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Buffett's Hypocrisy Exposed Yet Again

Tyler Durden's picture





 

All you need to know about the New Normal breed of crony capitalism and unbridled hypocrisy is once again best exemplified by the following quote by Charlie Munger - the lifetime business partner of crony capitalist par excellence Warren Buffett - from May 2013, in which he said that "I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else. It's legalized front-running. I think it is basically evil and I don't think it should have ever been allowed to reach the size that it did. Why should all of us pay a little group of people to engage in legalized front-running of our orders?"

Noble, noble words Charlie. What Munger, however, did not disclose is that as part of the Berkshire Hathaway-owned Business Wire news service, the company was enabling just this "basically evil" frontrunning, by allowing some, those who could afford the hefty fee of course, to make Munger and Buffett even richer and to subscribe to BW's HFT direct news access which gave them a few millisecond headstart and in the process frontrun everyone else.

So a few weeks ago, our friends at Nanex caught Business Wire redhanded, and in the process of leaking direct access. The WSJ reported:

At 4 p.m., Ulta’s stock was changing hands for about $122 a share. About 150 milliseconds after 4 p.m., Business Wire released Ulta’s earnings, according to people familiar with the timing of the release. The earnings results missed analyst expectations, a sign for traders to sell. Within about 50 milliseconds, in a series of rapid-fire trades, about 6,200 shares of Ulta’s stock were sold on New York stock exchanges for nearly $122, totaling nearly $800,000.

 

While it’s possible that the trades were executed by a firm that doesn’t subscribe to Business Wire, traders say the size of the trades indicates they were likely made by a firm, or several firms, with knowledge of the results. A spokesman for Ulta Salon said the company doesn’t comment on stock-market action.

 

At the time of the first wave of trades, newswires hadn’t yet distributed Ulta’s earnings. Bloomberg L.P.’s Bloomberg News issued the release 242 milliseconds after 4 p.m. Dow Jones & Co., which owns The Wall Street Journal, received the release 296 milliseconds after 4 p.m. and issued it 168 milliseconds later. About 700 milliseconds after 4 p.m., Ulta’s stock reached its closing price of $118 a share on Nasdaq, a price that took account of the orders placed after Business Wire and other news services distributed Ulta’s earnings, according to data analyzed by Nanex LLC, a market data provider, and people familiar with the trading.

 

Nasdaq stocks often settle a few tenths of a second after 4 p.m. as its computer systems seek to reconcile all trades, according to people familiar with the exchange’s practices.

 

Because of the heavy trading action, T. Rowe Price got $118 a piece for its 26,000 shares, say people familiar with the trading. That’s a difference of about $100,000 from what it would have gotten if the stock hadn’t taken a hit from the earnings report in the first second after 4 p.m. Such heavy, rapid-fire trading could explain why market volatility in the seconds after the 4 p.m. Eastern time stock-market close has increased in recent years, says Eric Hunsader, founder of Nanex.

Fast forward to last night when the firm that was exposed as enabling such "basically evil" frontrunning, Berkshire, pulled the plug on Business Wire's direct access:

After publication of the Wall Street Journal article "and in consultation with Berkshire Hathaway's chairman, Warren Buffett, Business Wire has made the decision to no longer allow high-frequency trading firms to license direct feeds from Business Wire," Ms. Baron Tamraz said in a statement.

...

 

The company said the decision was made after conversations between Business Wire Chief Executive Cathy Baron Tamraz and Mr. Buffett, whose company purchased the San Francisco press-release distribution company in 2006. The conversations with Mr. Buffett took place after The Wall Street Journal reported on Feb. 6 that Business Wire was selling direct access to news releases to high-speed trading firms, as well as to more traditional media and other securities-industry customers.

 

Mr. Buffett's personal involvement in the decision by Business Wire to end the practice is unusual for the legendary investor, who generally takes a hands-off approach to the business decisions of companies owned by his conglomerate. Mr. Buffett didn't immediately respond to a request for comment.

