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Exposed: The Real Market Manipulator Behind The Flash Crash
Having been among the first scapegoats fingered for causing the May 2010 Flash Crash, Universa's Mark Spitznagel has some harsh words for the latest farce that the regulators are trying to pull (telling CNBC):
“The Federal Reserve remains the largest market manipulator ever, and the desperate yield-chasing, hair-trigger markets that it created were the primary cause of that crash and the inevitable ones yet to come.”
While the CFTC head says the delay in finding Sarao is because "it takes a long time to put this together," it just makes him seem even more of a Luddite... and as Spitznagel wrote previously, "To find the real source of the system's excessive fragility, the regulators will need to look much closer to home."
Regulators have been busy searching for the cause of the May 6 "flash crash" when the market dropped by 9.3% and then recovered within minutes. I think it's a good bet no cause will be found; there is still no consensus on what triggered the one-day 20% stock market crash of 1987. But even if there was no trigger, market conditions created by the Federal Reserve's easy money policy definitely made the crash more likely.
The market is a critical system. To illustrate, let's consider another fragile system: the earth's crust. Imagine geologists scouring through the debris of a big earthquake in search of its trigger—as in, "Let's investigate anyone jack hammering in the minutes leading up to the quake." It is intuitively obvious that earthquakes don't have identifiable triggers. We know that big earthquakes, which happen very rarely, are nothing more than many little earthquakes piled on top of each other due to stresses built up within intricate networks of faults. These little fissures cascade into enormous ruptures. The more correlated the fissures, the more delicate the system.
Back to markets. Think of every investor holding a risky position. Then think of all of these investors together in a big herd. Each member of the herd focuses on what the others will do next, since the only reason anyone takes a position is because others are initiating like-minded ones.
When imitative behavior starts happening in markets en masse, expect funny things to happen to liquidity. All you need to know about market dynamics—as I learned as a Chicago pit trader—is that market prices always adjust to the level where market-makers see balanced two-way order flow between buyers and sellers. All market-makers want to do is buy at the bid price, sell at the offer price, and at the end of the day go home unscathed. When there are only buy orders, for instance, expect market-makers to be unwilling to sell to those buyers until the price has adjusted to the point where they see roughly equal buyers and sellers again. To expect them to do anything else is to imagine them as charities.
So when you combine imitative behavior with noncharitable market-makers, there will be seismic waves from time to time. What makes our current system particularly prone to global ruptures is that hair-trigger traders have crowded into exceedingly risky bets. Why would that be, with the crash of 2008 so fresh in traders' minds?
This type of alignment among investors in risky positions is precisely what the central economic planners at the Federal Reserve intended when, in response to the historic credit collapse, they commanded interest rates to zero and signaled that they would prop up all risky assets.
The profitability of an investment is simply its return on capital beyond the cost of that capital. It is against this spread that investors must assess risk. So when the Fed distorted the cost of capital following the 2008 collapse by lowering it for many by roughly 2% (to about 0% for banks), it had the same effect as the 2% higher aggregate dividend yield for stocks or higher credit spreads for investment grade bonds. Suddenly what was toxic looked cheap.
The Fed lured everyone to buy everything and anything that was risky—and did so itself with outright purchases of risky assets like mortgage-backed bonds. Anyone eager for easy profits fell right in line, bidding up dangerous assets like clockwork. Sensing safety in numbers, the herd quickly followed, and in no time the market had consumed the Fed's gifted 2% profit spread and then some.
All in all, it seemed like an impressively engineered recovery. In reality, it was an ephemeral illusion caused by distorting investors' assessment of risk. Despite what zero interest rates were signaling, savers flush with cash weren't flooding the capital markets and credit wasn't expanding.
The Fed has managed to align every little market fault right with each other such that they all succumb to the very same stresses at the very same time. Meanwhile—no surprise—the world remains a very seismically active place. What's extraordinary is that the Fed continues this intentional deception about the real cost of credit, even as we've repeatedly witnessed the consequences of this policy.
Left alone, the market works naturally, with waves of buy-order ruptures and waves of sell-order ruptures. Sometimes mini-ruptures coincide to form much larger ones, such as on May 6. But searching for a discrete trigger for such events is futile. To find the real source of the system's excessive fragility, the regulators will need to look much closer to home.
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Who is the CME's biggest customer for 100.
