Michael Lewis: "Are You Really Under The Illusion That The Individual Investor Trusts Wall Street?"

Tyler Durden's picture

CNBC's last hour is likely the most-watched in a decade (perhaps because after 5 years of delays HFT is finally getting the exposure it has deserved from day one... and covered right here on this website since April 2009). From the HFT lobby explaining that "there is no front-running going on in HFT," to Michael Lewis explaining the "skimming" amd why "HFT is a tax on your investment dollars," the following clips are stunning in their total failure to calm an uneasy investing public. Howevere, when asked by the CNBC anchors whether his comment on the market being rigged was exaggeration he summed it all up perfectly... "Are you really under the illusion that the individual investor trusts Wall Street... the financial crisis wiped out any residue of trust for Wall Street even if they ever had it."



First of all the HFT lobby explains how no one has been a bigger beneficiary of HFT than the small retail investor...


then he adds that HFT "trading" is not "skimming" - take the blue pill before you watch this...


So summing up the HFT perspective...



Lewis explains how HFT traders exploit the system


And how The SEC is asleep at the wheel... and most importantly how there is no trust left for Wall Street - forward to 2:00 for the money-shot


And we leave it to Bob Pisani to sum it all up... after watching this weekend's 60 Minutes:

My wife asked me "Honey, is it safe to invest in the stock market"

What did you tell her, Bob? Probably not this...

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fonzannoon's picture

I just posted this on another thread. It works better here.

I think they did a decent job of letting them all go at it. It's a bummer that they did not have the bad guy dude clarify his initial answer because once the Japanese guy got pissed he pinned bad guy in the first 3 seconds, exept no one understands this stuff enough to know it.

I was talking to someone offline today who made a great point. I own RGR. Yesterday, on no news, the stock was down big. Today, on no news, the stock is up big. Here is how that person summarized it.

"they squeeze retail until retail starts panicking thinking the technical collapse can only be bad fundamental news and they are too far out of the loop to know, so they panic and call their broker and tell him to dump RGR for no reason whatsoever because the chart was destroyed on a whim. Thats the crime, thats how shareholders are stolen from. Who cares about the fact that after they were fooled into selling, they could have sold for $59.02 instead of $59.00?"

This penny scalping shit misses the big picture on so many levels.


ArkansasAngie's picture

You don't even have to actually have any insider info when you can manipulate the market and make people think you do.

Horse manure.




maskone909's picture

if someone were to stack up 1000's of artificial bids and cancle just before they filled, it would send fake signals to the algo's and wipe them out.  maybe one day.

James_Cole's picture

if someone were to stack up 1000's of artificial bids and cancle just before they filled, it would send fake signals to the algo's and wipe them out.  maybe one day.

Yeah, quote stuffing. 


Up next on CNBC, Ted Bundy on why hitchhiking should be always legal.

Lol, the only reason I like twitter..

kliguy38's picture

I'm not feelin' that vaseline

CClarity's picture

Bill O'Brien served himself up as an April Fool today.

redpill's picture

Musta hit pretty close to the mark to get him all riled up like that, huh, kid?


Four chan's picture

"perhaps because after 5 years of delays HFT is finally getting the exposure it has deserved from day one... and covered right here on this website since April 2009"


smlbizman's picture

always blaming the brown guy.....

Rick Blaine's picture

I have CNBC on most of the day...really just for comic relief, etc...

...but I will agree with one thing - this past hour or so was EASILY the best stuff I've seen on there - like ever.

Bryan's picture

Here's a guarantee -- if this does turn out to get high ratings, watch the CNBC program director slowly change the whole format of the show to more stuff like this.  It's like watching cockfights, only legal.  :-)

CClarity's picture

So much better than the Ackerman/Icahn insults!

Keyser's picture

This was better than the day Rick Santelli went on a rant and re-formed the Tea Party... I would welcome a Thunderdome segment on CNBC. Carl Icahn vs the world!!!!!


CrashisOptimistic's picture


This is a time to sit yourself down and think about how to own farmland with a sharecropping tenant.  Own the land, rent the farmhouse to a tenant who is a farmer.  Have a long talk with him.  Pay him well.  Track the numbers.

In 15 years, do you think you'll wish you had been in equities?

Divided States of America's picture

Yup I agree with fonz here that the penny scalping is NOT the main issue here except of course it is definitely one of the many ways that retail folks are getting scalped. There is blatant manipulation going on because OTHER people can intersect your trades enroute and use that information to FUCK you....aka you buy at a higher price than you should or you selling at a lower price that you should. But not just that, most of the time, they know at anytime when the aggregate combined orders are coming in and knows where there is buying or selling pressure to come even before it actually it happens...its like that movie with Nicholas Cage where he sees things happen in the recent future before it happens. This is fuckin illegal and SEC have been dropping the ball.

I am sure that jap guy Brad over at RBC have been making a killing with this information over the past few years and have just now blown the whistle because he does not have any advantage over other players in the space.

As for RBC, they have recently lowered trade commissions to 9.99 at trade to sucker the retail sheeps into the stock market. The banks know that trade commissions will be marginalized going forward and it wont generate much trading revenue from it so in order to make money they are scalping client orders..

Check this ZERO cost broker that just came out, its fuckin insane...these assholes along with all the banks like RBC just want to frontrun client orders.


insanelysane's picture

Agree with both of you.  The penny scalping may have been the original reason to set up HFT but then they started playing around and doing what ifs.  When they realized that you could create and cancel orders all day long without anyone saying anything, it was game on.

Keyser's picture

The real ahh-Ha moment was when they discovered they could flood one exchange with quotes, effectively slowly down the system, then take advantage of the latency on another exchange. The time differential is in the milliseconds, but long enough for the scalpers to do their thing. 


