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The End Of 'Orderly And Fair Markets'

Tyler Durden's picture




 

Capitalism may have bested communism a few decades ago, but exactly how our economic system allocates society’s scarce resources is now undergoing its first serious transformation since the NYSE’s founding fathers met under the buttonwood tree in 1792.  Technology, complexity and speed have already transformed how stocks trade; but As ConvergEx's Nick Colas notes, the real question now is what role these forces will play in long-term capital formation and allocation.  Rookie mistakes like the Twitter hack flash crash might be easy to deride, but make no mistake, Colas reminds us: the changes that started with high frequency and algorithmic trading are just the first step to an entirely different process of determining stock prices.  The only serious challenge this metamorphosis will likely face is a notable crash of the still-developing system and resultant regulation back to more strictly human-based processes.

 

Via Nick Colas, ConvergEx,

Last week’s Twitter hack and resultant mini-crash in U.S. stocks made for a few minutes of confusion and several days of humorous commentary.  It is, however, also a sign of the times.  That a system of communication where Justin Bieber, Lady Gaga and Katy Perry are the lead dogs could encroach on “Orderly and fair markets” should force some discussion of where U.S. stock markets are heading.  “I crashed the market and I liked it…” isn’t a top 40 song. Yet…

Let’s begin with a few basics about what role equity markets are supposed to play in a modern capitalist economic system:

  • Stock markets exist to determine the value of publicly held companies using all legally available information that may impact their future cash flows and strategic positions.  There are a lot of items on this menu of value drivers, from prevailing interest rates to the quality of a given management team.  The benefits to any individual or group of investors to predicting enough of these inputs correctly on a consistent basis are, of course, sizable.
  • The resulting prices are signals to the broader economic system about the ongoing value of the company’s business model.  Well-considered companies with high valuations can purchase the assets of laggard enterprises with low valuations and operate them better.  Poorly run businesses fail, freeing up society’s intellectual and physical capital to pursue better uses.  Private equity can purchase underperforming assets as well, hopefully to re-engineer the business and return some or all of it to better health.
  • Through the IPO process, equity markets allow promising enterprises to tap a large pool of capital that allows for further growth.  Once public, they can make acquisitions for stock and reward productive employees with real ownership in the business.
  • Stock grants to management in well-run businesses – old and new - can allow the operation to entice the best available intellectual capital to join the firm and maximize their focus while employed there.  This ideally allows society to ensure that the scarcest of all economic resources – people – flow to their best possible uses.
  • Stock prices provide valuable economic signals to society at large – labor, capital, government and all other economic actors.  This, by the way, is why the Federal Reserve and other central banks care so much about rising equity values.
  • Public ownership of private capital allows society to “Spread the wealth around” through the individual ownership of equity assets.  Individuals can buy diversified portfolios of public companies and earn returns on their capital that mirror the trends in return on investment capital for the businesses they own.
  • Yes, I know it’s fashionable to pick apart these idealistic characteristics at the moment.  At the same time, free market capitalism has a reasonable track record over history for improving the lives of large chunks of the human race.  So until we get a race of incorruptible philosopher-kings in the mix, this structure is the best thing going.

The Twitter hack is the most notable example of “How” this process has changed, specifically in the real-time valuation of U.S. stocks.  To understand where we are, you first need to parse out the important changes that have occurred in stock trading over the last +10 years.  Over that period, market structure moved from having one dominant exchange for a given stock (IBM on the New York Stock Exchange, Microsoft on the NASDAQ) to a highly fragmented system of multiple “exchanges” – pools of buy and sell orders managed by very fast computers.

Technology – very fast, efficient, even ruthless – is therefore the backbone of the modern U.S. equity market.  It should be no surprise that this development is not without controversy.  The multitude of trading venues takes some pretty amazing processing horsepower to keep in sync.  The computer code needed to arbitrage prices among them needs to be highly efficient and operate faster than a human can literally blink an eye.  And the physical plant – cutting edge servers located near the data centers for the major exchanges, connected by microwave or high-speed data lines – costs billions to build and maintain.

