only then when they have placed their bets already. Then they simply start their HTF machines in the one or other direction whatever is needed to produce the needed profits.
So the game has to be rigged otherwise the banks would not make a money on their speculations. This functions well in the stock market and the commodities. But it does not work anymore in the PM market and the currency markets.
AND THIS IS WHERE THE PROBLEM SITS: The biggest wheel in the world economy is the currency markets, because it influences directly and massive the targeted economies. In the old times of fragmented and small currencies it was an easy play to rip of profits and to ruin hostile or not cooperating economies. But with the advent of the Euro and the huge Chinese US Dollar currency reserves this has all changed.
The Euro is difficult to manipulate because of its size but this could still be handled when using extrem measures. But the moment the Euro is getting assistance from China using their US Dollar reserves to counter the planned manipulations then it oes not work.
My opinion is, that it is an act of desparation to target the Swissie because the US was not able to get a grip on the Euro. This forced the Swiss to peg their currency to the Euro. This is not popular in Switzerland but there was no alternative.
So these are extreme difficult times for the big banks to make the enormous profits they desparately need. Thats why all kind of manipulation, tricks, fraud, robbery and wars can further be expected to satisfy their hunger for profit.
Because one thing prevails and this law can not be offset by anybody. The profit banks are making have always to come from the real economy. The banks are necessary in an economy to provide capital to the real economy and charge interest on this capital. But nowadays the big banks want to make giant profits which are totally disconnected from the real economy.
This will produce soon hyper inflation because this is the only way to bring the situation back to normal. To say when the bubble burst then hyperinflation is eminent. The bill as always has to be paid by the small man not only in the US but all over the world.
analogies anyone?
a corrupt and indifferent parent won't hem in his wayward, gambling-addicted son because the parent thinks it's beneficial
for the family to skim off some of the occasional lucre so that the parent can parade around like he owns the whole town.
Now the son is also a computer programmer who has let loose a virtual gambling monster.
Unfortunately, it will all fail, because as Denninger said on Keiser, the pool of suckers has dried up.
Butt, the gambler will continue until he sells off the father's house and everything in it and loses it all.
BTW the messages by the traders (landrew & tradingjoe) sound pretty scary. If those Alphas are running away scared and calling for taxation and oversight, then they are well and truly spooked. What does that mean for the rest of us?
Theres a worrying lack of interbank liquidity which has been getting steadily worse since Oct08, especially in Europe. The way it is supposed to work is that a hedge fund wants to put a trade on, goes to the street for pricing and trades with the best bank of the 3 or 4 they ask. Then that bank offloads their position ino the rest of the street. So the HF can talk to 3 guys but the bank can talk to everyone and offload the risk.
Right now, everyone is chasing the few HFs still putting trades on so the HF has all the liquidity, he can talk to 20 banks and gets a great price or a misprice. Then whoever wins the trade looks around the street but nobody wants to take he position off him, we all have reduced risk limits now and we all know he got the position at a tight price, we dont want to let him out.
So the HF has massive liquidity and the bank traders have none. Banks end up in the market trying to do big size quickly or all their pnl vanishes - thats why its getting flashy out there, thats why trading revenues are down on the flow desks.
Thats Broken markets.
Stop feeding the trolls. Starve the silly things!
When it comes to people, there is only so long they can be fooled, coerced, pushed and disrespected before the social contract that forms the foundation of our civilisations suffers a crisis of confidence.
When that confidence collapses, the concern will not be which chart is being raised, but what is being razed.
Da Boyz had to take GOLD down. 1880 was flashing "Danger,Danger" to them as it was building real support, and no way could they risk this safe haven to build more of a following.
They figured the takedown offset to pour into equities, lololololol!
Rotflmao. BTFD.