But before anyone congraultates the octogenarian billionaire for "doing the right thing", it appears he had some legalistic prodding:

Business Wire also had conversations with officials in New York Attorney General Eric Schneiderman's office about the issue. The officials expressed concerns about the practice and pushed the company to end it, according to a person familiar with the matter.

 

"Business Wire's decision to voluntarily step forward and stop selling its clients' information directly to high-speed traders is a tremendous victory for our effort to eliminate advance trading on market-moving information," Mr. Schneiderman said in a statement.

 

In a September speech, Mr. Schneiderman said trading on early access to publicly released information is a "new form of market manipulation" that requires action from regulators and lawmakers in Washington. Mr. Schneiderman's focus until now has largely been on high-speed traders getting early access to economic reports.

So congratulations to Nanex and Eric Hunsader for exposing yet another hypocrite, and congratulations to Buffett for doing the right thing... when there were no more options. And now we turn our attention to the other newswires who still provide the HFT parasites with the "basically evil" frontrunning info they so desperately need to make a mockery of the market:

Business Wire isn't the only press-release distributor that has been providing traders direct access to releases. High-speed traders are also paying Marketwired, a Toronto company majority-owned by OMERS Private Equity Inc., which distributes earnings releases and the ADP monthly employment report, to get direct access to the news. Marketwired had no immediate comment.

Sadly, at this point even if one were to root out all of these symptoms of an HFT-driven market that we have been writing about for five years, it would still be too late to fix a terminally broken market, where while HFT is the means by which manipulation is performed, the underlying cause was, is and remains the Fed. Until both HFT and the Fed are eliminated, one can only joke that the US capital markets are anything resembling "fair and efficient."

 


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Fri, 02/21/2014 - 09:57 | Link to Comment TheFreeLance
TheFreeLance's picture

Nothing more or less than pay-to-play. Or, a three-drink minimum at the casino.

Fri, 02/21/2014 - 10:00 | Link to Comment knukles
knukles's picture

The Casino of "Weapons of Mass Financial Destruction"
           -Grandpa Ukelele

Fri, 02/21/2014 - 10:03 | Link to Comment bania
bania's picture

wait until they find out he's sewing gold coins into his garments

Fri, 02/21/2014 - 12:06 | Link to Comment Jack Napier
Jack Napier's picture

Gold isn't an income producing asset, and Mr. Buffoon thinks [has been told to say] that's a reason not to invest in it [or he will lose all his wealth à la being forced to exit his silver position].

Oh contraire, that is all the more reason it is such an impressive asset.

I wonder if this man still knows what free will feels like. The love of money will undermine that real quick.

Fri, 02/21/2014 - 16:10 | Link to Comment fuu
fuu's picture

.

Fri, 02/21/2014 - 10:06 | Link to Comment TahoeBilly2012
TahoeBilly2012's picture

Some people say Obama has been a "dissapointment" and always say "to who?"....same thing here, this is success! Fascism is the game man.

Fri, 02/21/2014 - 10:19 | Link to Comment rubiconsolutions
rubiconsolutions's picture

What's a few milliseconds among friends?

Fri, 02/21/2014 - 11:01 | Link to Comment onewayticket2
onewayticket2's picture

use the obama excuse: 

"ah, shucks....i didnt know [insert scandal here] was happening"

or

come out as gay....

 

either way, problems solved.

Fri, 02/21/2014 - 11:13 | Link to Comment onewayticket2
onewayticket2's picture

my childhood buddy is a commie.  he LOVES obama....if anything, obama isnt doing enough destruction.

Fri, 02/21/2014 - 11:44 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

A "Liberal Paradise" would be a place where everybody has:

  • guaranteed employment, 
  • free comprehensive healthcare, 
  • free education, 
  • free food, 
  • free housing, 
  • free clothing, 
  • free utilities, and 
  • only Law Enforcement has guns.
 