With all this infrastructure in place, the logical question is “What’s next?”  To answer that larger question, we need some additional context:

Point #1: Human based active equity management has had a tough slog since the Financial Crisis, especially as it relates to U.S. stocks.  Money flows out of domestic equity mutual number in the hundreds of billions, and there hasn’t been a three-month period for positive flows in years.  That’s a significant development because this base of assets historically funded much of Wall Street’s traditional single-stock research efforts.  Sell-side analysts still have their role, to be sure, but over the last decade the job has been more of a concierge for management meetings and conferences than single-source experts on the investment merits of individual stocks.

Hedge funds do still gather assets, but their investment process values internal resources and evaluation over traditional broker-supplied research.  This group is the primary customer for newer products, ranging from satellite imagery of store parking lots to cyber-tracking of online web companies’ traffic patterns.  They also have the luxury of focusing their efforts on just a few investment ideas rather than needing to cover the entire investment waterfront.

Point #2: Passive management of U.S. equity assets continues to grow in popularity.  Nowhere is this more visible than in the ever increasing asset base of U.S. listed exchange traded funds, where $39 billion of the total year-to-date ETF money flows of $65 billion have gone straight into domestic equities.  The single most popular deomstic stock ETF by this measure is a relative newcomer: the iShares MSCI Minimum Volatility Index Fund, which only launched in October 2011.  The investment goal for the index underpinning this product is to provide equity returns in the context low overall price volatility.  Everything is done with mathematical analysis, rather than having a team of human analysts make stock-by-stock evaluations of potential investments with the help of Wall Street research.  That’s a very different approach from the old-school methods of managing money anchored in human judgment, to be sure.  How this approach does over time is anyone’s guess.  But it is a useful signpost for how money management as a business is changing.

Point #3: We work with a variety of quantitatively based investment managers at ConvergEx, and their appetite for research skews strongly to datasets and real-time indicators of business fundamentals.  In an increasingly open world, and thanks to our ever-increasing reliance on technology, there is no shortage of new resources to feed a numbers-based investment discipline.

A few examples serve to highlight this growing field.

  • One research provider I know has permitted access to the contents of hundreds of thousands of individual email accounts.  Any personal identifiers are stripped out before they get the data, but what’s left is a very useful amalgam of information about buying trends for everything from online retailers to video content providers.
  • Another product we’ve seen recently offers up essentially real-time satellite imagery of retail store parking lots around the country.  Forget walking the mall; you can count cars parked next to 200 representative stores for your favorite retailer. And if U.S. retail is too prosaic, they can get you images of virtually any place on the planet, cloud cover permitting. 
  • Lastly, one product which has been out for several years scours the websites of every airline around the world to see how much these businesses are charging for tickets and how full the flights are getting.  It’s not a perfect source of information – you need a handle on cost structures to know earnings – but it is a great starting point to understand near term business fundamentals for a very volatile sector.

The upshot here is that the technology of market structure – large, expensive and complex – is looking for a dance partner and our increasingly tech-based society is increasingly able to play that role.  The critical questions to this inevitable direction are pretty straightforward:

  • Can anything change this glide path to an ever more technology-based system of stock analysis?  I can only think of one: a very large system failure that causes a recession in the U.S.  We’ve seen individual brokerage firms teeter on the brink of failure after a systems glitch caused a large trading loss.  The momentum behind the current migration to technology-based data analysis in order to assess stock prices is strong.  At this point, only regulation can likely reverse it.  And regulation in the U.S. only comes after large systemic failures – never before.
  • How will capital markets assess stock prices in 5, 10 or 20 years?  There’s a saying in the tech world, especially among hackers: “Information wants to be free.”  On Wall Street, information is supposed to be expensive, since it can be used to generate profits.  Now that technology is being used to generate fundamental insights into corporate performance and the direction of stocks, which approach will win?
  • Over the next decade, as investors in U.S. stocks continue to expand their use of datasets and online resources to analyze securities, information will likely continue to be expensive.  We’re still in the early days of this transition, after all.  Thousands of institutional investors still use analyst-based resources and personal judgment to allocate capital and this process isn’t going away.  Many are adapting as the world changes, offering up new sources of investment insight through an effective hybrid approach. 
  • Over the long term – and I am talking decades here – it does seem inevitable that the analytical function behind assessing stock prices will change dramatically.  Will equity research based solely on human judgment go the way of the neighborhood bookstore, a quaint anachronism in an ever more connected world?  I can’t help but think that the answer is “Probably.”