I'm in my cups and worthless to you my ZH friends, so I am signing off to annoy Mrs. Smiddy and pester her into a sympathy union. Wish me luck!!
machines only do what they are being programmed for, nothign else, the "crazzies" are the people who need a new conscience and character traits! greed has destroyed the markets as we knew them and they ain't coming back as we knew them, something else will emerge, and I bet this time I won't be part of it, for now I know the markets are rigged and trade accordingly, once I don't know anymore I STOP! FACT is though, machines (led by greedy out of control humans) will bring this sucker down in an unprecedented "style", aka TOTAL WIPEOUT, I want to see then whom's trades will be "cancelled" by whom!!!
As an options trader, I hate to think a trade tax is needed. I just don't know how you can stop the HFT trades without some kind of tax on vol. trades? HFT is killing the markets, I used to make money trading after hours and now because HFT's they have killed the volume. People are afraid to trade against the ghost machines. There is close to zero logic at times in the direction of trades. I don't know how you can ban machine trading? We may be looking at the end of trading for the less than 50,000 share crowd? I never thought I would even think tax to myself let a lone say it out loud.
The only thing I can think of is to enforce a minimum holding period.
I'd personally prefer something like a day, but 30minutes should not be unreasonable.
The markets are supposed to be for INVESTORS, not abitrage seekers.
This is one of the reasons they're all so volatile. PE's grow far beyond the fundamentally supported price based on ROE. This is in part because speculative traders hope for a greater fool in a minute or two.
'We are rather concerned with the big Black Swan event around the corner, which will be magnified by the HFT Community, and ultimately create the big Panic.'
Who is "we". And think about the HFTs. Basically they own the market's direction. With prior knowledge they front ran the Bernanke. As they do, they start a push up and let the dumb money follow while they exit. Since, they have started all push ups in the range bond market using this principal of leaving near the top.
When they decide to not start the next trend up, there will be NO bid underneath. Because most fund managers are already all in with little cash.
The question is, when will the HFTs say, 'No Bid this time' and watch something that could be worse than a flash crash. Because nobody will be there to absorb all the supply of equities that are present from redemptions by the public and hedge funds who have left in disgust. This imbalance of supply versus buyers has not been corrected yet. I believe this will be the Black Swan in itself. When the likes of Cramer says, Don't Buy, Don't Buy, Don't Buy. You will know we are near a possible bottom.
The only other question is, how long can they play, extend and pretend as said here on ZH. Looks like the end game is near.
Interestingly a group of black Swans is called a wedge.
Remember that, the next time you're looking at charts, drawing wedge formations that lead to one moment of collapse.
All hail Cygnus atratus!
The markets are sick. Rocker is right, and the bill will be paid by everyone. At the very least, Wall Street just drove away Mom and Pop for the rest of their lives.
They lost me too. I couldn't care less about investment ideas. All I care is about manipulation. If I can't spot the manipulation and trade it, I stay in cash.
Most of my money is locked up in PMs anyway (and big guns like my beloved tricked-out Saiga-12 gauge shotgon with the 20 rd drum mags and the 15 rd stick mags. No! Bad zombies!!!!)
+1 for coming back in your cups!
I thought you said you were going to have sex with Mrs S? Oh, guess that didn't work out ...
If the markets are broken and manipulated :
1° Why doen't we regulate them? Maybe the EU should show the way. If they have the financial legs and the balls as the US WILL NOT! No desire, as the Oligarchs holds Congress, Potus by their short hairs.
2° Must the world wait for the total collapse in the absence of political will and clout?
3° What sort of market will emerge after the fall?
4° Who will define how politics and markets interface?
5° What happens to people's ability to influence the procees overall?
2° Must the world wait for the total collapse in the absence of political will and clout?
3° What sort of market will emerge after the fall?
4° Who will define how politics and markets interface?
5° What happens to people's ability to influence the procees overall?
2. Aside from beer and football, what else is there do on such a nice weekend? It's completely out of our hands, but I think that was the point of the article.