And believe it or not, such a place does indeed exist 

 

...it's called prison.
 
Sheriff Joe Arpaio
Maricopa County Sheriff's Office


Think about it - there's some real wisdom in what he said.
Fri, 02/21/2014 - 12:02 | Link to Comment Your Creator
Your Creator's picture

Nothing is free in society.  It's all paid by hidden and non-hidden taxes.

Fri, 02/21/2014 - 13:39 | Link to Comment monad
monad's picture

He left out the free sex. Homos love prison. 

Fri, 02/21/2014 - 10:50 | Link to Comment caShOnlY
caShOnlY's picture

munger and buffett, those are two bodies we need to see planted face first from 32 floors above

Fri, 02/21/2014 - 09:58 | Link to Comment ArkansasAngie
ArkansasAngie's picture

Somebody's gotta do it?

Piss on the lot of them.

Fri, 02/21/2014 - 10:48 | Link to Comment 101 years and c...
101 years and counting's picture

when this fucking turd dies, i'm going to break out one of my finer bottles of scotch.  the best will get taken out when the fed burns.

Fri, 02/21/2014 - 09:58 | Link to Comment buzzsaw99
buzzsaw99's picture

it's all that maggot can, er, doo to keep from pooping his pants at 2 p.m. every day

Fri, 02/21/2014 - 09:58 | Link to Comment PartysOver
PartysOver's picture

Why is this surprising?  Just asking.

Fri, 02/21/2014 - 09:58 | Link to Comment Sudden Debt
Sudden Debt's picture

what does that old fart know about computers?

 

Fri, 02/21/2014 - 11:39 | Link to Comment TheAntiBen
TheAntiBen's picture

I've always wondered why it was so hard to build in a randomized delay to the stock trader? So if you go to trade a stock/commidity, it would just be common knowledge that your order will hit a time randomizer and your bid/sell may be held anywhere from 1 millisecond to 1000 (or more) milliseconds.  This would level the playing field of HFT's as then it is less about the speed of their connection to the trading system.

Fri, 02/21/2014 - 10:01 | Link to Comment Dr. Engali
Dr. Engali's picture

Isn't it about bath time for the decrepit old oligarch? And by bath, I mean dirt bath. His little fan girl Becky Quick can join him too.

Fri, 02/21/2014 - 10:07 | Link to Comment RSloane
RSloane's picture

To this day I can't see or read anything related to Buffett without remembering Becky Quick's drooling all over him. I swear to God there were times that I thought she was about to unzip him and do him live. It was the most sickening display of pandering to the elite I've ever seen on CNBC, and that's saying a lot.

Fri, 02/21/2014 - 10:17 | Link to Comment Dr. Engali
Dr. Engali's picture

Good morning Sloane. Watching her with him was one of the most foul displays of a minion worshiping their masters that I have witnessed. I wonder if they realize how blatantly obvious, and disgusting, they are.

Fri, 02/21/2014 - 10:27 | Link to Comment RSloane
RSloane's picture

Good morning Doc, good to see you. I don't think that either of them has any sort of introspection abilities and believe their audience found them to be just delightful. Disgusting is a good word to describe their behavior. Its also one of the reasons I stopped watching CNBC. Cramer is another one.

Fri, 02/21/2014 - 09:59 | Link to Comment adr
adr's picture

I tried explaining this to people, but when I started talking about nanoseconds I lost them. They always say it is impossible for someone to manipulate the market is less than half a second. They still think the market is traded by humans.

Fri, 02/21/2014 - 11:16 | Link to Comment _SILENCER
_SILENCER's picture

Ages ago, my wife used to work for a hedge fund. She said they employed a cadre of mathematicians that were busy writing high frequency trading Al Gore Ithms. MIT cats, turbonerds, who were making crazy crazy money figuring this shit out.