Will capital markets become more efficient as a result?  If computerized algorithms with access to petabytes of real-time fundamental data can perform single stock analysis efficiently and without human biases, shouldn’t we welcome the development?  Stock market volatility might diminish with all that finely parsed data, and capital markets could become more accurately predictive of future corporate profits and strategic outcomes.

At the same time, technology has a way of creating distance between humans just as much as it can bring them together.  Just ask any parent with a college-aged child for the ratio of text messages to actual phone calls from their offspring.  Will an equity market running on algorithmic autopilot serve to tie the managers of capital (senior executives) to the ultimate owners (shareholders) as robustly as one dominated by flesh-and-blood money managers?  It seems a stretch to think so.

 

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Mon, 04/29/2013 - 13:39 | 3510574 redpill
redpill's picture

BREAKING NEWS>>> SKYNET BECOMES SELF-AWARE

Mon, 04/29/2013 - 13:42 | 3510581 prains
prains's picture

lock up your virgins

Mon, 04/29/2013 - 13:54 | 3510616 espirit
espirit's picture

This pretty much goes along with Bloomturds Declaration of Servitude, and re-interpretation of the Bill of Debts.

Mon, 04/29/2013 - 15:33 | 3510972 Herd Redirectio...
Herd Redirection Committee's picture

OK, so you are going to let algos and computers decide what companies stock to buy... How long until companies know what the algos are looking for, and give it to them, i.e. you have the accountants cook the books to show certain ratios, pull the old Enron trick of classifying expenses as assets and Bob's your Uncle.

Mon, 04/29/2013 - 21:02 | 3512068 screw face
screw face's picture

accountants.............Enron.................Toast on a Stick

Mon, 04/29/2013 - 13:45 | 3510584 Groundhog Day
Groundhog Day's picture

I was doing so well on the roulette table until a HFT program ran wild and just started rolling 0 / 00

Mon, 04/29/2013 - 17:40 | 3511397 nmewn
nmewn's picture

A Bit-Market, what could possibly go wrong? ;-)

Mon, 04/29/2013 - 13:46 | 3510593 Jekyll_n_Hyde_Island
Jekyll_n_Hyde_Island's picture

No one in Washington is smart enough to understand what rollercoaster algo profits are, much less draft and implement any legistlation to prevent the devaluation of equities.  Odds are some fucking idiot, (most likely subscribing to the ass party) or group of idiots will get together like Dodd-Frank and publish some regulation that actually fuels more pseudo-valued algo engines.

 

  Just more proof that hard commodities like Platinum will retain and grow in value.  You can fuck with the paper and the futures, but you can't fuck with the phsycial product.

 

Mon, 04/29/2013 - 13:51 | 3510608 ParkAveFlasher
ParkAveFlasher's picture

They know enough about HFT to vote themselves legally pre-market information.

I practice Hanlon's Razor in reverse.

Hanlon's Razor: Don't blame evil for what is clearly explained by stupidity.

The reverse: Don't blame stupidity for what is clearly explained by evil.

Mon, 04/29/2013 - 13:59 | 3510626 Jekyll_n_Hyde_Island
Jekyll_n_Hyde_Island's picture

  I'm wondering how much puppeteering was in that bill.  There are these dark shadowy masses much like those cast by the fire in Plato's cave that I'm sure are behind this.  I'm just not willing to chalk it up to the Jews.