BC6's picture

This game is far from over. The Russian programmers will be probing for weakness in IEX and they will find them. Cat and mouse.

Brad and his team are heroes, but heroes die (as Boris has noted before, typically from the 2nd bullet from the self-inflicted headshot).

mummster's picture

Well put 'fonzannoon' . I also believe that the big picture of HFT is to maintain the big indicies within a certain predetermined band so that they can milk the premium out of the puts and calls. This is where the big money is being made because the ordinary person does not or is not allowed to sell options short. Can you imagine the number of puts which were touted to "protect the portfolio" that have expired worthless over the last 6 - 12 months?

Freddie's picture

Oh Fonz you know it is rigged. You had to have seen all the fiber optics truck in Weehawken, Harrison and Seacaucus for all those years.

fonzannoon's picture

This is not even news. It's been going on for years. For me, this was the best illustration of HFT (this is not one of my typical stupid funny youtubes)



Catullus's picture

I own RGR. And I had to look at it yesterday and think "wtf, are they not growing sales by 30% YOY now?" Then you realize nothing has changed and it goes up by 6.5% today.

To be honest, I'd rather just play blackjack with my money. Maybe craps. I'm just concerned my father-in-law will think I'm an asshole

AND yet my wife owns AMZN, she has no idea what I'm talking about when I say "their P/E ratio suggests that had you put money with them between the birth of Christ and the Normans invading England, you'd just now be paying this off". She properly rode the Pandora wave from $7 to $36 and only sold because I begged her to put a trail stop in.


Dollarmedes's picture

Even Al Capone knew the market was rigged, and refused to invest in it.

madcows's picture

legalized kleptocracy

madbraz's picture

Close the NY FED for one day and we all would find out in a hurry where prices would go.

PeeramidIdeologies's picture

It's 1430 EST. Do you know where your investments are?

maskone909's picture

ted bundy on why hitchhiking should always be legal





SheepDog-One's picture

How DARE he go against the allmighty Wall St blow horns narrative! All is WELL! Everyone loves WallSt and trusts them completely! All hail the FED!

Cannon Fodder's picture

I lost all faith in 2008/2009. At the time I had a position in a ETF that shorted the financials as a hedge against some of my long positions. When the market started tanking 800 points a day the regulatory bodies came out and halted the ETF I was in. I wake up on morning only to have my position, which should have protected me, wiped out. How fair is it to the individual investor to change the rules of the game midstream? Yeah, it's all rigged...

mayhem_korner's picture

How fair is it to the individual investor to change the rules of the game midstream?


I'm sure the beneficiaries of that maneuver would tell you it's quite fair.

ebworthen's picture

Yeah, more important to "provide liquidity" than to make the playing field level.

They leave out that the "liquidity" is Astroglide for ass raping Mom and Pop.

Dr. Engali's picture

I had put options on the financials and made a boatload of money. When they started changing the market rules Is when I closed all short positions.

alangreedspank's picture

Most of the 2009-now new financial regulations was all about forcing you to do so and not make money shorting the clusterfuck.

economessed's picture

After watching those video clips and reading your comment, I'm left with the following thought:  "Every parasite needs a good host."

alangreedspank's picture

Huh huh, and that my friend, has nothing to do with HFT and daytraders and scourge du jour. Sorry to hear that seriously, I heard many stories as such and what probably pisses you off most, stories of success doing exactly this.

mayhem_korner's picture



Lewis has nailed a grenade to the center of the trading floor and pulled the pin.  Now everyone is running to one side or the other.  Could get interesting.  Wake me when someone is rightfully being dragged out for public caning.

CrashisOptimistic's picture

Lewis has turned out to be one of the good guys.  Not how he started.

And now I have to wonder when his publishing company will get a phone call informing them that the promotion tour is ended, if they know what's good for them.

mayhem_korner's picture



I was thinking his publishing company was going to get a call that Lewis is paws up in a back alley somewhere...

Chaos_Theory's picture

Hopefully he doesn't drive a Benz.

Laughinggrizzley's picture

Remember; BATS were the fuckups that caused the flash crash, and fucked up so bad; they couldn't even do their own IPO. The CEO of BATS is an ASSHOLE!

Seasmoke's picture

I woke up in 2008......why are having this discussion in 2014 ???

Dr. Engali's picture

Because everybody else is way behind the Zero Hedge curve, and it irritates the snot out of me that somebody else is getting the credit.

insanelysane's picture

Because you need to have 5 years of data to prove you are not a conspiracy theorist nutbag.  See libor manipulation, fx manipulation, hft manipulation, and gold/silver manipulation.  Wait a minute, we only have 4 1/2 years of gold/silver manipulation data so the MSM is still touting that as conspiracy theory.

jubber's picture

These CNBC scum defending the BATS guy and attacking Lewis fucking unreal

Confused's picture

To end the argument on TV and make the talking heads and apologists look like douches just need to ask why 90% of all available jobs at firms require some form of quantitative analysis degree. Surely that isn't because of programming and model building. Right? Hahaha ugh. This is sickening. 

Freddie's picture

I don't watch TV especially CNBC scum. I like Lewis and generally think he is honest. This Jpanaese kid as head trader at Royal Bank of Canada claiming he figured it all out is total BS story.

He was the head trader there and was not aware all of his orders were being directed through BATS? Royal Bank of Canada should be suing BATS or this guy was a dope for directing all of his trade their or Katayama or whatever his name is was getting a kick back to "add liquidity" to BATS book.

What trade desk is using market orders?

fonzannoon's picture

When did this kid claim he was the one that figured it all out? He wrote the book?

Don't forget who Snowden worked for before he "figured it all out".