Navinder Singh Sarao
/sarc
Hillary Clinton (cattle futures extraordinaire)?
I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com
I make twice that just working 3 hours a day. I empty waste baskets and turn up my hearing aids. I work at Gold Sacks. I want to make it clear I'm only joking, I sure don't want an insider trading charge to hit me.
Do ya mean in terms of Christians, Jews, or Muslims ?
From the perspective of labor, there is no difference between IBM, Apple, Google or the AMA. They all seek something for nothing in the short term, at the expense of the long term, and, sooner or later, the long term becomes the short term, regardless of M&A, Nation or State. The computers have taken over the markets, resulting only in RE inflation, falling living standards, discharge through a short, surprise, and the critters are killing each other.
Empire is not true power. It is merely reactive power. If the election were held today, Hillary would win in a landslide, despite all the noise to the contrary, from those who would vote for her, Herd Misdirection 101.
Does it really matter who wins the white house? The President doesn't even call the shots.
Well except for whom the drone buzzes.
Prices should just be fixed. At least it would be honest, rather than this professional wrestling style contrivance.
We should devise a new system where people in brightly colored jackets and 5 o'clock shadows stand in a little hole in the floor, shouting and waving their arms at each other.
. . and WHO are the Federal Reserve?
Hang ALL these FUCKERS!!!!!!!!!!!!!!!!!
Slightly off-topic, but, today China was in the news because there was rife speculation that their gold holdings may be triple what was officially declared. Now, we ZHers already knew this was a real possibility, but what made this interesting was that this was reported by the MSM.
So why did gold get slammed today? There's a possibility that there may be more gold off the market than previously thought and the price went down.
Now I know what you're going to say "But Chuck, you know it's the COMEX dumping tons of paper contracts onto the market". How is THAT manipulation not receiving any attention?
Answer: Banksters lost money on the flash crash.
Just remember it's going to be the evil computers fault, never mind the people who actually created the programming. We are on a way way trip through hell and the roller coaster ride is just starting.....
Check the lap belts twice. It is going to be a nasty ride.
QE distorted the meaning of any financial Darwinism correcting a free market.
"I know, let's allow banks to become investment banks, repeal Glass-Steagall, get rid of human traders, allow securities and default swaps that are bets on bets on bets, then get co-located algo computers into the exchanges, a revolving door at impotent regulatory agencies, and have the FED force pensions and defined benefit plans to chase yield in equities with ZIRP while juicing investment banks with free money to gamble with."
"Brilliant plan Mortimer."
I see you have been paying attention, EB.
“The Federal Reserve remains the largest market manipulator ever, and the desperate yield-chasing, hair-trigger markets that it created were the primary cause of that crash and the inevitable ones yet to come.”
Where's the EU, to sue for Market Monopoly? Gas pipeline monopoly? Really? Gas is something you actually NEED, you EU bum-fuckers. Paper chits from the Fed, out of thin fucking air, is NOT something you need.
Hey Europeans, hang the Eurocrats! Mussolini style. I'll help from here: PPV. Come to think of it, I'd do a Pay Per View for the same in DC or NY.
yeah, so?
Heres an idea, make a market that works like crypto coins two order books a buy and a sell.
Done, if you dont have any shares to sell, you cant sell or borrow to sell, if you dont have any money to buy you cant buy.
If there is no supply to buy you cant buy.
For an individual like myself who has no meaningful influence in the decisions made by FASB, the Federal Reserve, Congress, etc., the only valid option I had was to pull all my money out of the markets and invest it elsewhere.
The short-term opportunity cost for that decision was high. I could have doubled the money and then some since 2009. But to me the principle of free, fair, and unfettered markets was more important, and I don't regret my decision at all.
Unfortunately, not enough individuals chose to act like I did. Everyone left made lots of money, everyone has stayed out of jail, and everyone is content to have the Federal Reserve kill-off natural market forces that create and sustain efficient and effective markets.
All I can say for now is that I'm very secure, sleep very well, and have a certain intuition that many on the inside aren't in that same situation.
Exposed: The Real Market Manipulator Behind The Flash CrashHint: An exceedingly evil tribe of hooked nose, cowardly manipulators who control big finance and the media. They also whine about non-events that happened 70 or so years ago!
to complete your Savonarole depiction of tribal evil don't forget their circumcised dicks...!