3. God only knows. Someone else mentioned taxing trades. This was the case at one time, and it served to make folks a bit more conscious of their moves. I would think such a tax would do well to not only create caution and less risk(to some extent) in the markets, but also improve the balance in revenues the Fed has been struggling with.
4. No one should define how politics and the market interface--that's the problem! The Fed should NOT be influencing the markets, NOR should these financial corporations be influencing politics(virtually impossible, I know, but steps could realistically be taken--such as simple enforcement of conflict-of-interests standards). If you want capitalism, let's have capitalism! Sink or swim economics, plain and simple. Laissez fare and no bailouts.
5. This can only be determined as the process of rebuilding unfolds--IF it unfolds. Let's see if there is a frame of a house to build on after the fire before we start thinking about where to lay new carpet.
...No one should define how politics and the market interface--that's the problem! ...
I beg to disagree right there! Using the sporting analogy, the board of governers DEFINE the RULES of the sport, the referee on the field applies them. We should have the same approach to financial markets and the players.
The legislator and the executive SHOULD define the role of markets in society, of wealth creation and distribution in order to have a LEVEL playing field for all; no oligarchy, arm bending, table tilting plays; no mad speculative plays that commit society VIA financial intermediaries to EXCESSIVE RISK in opaque markets, as this, our current situation.
Risk and return tradeoffs, good governance of market mechanisms, IS the role of legislators and government. Glass-Steagall a good example, where investment banking activites and Joe Doe's bank deposits were NOT put in the same mad, unregulated financial casino pool. G-S is just ONE example of what needs to be done
If the elected leaders of a democratically elected Republic CANNOT address these issues in times of CRISIS like today; we are inexorably heading to the wall and the next step will be OVERT totalitarian governance, not the watered down Oligarchy governance of broken markets and surrogate political front-men of today's world.
As for the comment below "Are you joking"; my reply is "definitely not!" I am not totally cynical and unconcerned here at ZH to indulge in pure navel gazing. I don't believe that "cognitive dissonance" without civic pressure nation-wide is sufficient to allow the ponzi to crumble and resolve itself out. No way! Quite the contrary!...
I think it's the way you phrased it: how politics and markets interface. That implies an interacting, a cooperative exchange, give-and-take, etc.
Maybe if you ask "Who will decide how the markets function politically?" that might be closer to what you mean, I think.
In any case, that was the basis of my response. Sure, regulation is a neccesity, but Fed pumping and manipulating of the market for the benefit of specific investors and interests is NOT what should be happening, as I am sure you agree. But regulations on the market are not a form of "interface", as it were, that is a oneway street with specific restrictive dictates keeping the professional rabble in line.
Interface is more like a PAC, or a financial thinktank working the hands in Washington to exact favors.
That was an attempt at humor, right?
I believe there are plenty of regulations in place. Getting the DOJ and SEC to prosecute is the impossible part.
Yes, let's all hold our breath for that to happen.
what does the DoJ and SEC do, anyone know?
Shake it 'till you break it!
Those HFT machines are busy playing equities and gold and oil off each other.
Pretty obvious patterns day to day over the past month but talking heads keep mentioning "fundamentals".
I'm still thinking of Ella Fitzgerald breaking the wine glass in the Memorex commercials.
Resonance is an interesting phenomenon, which will occur in any system governed by 2nd-order differential equations.
I prefer 3rd order - e.g. change in acceleration = jerk.
It will be "live" (unrecorded) soon enough, too.
Thetrader,
Unfortunate handle, partner. The original Thetrader was a writer for the Daily News that got caught accepting $19,000 in return for writing bullish stories on the stocks owned by John J. Levinson between 1929 and 1930. Levinson denied it, citing his generous nature.
No relation I hope.
Ten years after...have we learned anything?
Here is an excellent video by AE for 9/11 truth:
http://www.youtube.com/watch?v=YW6mJOqRDI4
http://www.ae911truth.org/
Pass this around folks and especially send it to those who still think some clown in a cave and 19 guys with box cutters outsmarted our 400 billion dollar NORAD defense system.