Mon, 04/29/2013 - 14:24 | 3510690 ParkAveFlasher
ParkAveFlasher's picture

Really? 

If you don't price trade in gold, and especially if gold never crosses borders, you must have local currencies and their attendant arbitrageurs (sp).  The institutions of credit that all trade implies become more vital in such a system of credit scrip, and may become swollen as trade volume swells, as it is predisposed to do when the currency itself can blow on the wind. However the job of agreement of terms has to still be achieved.  Metallic systems are easy enough to agree upon: you price your goods in a verifiably pure amount of the metal and change hands.  Fiat systems, not so much.  Risk implies interest, which implies expansion, which implies inflation, which implies more risk of value distortion, as your baselines are exploded in every direction.

HFT is designed to absorb shocks (you might think of it as a "shtawk absorber") and "disburse" the potentially de-stabilizing forces throughout the entire framework of global finance.  HFT is required today precisely because inflationary forces introduce degrees of volatility that markets run by humans and their cumbersome humanity could not participate in, much less operate, much less profit from.

Banks need prop trading desks because they price their existence in this volatile compound called fiat, and buy and sell nothing of tangible value.  Time, they buy and sell time.

I digress...

It is very easily postulated that insular communities with a far-flung diaspora concentrated in the world's urban centers - the national cores of finance, government, and commerce - may achieve a goal of monopolizing trade by seizing financial choke points in these urban centers: the issuance of credit, the valuation and trade of scrip, the survey of contract laws and the dispensing of justice, and the geographic flow of credit and scrip.  This community would have to be hierarchal, strict, obscure, easily camoflauged, rabidly loyal, and with significant history built behind it with the correspondingly long-visioned historical resources and scholarly traditions.

Now, who does that sound like to you?

Mon, 04/29/2013 - 14:28 | 3510736 otto skorzeny
otto skorzeny's picture

derp- dipshit JDL troll- derp

Mon, 04/29/2013 - 14:05 | 3510633 slaughterer
slaughterer's picture

Tomorrow: EOM window dressing (we go up and break ES 1600), then 1 May low volume anf FOMC (we go up), then Thursday (ECB) we still go up.  Then maybe Friday we go down.  

Mon, 04/29/2013 - 14:23 | 3510724 Kirk2NCC1701
Kirk2NCC1701's picture

Paging Mister Ragnar Lothbrook and Mr. Hulk to Skynet Central. A slash & smash activity required.

Mon, 04/29/2013 - 13:44 | 3510577 JustObserving
JustObserving's picture

Fair and orderly markets were destroyed when the uptick rule was rescinded on July 6, 2007 after being in existence since 1938.

Mon, 04/29/2013 - 13:44 | 3510587 Groundhog Day
Groundhog Day's picture

impressive that you know the date

Mon, 04/29/2013 - 13:45 | 3510594 Levadiakos
Levadiakos's picture

"Man's long agony."

Mon, 04/29/2013 - 13:51 | 3510612 Timmay
Timmay's picture

It's only a matter of time before this bitch realizes it is connected to, and controls; everything.

Mon, 04/29/2013 - 13:44 | 3510579 Manthong
Manthong's picture

"tough slog"

not yet,, but eventually, and way more than tough.

Mon, 04/29/2013 - 13:44 | 3510582 otto skorzeny
otto skorzeny's picture

at the rate the Ponzi is going there will be no "stock prices to assess in 5,10 or 20 years". the only assessment in a few years will be if you are "fit for work" at the FEMA camp.

Mon, 04/29/2013 - 13:49 | 3510599 El Oregonian
El Oregonian's picture

BERNANKE: "Was that assess or assist?"

Mon, 04/29/2013 - 13:48 | 3510603 prains
prains's picture

80's = S&L scamathon

90's = Enron Accounting Scamathon

00's = Tech Scamathon 2000

10's = Mortgage Scamathon 2000.2

 

when did we have fair and orderly markets again? 