Fri, 02/21/2014 - 09:59 | Link to Comment Charles Nelson ...
Charles Nelson Reilly's picture

Buffett & Munger... Life long members of "the Big Club" and well known for giving free BJ's to all newbies in the horse barn at the polo matches.

Fri, 02/21/2014 - 10:02 | Link to Comment HyBrasilian
HyBrasilian's picture

What did I do wrong to, INSTEAD of being born in the time of Achilles & Hector, be born in the time of Buffett & Obama?

Fri, 02/21/2014 - 10:36 | Link to Comment RSloane
RSloane's picture

Pish-tosh. Look at it this way. If all of the predictions of a global meltdown come to pass, you'll be scouring the back yard with dousing rods looking for water and and fighting off poachers in your vegetable garden with a poker and trashcan lid for a shield. Maybe in this way we will all get to relive the 'glory days'.  

Fri, 02/21/2014 - 10:43 | Link to Comment HyBrasilian
HyBrasilian's picture

GET.OFF.MY.LAWN. :-)

Fri, 02/21/2014 - 10:03 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Buffet is yet anther kleptocrat determined to remove things like "conflict of interest" or "collateral" from the English language.

(in case you were wondering, they don't exist in Chinese already)

Fri, 02/21/2014 - 10:08 | Link to Comment _SILENCER
_SILENCER's picture

Buffet is your buddy. He likes ice cream cones.

 

And bailouts.

Fri, 02/21/2014 - 10:10 | Link to Comment Dineroguru
Dineroguru's picture

Another good look at what this "Wolf in Grandpa's Clothing" really does and believes.  I guess ole WB wasn't just lucky to end up with that money after all!

Fri, 02/21/2014 - 10:12 | Link to Comment Loophole
Loophole's picture

Manipulation by the Fed is (ultimately) manipulation with a gun, but I don't see that HFT is. Like it or not, high frequency traders are not violating anyone's rights. As they say, sellers sell and buyers buy in the belief that each knows more than the other. No one has to engage in this kind of trading.

Fri, 02/21/2014 - 10:15 | Link to Comment marginnayan
marginnayan's picture

What about the ill-gotten money HFTs have made so far trading ahead of public using such direct access services and jail time for HFTs? When is New York Attorney General Eric Schneiderman and SEC Enforcement crooks going after that huh?

Fri, 02/21/2014 - 10:26 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

There is a widely disseminated piece based upon a now famous Harvard graduation address in the late 1990s by Charles Munger.  It is almost 'worshipped' for its supposed 'behavioral investment' insights from Mr Munger.

However, without elaborating personal detail, I found it elitist, hypocritical and actually far removed from life's realities despite the consensus worshipful commentary.

Precise example from recollection (and this was a report of someone who listened to the address - cannot recall if there was an actual recording or not):

Mr Munger uses the tragedy of a supposed 'personal acquaintance' to make an almost heartless anthropoligical 'insight'/point which actually garnered a question from an equally elitist anthropologically-oriented attendee.  Mr Munger recalls how the mother of a naval aviator, who died in some accident involving or associated with carrier landings (I cannot recall this clearly) could not come to 'accept' how her son 'would not return'.  The equally heartless Harvard graduation attendee, was 'intrigued' by this insight of Mr Munger's and how the supposed mother could not face her son's loss when it was logically apparent.  Mr Munger went on at length about how this 'insight' illustrates that 'we see what we want to see', etcetera, for investing or 'life' or blah, blah, blah.

As someone who has experienced the unexpected tragic loss of someone very close .........I found this entire exchange incredibly heartless, antiseptic and far removed from life's realities which these ensconced people have no idea of.....

First, in my estimation, this has no connection with 'behavioral investment' insights, or even typical 'life' perceptions, ........ but resides at a more primal emotional, intellectual and existential survival level.