You belong to that other breed...you whine as much about what happened after what happened seventy years ago!
You know how Savonarole ended?
The arrest of this guy is a joke. It is an insult to intelligence of tens of millions of rational, thinking people.
The markets now, all markets with their prices, numbers and indexes are engaged in pure financial propaganda, not worth to even mention as they are just incoherent utterances of a psychotic aimed to create shock, confusion or reaction against our own vital interests.
The "wealth" supposedly created through these contortions wrongly called market activities, is an illusion so is fiat money. It only power comes from millions of gullible people believing or terrorized to believe that any of it has any value whatsoever. It is like mass hysteria. Only when most believe it it "is" happening.
Unfortunately trying to wake up people from their torpor could be dangerous or fatal since they will respond with aggression like any patient with serious mental illness. Sadly some of our love ones are such people making any fundamental changes in perception of money and what's going on in economy more of moral dilemma.
The honest look at myth of money and power and its role in development of civilization, through historical perspective I found at:
https://contrarianopinion.wordpress.com/2015/04/14/plutus-and-the-myth-o...
“The Federal Reserve remains the largest market manipulator ever," BECAUSE it has the greatest legal power to create the global reserve currency out of nothing. Flash crashes are the electronic automation of the FACTS that the entire political economy is based upon ENFORCING FRAUDS. Of course, the vast majority of people want to stay within the view that the economic systems are supposed to be based upon production, while actually the production of destruction controls production.
The morality that pretends to dominate the economic system is the morality of the people who are the productive prey of the predatory parasites. That kind of social pyramid system has conquered the whole world. "To find the real source of the system's excessive fragility," one should look at the ROOT CONTRADICTION that being able to ENFORCE FRAUDS never stops those frauds from being false.
The essential problem is that human beings operate as entropic pumps of energy flows, which means that human civilizations necessarily operate according to the principles and methods of organized crime. That is presented by the biggest bullies in the most backward ways possible. Therefore, the biggest gangsters, the banksters, are able to promote their bullshit that for them to make the public "money" supply out of nothing is productive. However, those are the actions of predatory parasites, that are thereby feeding off of those who are living as the productive people who are the prey.
By and large, it is IMPOSSIBLE to have any rational public debates about the political economy, since it is almost totally dominated by ENFORCED FRAUDS, which are surrounded by almost nothing but controlled opposition groups. The controlled opposition wants to continue to operate within the false fundamental dichotomies of production versus destruction, which then leads to promoting the impossible ideals that the political economy ought to be solely based on productivity. The banksters, as the biggest bullies, have been able to beat almost everyone else into submission, to parrot their HUGE LIES regarding the acceptance of their bullshit world view, which is as backward as it can possibly be.
Regulators will NEVER look much closer to home, because that would take them recognizing that all private property is based on backing up claims with coercions, while the most abstract form of that was that money is measurement backed by murder, because the debt controls are backed by the death controls. IF one was to really regulate the economy, one would regulate the production of destruction that controls production. However, those regulations are ACTUALLY done through the maximum possible deceits and frauds about themselves.
The ability to back up lies with violence became legalized lies, backed by legalized violence, in the form of MAD Money As Debt, backed by MAD Mutual Assured Destruction, as globalized systems of electronic frauds, backed by atomic bombs. That is the context in which High Frequency Trading could drive Flash Crashes. We are operating through fundamentally fraudulent financial account systems, which have merely applied electronic technologies to do that more than ever, faster than ever ... Meanwhile, the few that somewhat understand that, only superficially do, because they still then tend to collapse back to the original backward bullshit views which deliberately ignore the necessary ways that the production of destruction controls production.
The pyramidion people at the top of the social pyramids based on ENFORCED FRAUDS, appear in public as "Wolves in Sheep's Clothing." Their long history of being able to back deceits with destruction, and enforce frauds, has resulted in there being almost nothing surrounding them but controlled opposition groups, that spout the same bullshit view of the world, which deliberately ignores that the production of destruction controls production.
The actually existing situation is due to the dynamic equilibria between different systems of organized lies operating robberies. What has emerged through those processes are that governments are the biggest forms of organized crime, controlled by the best organized gang of criminals, the banksters. However, instead of understanding that more deeply, what mostly continues to transpire is that the controlled opposition groups to that core of organized crime STILL promote the bogus moralities of the productive prey people, who were taught to do that by the biggest bullies in the first place (who were the dominant predatory parasites.)