50's false war scamathon

60's false war scamathon 2.0

70's Nixon blows himself up

Mon, 04/29/2013 - 14:13 | 3510679 LawsofPhysics
LawsofPhysics's picture

At least people went to fucking jail in the pre-2000's scam-a-thons.  Full regulatory and judicial capture now bitchez.

Mon, 04/29/2013 - 14:47 | 3510828 prains
prains's picture

they built themselves some financial weapons of mass destruction so if anybody even looks sideways at them they go " uh ha" and put their finger on the button. yahtzee bitchez !

Mon, 04/29/2013 - 13:55 | 3510614 Poor Grogman
Poor Grogman's picture

What you mean there will be coffee machines, computers and email at the FEMA camps? I do hope it's decent stuff or that would really suck...

Mon, 04/29/2013 - 13:44 | 3510588 Cognitive Dissonance
Cognitive Dissonance's picture

Markets do not move. They are moved..........now more than ever.

Mon, 04/29/2013 - 13:49 | 3510597 DavidC
DavidC's picture

Absolutely spot on, CD.

DavidC

Mon, 04/29/2013 - 14:13 | 3510676 eclectic syncretist
eclectic syncretist's picture

The apogee may be nearer than we realize

 

Mon, 04/29/2013 - 14:17 | 3510701 NoDebt
NoDebt's picture

I read an article this morning about a few smaller markets that are thinking about introducing random multi-millisecond delays or even "small batch and randmoize execution order".  Obviously, with an eye towards snuffing HFT's tactics.  I suspect they are trying to carve out a niche for themselves by being an ANTI-HFT market while every other exchange is, obviously, very much PRO-HFT.

Sounded like an elegant way of scuttling HFT without introducing any significant delay or added cost in actual order execution.

 

Mon, 04/29/2013 - 14:27 | 3510727 css1971
css1971's picture

Just don't let them cancel trades.

"You are now the proud owner of 90% of Netflix. How would you like to pay?"

Mon, 04/29/2013 - 13:44 | 3510590 Cacete de Ouro
Cacete de Ouro's picture

why does the travelgirls advert always appear after lunch?   gold diggas work on a full stomach?

Mon, 04/29/2013 - 13:51 | 3510606 espirit
espirit's picture

I always get Albanian Hooker ads after lunch.

Mon, 04/29/2013 - 13:50 | 3510611 ParkAveFlasher
ParkAveFlasher's picture

Albanian?  I get all flavors of Asian, with cool baseball card-stats like "mass in kilograms".

Mon, 04/29/2013 - 14:36 | 3510773 espirit
espirit's picture

Yes, with captions that say "wanna get weighed?"

Mon, 04/29/2013 - 15:41 | 3510998 Herd Redirectio...
Herd Redirection Committee's picture

a d b l o c k

You're welcome.

Mon, 04/29/2013 - 16:42 | 3511222 espirit
espirit's picture

Only if I don't like it.

Mon, 04/29/2013 - 13:47 | 3510600 piliage
piliage's picture

Like anything being bought now has any basis in fundamentals...Let's turn off the 85 billion a month and see some REAL price discovery. Woohooo!

Mon, 04/29/2013 - 13:48 | 3510602 Law97
Law97's picture

They're not even trying to say this rally has anything to do with anything else but QE. 

 

The MSM story today is "The recent spate of unexpectedly weak macro and earnings news has cheered stock investors who now believe the Fed must continue its loose monetary policy."

 

Litterally that is what they are saying today.  Go read CNBC et al and prepare to enter Wonderland. 

Mon, 04/29/2013 - 13:57 | 3510617 Poor Grogman
Poor Grogman's picture

They still can't bring themselves to substitute "ALGO" for "investor"

Mon, 04/29/2013 - 14:47 | 3510829 web bot
web bot's picture

They're #ucking absurd. Qemorphine and an impending cut in the European rate are the drivers. Full stop.