Second, without wasting more time, over this still painful recollection, more relevant, it clearly illustrates that Mr Munger, and the Harvard graduate attendee that asked the specific question about the 'naval aviator son', both are heartless and removed from life as only a certain elite section of the West can be.  They are so removed from life's realities that they present a caricature of themselves to others that they fail to realize (there is one of the ironies of this example).  The condescension that was obvious to me immediately upon reading the Munger commencement address at Harvard, was lost on many, many others apparently ...... as they obviously strive to 'be like Mr Munger'.

 

Fri, 02/21/2014 - 10:20 | Link to Comment DerdyBulls
DerdyBulls's picture

And all of the money backing BH HomeServices' foreclosure binge came from the small guy...

 

Riiiggght....

Fri, 02/21/2014 - 10:21 | Link to Comment DerdyBulls
DerdyBulls's picture

And none of it was accomplished through the dark "inner circle"

Fri, 02/21/2014 - 10:22 | Link to Comment williambanzai7
williambanzai7's picture

Fri, 02/21/2014 - 10:29 | Link to Comment RSloane
RSloane's picture

OMG Buffet stole Becky Quick's clothes!

Fri, 02/21/2014 - 10:23 | Link to Comment williambanzai7
williambanzai7's picture

Fri, 02/21/2014 - 10:32 | Link to Comment RSloane
RSloane's picture

That horse is speaking for me, also. I wonder if Mr Ed would consider running for a senate seat in The People's Republic of Maryland.

Fri, 02/21/2014 - 10:30 | Link to Comment Chippewa Partners
Chippewa Partners's picture

Come on guys, that is why she is called MS. QUICK...

Fri, 02/21/2014 - 11:09 | Link to Comment viator
viator's picture

Not just HFT, there also is crude oil tank car regulations.

"Research shop Capital Alpha Partners reports that “oil & gas and railroad industries are reportedly close to a deal with the U.S. Department of Transportation on new operational standards. That likely means any mandate on retrofitting rail tank cars is years away.”

Capital Alpha adds that the “Obama administration has never been shy about new regulations carrying a significant economic cost. Indeed, a major theme of the administration has been the goal of increasing standards—safety, health, environmental—as far as the political consensus will permit. However, even they seem less than eager to to inflict the potential increase on energy prices that a major new safety mandate on rail tank cars could trigger.”

The upshot is that while the Keystone XL pipeline project still isn’t allowed to proceed, the other infrastructure for transporting oil—railroads—will avoid costly new regulations, at least for now. We’re all for avoiding costly new regulations. And in this case the uncharacteristic Beltway restraint is particularly helpful to President Obama’s pal Warren Buffett."

Fri, 02/21/2014 - 11:14 | Link to Comment More_sellers_th...
More_sellers_than_buyers's picture

This guy never did anything in his life, but make a bet on America in the 60's and 70's.  He is no genius, hell he just went along for the ride.  I suspect he knows it too.

Fri, 02/21/2014 - 11:24 | Link to Comment SweetDoug
SweetDoug's picture

'

'

'

And now, an appropriate quote from the great philosopher of the early 00's, Mr. Lehay…

 

"The shit apple doesn't fall far from the shit tree, Ricki!"

 

•?•
V-V

Fri, 02/21/2014 - 11:31 | Link to Comment PCAOBFASBGAASGA...
PCAOBFASBGAASGAAPCountLentils's picture

The same Warren Buffet who made a handsome $5B investment in Goldman Sachs back in 2008 to fatten his pockets with malodorous usury? How can one argue that's not prima facie evidence of bad character and conduct?

Fri, 02/21/2014 - 11:43 | Link to Comment Jim B
Jim B's picture

He is a true hypocritical POS!

Fri, 02/21/2014 - 12:00 | Link to Comment Emergency Ward
Emergency Ward's picture

Yes, the same putrid pork faced prick.  I hope there aren't two of him.

Fri, 02/21/2014 - 11:35 | Link to Comment Lothar the Rott...
Lothar the Rottweiler's picture

1. Some of us who worked there told our superiors what the HFT guys were doing, and trying to do, with the boxes they were given (sold).