Also, a big question to ask them is, if fires bring down buildings at the speed of gravity, why doesn't my BBQ or fireplace grill come crashing down at the speed of gravity when lit and on fire for hours and hours?
Who was responsible for 9/11?
http://republicbroadcasting.org/?p=7058
You started with an interesting link and video ... then you completely blew your credibility (what there was of it) with your ridiculous 'BBQ' analogy ... then you completed your self-destruction with a link to extreme Right-wing, white-supremacist, neo-Nazi rat-baggery. Piss off!
The Heart:
You are so stupid, I don't even know where to start. The jet fuel burns at much higher temperature than your fucking BBQ. If you don't know it, then STFU.
My sincere suggestion: buy jet fuel, fill up your BBQ, and then light up the match. This will remove your DNA from the pool.
If you could even light it with a match. Jet A is basically kerosene - not very volitile stuff, really. You can throw a lit cigarette into a bucket of it and it won't catch unless conditions are perfect. It certainly won't explode.
Open air burning temp is about 600 deg. F. btw.
You need to get your facts straight first. It wasn't open space fire. Engineers estimated the temperatures inside WTC to be close to 1,000C.
The structural steel begins to soften around 425C and loses about half of its strength at 650C.
The WTC fire easily caused the steel to lose 50% of its strength.
That's what all of you 'truthers' are - single digit IQ morons. Have some respect to all these who died there, and stop propagating these idiotic theories. At least refrain from doing so, during this important weekend.
1,000 Deg.C? Are you high? That's 1800+ Deg.F! There is no way liquid Jet-A is going to burn that hot. Black smoke = incomplete combustion btw. There's no way that fire burned long and hot enough to heat soak that steel reinforced concrete core. Hell - paper burns at 450 deg. F. - according to you, conventional office fires should be collapsing buildings left and right. To my knowledge that's only happened once in history: WTC7.
Oh wait. . .
Finalcollapse;
Your knowledge of the combustion of jet fuel is "limited"
Limited by your IQ in the single digits.
Put jet-A in your car.
Call us when you get it running...
So, the steel softened yet sheared? And, I suppose you subscribe to the pancake theory as well?
When will evolution take care of morons like you, clowns that don't understand simple gravity?!
Bottom line: go fuck yourself.
Humpty Dumpty was pushed.
Thanks. I needed a laugh.
Oh my, you are kidding right? BBQ grill? It might be nice if you picked up a book on metallurgy. Material science has been around a while. Really BBQ grill? Really? I laughed when I read it but bad timing with your other questions. The second question, are you questioning Newton? Can I suggest another book. Really?
Probably a coincidence (wink).
Thetrader,
I have to strongly disagree that the markets are being run by psychopaths. The logic in what they are doing is completely clear if you just accept that the system cannot be saved. Therefore, any harmful action they take is irrelevant, just as long as it facilitates the transition to a new system or makes their position within that new system better. With that in mind, the only long term action the central banks and soverign nations are taking, all at the same time, all over the world, is buying gold. Makes sense to me.
I read Geo's article and the book. Is it possible to create a machine code that is psychopathic? I would suggest yes it is. Knowing some code, programs do seem to take on the personality of programmers. Is it possible these psychopathic machine trades are intended to destroy markets for the very big trade of a dime on the dollar bid? This has bothered me each time I enter an order. Am I being set up for the kill by a machine? Strange isn't it, science fiction comes alive. I think I might have to stop trading until something shakes out? Any thoughts?
As it's been stated before: "Asking whether a computer can think is like asking if submarines can swim!"
I'd lime to see the dead body count of margin kills on hedgies. Otherwise they all knew in advance. One one could survive those moves on 14x leverage
Lime would certainly be the right thing for dead bodies. Perhaps a good dose for this market would work as well.
Or, you could feed the hedgies to Wu's pigs.