I can't imagine how I would be taught corporate finance today, compared to when I was in BSchool.

 

Mon, 04/29/2013 - 15:03 | 3510864 Widowmaker
Widowmaker's picture

Who needs corporate finance with FASB 157.  It's the only thing you need to know.

Mon, 04/29/2013 - 13:50 | 3510604 q99x2
q99x2's picture

Drop the dogs off at the kennel.

Mon, 04/29/2013 - 13:49 | 3510607 Widowmaker
Widowmaker's picture

Tyler pushing propaganda describing the current racket as a "market."

These aren't markets, they are shit on a stick that Americans swallow as cotton candy until told to taste.

END THE FUCKING FEDERAL RESERVE, ENABLER OF HORSE SHIT MONEY AND FASCISM INC!!!!

Mon, 04/29/2013 - 13:50 | 3510610 observer007
observer007's picture

Casey: All Banks Are Bankrupt

 

The whole banking business is corrupt from top to bottom today. Part of the problem is that banks are no longer financed by the individuals who start them, putting their personal net worth on the line. Now, they are all publicly traded entities - just like all brokerages - playing with Other People's Money. Management has no incentive to do anything but pad their wallets, so they pay themselves gigantic salaries and bonuses, and give themselves options. These people aren't shepherding their money and that of clients they know personally. They've got zero skin in the game.

 

http://homment.com/bank-bankrupt

Mon, 04/29/2013 - 14:56 | 3510846 Widowmaker
Widowmaker's picture

Don't forget the first line item paid out of TARP was trader payroll.

That single decesion shreaded any last semblance of credibility for the entire fucking racket for a generation.

Second verse same as the first.

Mon, 04/29/2013 - 13:54 | 3510613 syntaxterror
syntaxterror's picture

Capitalism bested Communism? Really? Tell that to the Chinese! Seems as if they have our jobs, factories, technology, and cash!

Mon, 04/29/2013 - 13:59 | 3510621 Ness.
Ness.'s picture

Yet another catalyst for a new high... Russian Govt. confirms a rocket was fired at a passanger plane... stawks ramp higher on the news.  10 year UST unchanged - DOW up 121 and rising.  Nothing to see here.

Mon, 04/29/2013 - 14:00 | 3510628 fonzannoon
fonzannoon's picture

Dow 15k (almost)

S&P 1600

Ten Year 1.67%

I can only guess that the insiders on the list got notified of QE6

Mon, 04/29/2013 - 14:04 | 3510631 yogibear
yogibear's picture

And so on to QE to infinity. The Fed cannot stop buying up US debt with magic money.

Mon, 04/29/2013 - 14:03 | 3510630 Fuku Ben
Fuku Ben's picture

The market is just one giant wholly fraudulent illusory game of monopoly played on the backs of slaves

The winner with all the marbles has already been selected

Hint: Their einsatzgruppe begins with a Z

 

http://www.youtube.com/watch?v=C8oYlXNyAN0


Mon, 04/29/2013 - 15:13 | 3510912 falak pema
falak pema's picture

your sir are debunking the "wealth of nations" to its very roots and stirring the grave of its writer, father of free markets, to his caledonian origins; Adam Smith. 

He was a son of Enlightenment like Voltaire; they were contemporaries but on opposite sides of the enlightenment equation : moral ethics in common, but one looked at the socio-political construct, the other at the economic one.

Brothers against the old order, but not on same page, each wrote his own story in indelible ink. 

That the socio-political construct, forever top down controlled, recuperated the economic model in the subsequent industrial age, to leverage up the clash of classes in dire social contest, is the ongoing conundrum of the polluted legacy left to the post industrial age by this technological fulgurance of the last two centuries, of which the oil monopoly is the last visible and "concrete" frontier; the fossil fuel energy barrier is like the coral reef, a mirage  in a paradisiacally protected far away island so precious to Gaugin.  We hang on to it like a life line, legacy from a past age...