2. The fees were not nearly as exorbitant as anyone wants to think. In fact, they were pocket change for even a mildly retarded, but semi-successful, day trader.

3. We were ignored and/or told to shut up.

4. Anyone who wishes to get info from this pseudonymous guy can contact me and while I won't comment for attribution ("a source familiar with the situation" will do fine, thank you), I still may know someone with an axe to grind. Or, they may not wish to grind that axe.

5. If you are such a person who wishes to know details, a few phone calls to sources already named in media reports will be able to answer some of your more pressing questions. Not that you'll do it, but the answers are already there if you just ask the correct people the correct questions.

And with this, my first comment in eons, it's back to the pseudonymous ether from which I arose.

Fri, 02/21/2014 - 22:50 | Link to Comment nanex
nanex's picture

Can you help me ask the right people the right questions? pr@nanex.net

 

 

--nanex

Fri, 02/21/2014 - 13:24 | Link to Comment Emergency Ward
Emergency Ward's picture

Somewhat OT but worth a mention: Journalist Matt Tiabbi has quit Rolling Stone.

Fri, 02/21/2014 - 13:32 | Link to Comment pipes
pipes's picture

Having "Rolling Stone" before your name limits your readership AND colors the perception of what you have written. He's been casting pearls before swine there.

Fri, 02/21/2014 - 13:47 | Link to Comment Emergency Ward
Emergency Ward's picture

Good for Tiabbi to get away -- he could not have continued what he was doing at RS.

Fri, 02/21/2014 - 17:29 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

He's going to be working with Glen Greenwald

 

And for when the poster who wants to know why we are hating on Buffet comes along...

 

Buffett’s Betrayal

 

 

Fri, 02/21/2014 - 13:25 | Link to Comment LordAarioc
LordAarioc's picture

So if they were in a staring contest and both parties blinked at the same time you lose because you blinked 252 nanoseconds before they did. Except in this case the loss is $800,000.00 Bet on the staring contest.

Fri, 02/21/2014 - 13:28 | Link to Comment pipes
pipes's picture

Munger;"Don't hate the playa...hate the game!"

and...

Nazi soldier; "I was just following orders!"

 

Give the first guy the same type of justice the second guy got.

Fri, 02/21/2014 - 13:28 | Link to Comment 22winmag
22winmag's picture

My know-it-all MBA brother-in-law idolizes Buffett... which tells me he (Buffett) should be flogged in the public square.

Fri, 02/21/2014 - 14:30 | Link to Comment GhostInTheMachine
GhostInTheMachine's picture

I think that bashing is good and flogging is good, but you can bash and flogg and learn something from Buffet. Look at ZH hero (and mine) Michael Burrey, he learned from the stock gugus and last time i checked got a few hundred millions behind his belt and he started as a doctor (then became an investor and did in fact bash none other than Greenspan in NYT). The Burrey story gets me everty time, its unbelievable. Go and read about this guy if you havent, he's got a whole readling list if you want to invest in stocks. You may want to read about how buffett made his billions, its better than watchig tv for the sheeple. Then you can return to bashing, and deservedly so.

Fri, 02/21/2014 - 15:46 | Link to Comment 22winmag
22winmag's picture

Burrey's story and wisdom is a great and it reinforces stuff I already knew... start a legitimate business and experience genuine success and you will attract the attention of crooks, crooked government agencies, and virulent parasites.

Fri, 02/21/2014 - 16:15 | Link to Comment TheReplacement
TheReplacement's picture

Maybe if they just used captchas!

Fri, 02/21/2014 - 17:23 | Link to Comment Umh
Umh's picture

Let's see Buffet trade without "dark pools". He just thinks his side should be able to cheat.

Sat, 02/22/2014 - 12:57 | Link to Comment PubliusTacitus
PubliusTacitus's picture

Somebody shoot this piece of shit.

 

Soros is target #2.

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