It SHOULD be obvious that WE OUGHT to understand political economy as manifestations of the evolutionary ecologies of general energy systems. However, what is not so obvious is that the social successes of those systems of ENFORCED FRAUDS depend upon the vast majority of people not understanding that, because they have been conditioned to not want to understand that ... While economic productivity is actually controlled by destruction, the vast majority of people want to continue to embrace the moralities that worked for the productive prey, which moralities are also those publicly promoted by the predatory parasites. Ironically, therefore, the actual situation is that money is measurement backed by murder, while those facts are as deliberately ignored and denied, as much as possible. (Which attitudes of evil deliberate ignorance were built into the basic structure of the dominate natural languages and philosophy of science)
" ... think of all of these investors together in a big herd."
BUT, which kind of herd, that of the herbivores, or that of the carnivores? The ironic tragedy of the human cultural systems of artificial selection within social pyramid systems are that those are based on the maximum possible bullshit about themselves. The prolonged history of the wolves in sheep's clothing, teaching the sheep to bleat their morality, has resulted in there now being almost nothing but a core of organized crime, surrounded by controlled opposition groups.
The basic facts that the death controls are NECESSARILY central to everything else means that the most important regulations are necessarily the regulation of the death controls. However, since the actual history of the human murder systems has developed militarism whose social successes were based upon the maximum possible deceits and treacheries, so too, the political economy is based upon the maximum possible ENFORCED FRAUDS, whose fundamental nature is as deliberately ignored and denied, as much as possible, by almost everyone. Indeed, that includes the controlled opposition groups, just as much as the those operating the established systems, because the controlled opposition continues to present the morality of the productive prey as being the most valid morality.
Hence, those few who recognize that the Federal Reserve Board is the American King of Fraud, tend to then want to promote bogus "solutions" whereby it will no longer be the case that the production of destruction controls production. Therefore, the problems automatically get worse, faster, without any publicly significant groups who propose genuinely better resolutions of those problems, since the only such genuine resolutions must necessarily be based upon better death control systems, because those were always the ways that the economic productivity was actually regulated.
The history of successfully backing up deceits with destruction, morphing into enforcing frauds, was always the foundation of human systems, which were necessarily operating according to the principles and methods of organized crime, because that is the way that general energy systems must have operated, as demonstrated over, and over, and over again, by the evolutionary emergence of ecological systems, in which different species filled the niches of the productive prey, or the predatory parasites. Human civilizations have necessarily done the same things, through cultural systems of artificial selection, in which different specialized groups of human beings developed culturally (& somewhat genetically) to act like the different groups of productive prey, and predatory parasites, inside of the overall political economy, within the overall human ecology.
However, along the way, the tragic ironies developed that those systems of artificial selection became the most socially successful by becoming the most successfully deceitful and fraudulent. Therefore, those who were the best at being predatory parasites were able to control their opposition to promote the false fundamental dichotomies and impossible ideals of the morality of the productive prey. Hence, metaphorically speaking, the controlled opposition to the fundamentally fraudulent financial accounting systems (in which banksters like the Federal Reserve Board are actually the American King of Fraud, that dominates the rest of the world to the degree that the American Dollar dominated the rest of the world), stays within the frame of reference that the economy should be based on production, while that should not be controlled by destruction.
Overall, to simply the situation, the wolves in sheep's clothing are controlled the real economy. Meanwhile, the controlled opposition to that triumphant system of organized crime promote the bogus "solutions" that "everyone should become better sheep." However, the only actually better resolutions of the real problems would require that "everyone should become better wolves."
OF COURSE, WHAT THAT MEANS IS THAT EVERYONE SHOULD UNDERSTAND THE OVERALL POLITICAL ECONOMY INSIDE OF THE OVERALL HUMAN ECOLOGY. However, almost everyone continues to be fixated upon and attached to their own little keyhole view of those systems, depending upon their niches within those overall systems. The ruling classes do not want those they rule over to understand the overall systems any better. Moreover, the controlled opposition groups within those who are ruled over also want to continue to promote the moralities of the productive prey as being the ideals that ought to provide the "solutions" to the problems that the ruling classes actually operate as predatory parasites.
& NEITHER WANT TO TRANSCEND
THEIR OWN FRAMES OF REFERENCE.