We are in the midst of two paradigms...without any visibility except faith, hope and...if the stars will it, a modicum of charity, to the desperate and damned of this awesome reset. 

Mon, 04/29/2013 - 14:12 | 3510668 Flakmeister
Flakmeister's picture

Hee, hee, hee...

"allocation of scarce resources" and "promoting mindless consumption" are a little at odds with each other..

Mon, 04/29/2013 - 14:27 | 3510729 adr
adr's picture

Let’s begin with a few basics about the role equity markets play in a modern Corporatist system:

Stock markets exist to enrich the executives of publicly held companies using manufactured information that hides the impact of their future cash flows and lies about strategic positions.

The resulting prices have nothing to do with the broader economic system and in no way reflect the value of the company’s business model.

Through the IPO process, equity markets allow spoiled Ivy League grads to tap a large pool of capital that seeks to fleece investors for quick gains.

Stock grants to management in poorly run businesses – old and new - can allow losers who bankrupt every company they ever worked for to obtain massive equity share plans and secure eight figure golden parachutes after the inevitable six month turnaround plans blows up.

Stock prices provide valuable entertainment to society at large – daytraders, TV hosts, and habitual gamblers.

Public ownership of private capital allows a small segment of society to “Transfer Wealth” by allowing individuals to hold the bag of worthless equity assets during market corrections.

Yes, I know it’s fashionable to gloss overe these facts at the moment.  At the same time, state run capitalism has a reasonable track record over history for impoverishing the lives of large chunks of the human race.

Mon, 04/29/2013 - 15:39 | 3510992 smartstrike
smartstrike's picture

Brillant, even individuals like Bill Gates make most of their money selling options and equities in what is leveraged Ponzi, many times over the actual software sales. What's more, equity valuations are usually valued at their terminal valuations.

Mon, 04/29/2013 - 14:34 | 3510777 Clowns on Acid
Clowns on Acid's picture

Mr Cola doe sit again. A very interesting cat among the pigeons article. However in my opinion Mr Colas neglects to address the fundamental (and might I say obvious) issue.

All the information aggregating companies who buy all the personal data from the GOOG's of the world have a stategic advantage over all the participants. COST of data.

Why can GOOG and all the other info gathering entities mine personal data for FREE ? Why can GOOG just video record store parking lots for example for FREE?

The real change is not just technoogy, it is IP law. Think of it as if years ago, there was a company that could read everyone's corresspondence and film everyone's store, process all the information and then sell it back to you!

The fact that the Post Office was a Gov't institution probably made it so there was heavy penalties t5o read someone 's mail.

Today GOOG and the like just take everyone infoirmation for free, and then resell it to companies that wuil,l distill it to thweir pricing advantage with absolutely no benefit to the indivdual.

That is the real development in the trading sphere. That is where laws regarding usage of private emails / corresspondence would require development.

Given that Eric Schmidt of GOOG and of Suckerberg of Fleecebook were on Obama's re-election committee. They love the smell of fasism. They profit from it.

Mon, 04/29/2013 - 14:43 | 3510805 Toolshed
Toolshed's picture

Hmmmmm, since we all know that the quants and their computer army are NOT analyzing equity prices, but are in fact manipulating them........what is the point of this article? Distraction? Misdirection? Rationalization?

Mon, 04/29/2013 - 15:02 | 3510862 Target Practice
Target Practice's picture

Capitalism beat Communism, then started to turn itself in to Communism.....and now were all in the shit and hoping the ones who can save us is China, the ones who are switching from Communism to Capitalism.

Capitalism works, if it is allowed to.

Mon, 04/29/2013 - 15:00 | 3510866 pragmatic hobo
pragmatic hobo's picture

for now at least, the capitalism is dead.

Mon, 04/29/2013 - 16:12 | 3511120 muleskinner
muleskinner's picture

On June 25, 1876 George Armstrong Custer rode into the Little Big Horn and Crazy Horse turned him into a pin cushion.  Put a dent in the 100 year celebration of Independence Day in 1876.  The Cheyenne and the Lakota Sioux saw Custer coming from a long ways away.

 

2013 - 1876 = 137 years since Custer bit the dust.

 

I'm just thinking that these markets just might be riding into a big Little Big Horn.  Custer's Last Stand pops into my cabbagehead, anyhow.  Might be a bad analogy, but I think that analogy is a good one. 

 

 

 

Mon, 04/29/2013 - 16:18 | 3511143 Stuck on Zero
Stuck on Zero's picture

Random walk driven by TPTB.

 

Mon, 04/29/2013 - 16:21 | 3511156 Zymurguy
Zymurguy's picture

Just wait until I get my quantum-pre-frequency-trading computer online... I'll be making moves before the market does by trading in a dimension set a few seconds before ours.

Now, it was here just a minute ago... dang.

Mon, 04/29/2013 - 16:25 | 3511158 MedicalQuack
MedicalQuack's picture

Absolutely do not count on the Consumer Protection Agency to do one thing.  Richard Cordray is lost and thinks that by building a data base he can study and see how consumers react with financial firms..duh.  Hire a few quants who design the models and software that we react with ...duh

He's totally lost and it shows to any in tech and building that data base of millions of US consumers is just showing he's doing something...same garbage again with putting a lawyer into a job where a technologist would be better.  Sure we need lawyers in the background but not up front.  I predicted this over a year ago and asked if he understand formulas and math...well here we are...and I don't pride myself on being able to predict, I'm just a scary logical female who understands data mechanics and tries to share it in layman's words with others so you know WTF is going on.

http://ducknetweb.blogspot.com/2013/04/richard-cordray-fail-with-underst...

The consumer areas of privacy are still a huge problem too and we do need to license all who sell data as well as who knows who's doing what and bottom line is that consumers are the free labor that fixes all the data banks and corporation sell about us while they put billions in the bank and sit on tons of cash.  Example in 2010 Walgreens made short of $800 million selling data, so does that give you an idea of the billions we are taling about with pure cash created by some mining and query algorithms.  It is so hard for most to get their head around this as its an invisible intangible out there but believe me it exists and the less you know about it, the happier the banks and other data sellers are. How did that data get out there about me...hmmm..once upon a time you did a web search about that topic and it may have been sold half a dozen times before you even see it

http://ducknetweb.blogspot.com/2013/04/data-floating-around-web-and-you-...

In all honesty I used to just write about the illiteracy of the GOP but there's plenty of it migrating over the White House staff areas now too, as Kerry said a few weeks ago that it's ok in the US to be stupid, well not if you want to keep a little of your money but he has plenty so he can be stupid himself I guess:)

Mon, 04/29/2013 - 16:33 | 3511190 dadichris
dadichris's picture

IMO, the author needs to rethink his assumption that free market capitalism actually exists in the US.

HFT is a central planners wet dream

Mon, 04/29/2013 - 17:40 | 3511405 observer007
observer007's picture

Casey: All Banks Are Bankrupt

 

The whole banking business is corrupt from top to bottom today. Part of the problem is that banks are no longer financed by the individuals who start them, putting their personal net worth on the line.

Mon, 04/29/2013 - 22:13 | 3512328 cdskiller
cdskiller's picture

Always nice to read drivel from the enemy camp.

Tue, 04/30/2013 - 07:54 | 3513192 Downtoolong
Downtoolong's picture

And when the valuation models become institutionalized, and all financial managers are pressured into accepting and following them, all profits and wealth will be transferred at nearly the speed of light to those who create the models and are allowed to front-run the results of their calculations in the market. At this point, investment asset gathering might as well be a collection process administered by the IRS.

Resurrect Isaac Asimov. We need him to write “I Robot Stock Markets”. Of course, in this version there wouldn’t be three laws; there would be no laws.

Or, we could just wait for the PBS documentary when it all unfolds and nobody saw it coming.

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