Why The Market Is Slowly Dying

Tyler Durden's picture

Three years ago, when virtually nobody had yet heard of High Frequency Trading, Zero Hedge wrote "The Incredibly Shrinking Market Liquidity, Or The Upcoming Black Swan Of Black Swans" in which we asked "what happens in a world where the very core of the capital markets system is gradually deleveraging to a point where maintaining a liquid and orderly market becomes impossible: large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades?" Subsequent to this, our observation was proved right on both an acute (the May 6, 2010 Flash Crash), and chronic (the nearly 50% collapse in average daily volumes since the 2008 top) secular basis. And while we are not happy to have been proven correct in this particular forecast, as it ultimately means the days of equity capital markets in their current configuration are numbered, we now note that none other than Morgan Stanley's Quantitative and Derivative Strategies released a note which, with a three year delay, effectively predicts the end of capital markets in a world where every declining retail participation (another topic we have been hammering for the past 3 years as it is only the most natural response to a world in which not only equities are openly manipulated by central banks, but in which perpetrators for massive market disturabances are neither identified nor prosecuted) is replaced by artificial high frequency trading churn, which never was and never will be a true liquidity provider on a long-term basis.

To wit from Morgan Stanley: "In our mind, many of the approaches to algorithmic execution were developed in an environment that is substantially, structurally different from today’s environment. In particular, the early part of the last decade saw households as significant natural liquidity providers as they sold their single stock positions over time to exchange them for institutionally managed products... While the time horizon over which liquidity is provided can range from microseconds to months, it is particularly shorter-term liquidity provisioning that has become more common." Translation: as retail investors retrench more and more, which they will due to previously discussed secular themes as well as demographics, and HFT becomes and ever more dominant force, which it has no choice but to, liquidity and investment horizons will get ever shorter and shorter and shorter, until eventually by simple limit expansion, they hit zero, or some investing singularity, for those who are thought experiment inclined. That is when the currently unsustainable course of market de-evolution will, to use a symbolic 100 year anniversary allegory, finally hit the iceberg head one one final time.

How does Morgan Stanley frame their analysis? First, MS notes the ever increasing ownership of the stock market by big institutions, as retail investors took a back seat to investment allocation decisions, a secular theme until 2008, which however has subsequently plateaued:

Asset management has become increasingly institutionalized over the years. Individuals have outsourced their wealth management to institutions, whether pension funds, insurance companies or investment advisors. These, in turn, invest mostly in institutionally managed products such as mutual funds, ETFs, or long/short vehicles. The net result of this is that the vast majority of investable assets are held through institutionally managed vehicles. Exhibit 1 shows the evolution of ownership vehicles of corporate equity in the US. 37% of the USD 22tn of corporate equity is held by ‘Households and Nonprofits’ now, down from 50% at the turn of the century. This segment includes endowments and foundations, as well as on-shore hedge funds. Arguably, these should be counted as institutional investors as well. This means that direct household ownership of corporate equity is substantially below this figure.


For a universe of large-cap stocks4, Exhibit 4 shows the evolution of the percentage of ownership attributable to 13F filers and mutual funds since Dec 2001. This data corroborates Exhibit 1 on the increase in institutional ownership – on average, institutional ownership increased from 54% in March 2000 to 81% at the end of 2011.


Following the rapid growth of institutional asset management, however, the pace of increase in institutional ownership has slowed since 2008. We see this as one of the key drivers of the change in market structure and liquidity sourcing opportunities in recent years.

As more and more "equity capital" was concentrated into the hands of fewer and fewer people, the only logical outcome took place:

Trading decisions have become more concentrated as asset management has institutionalized. There are fewer decision makers (fund managers) now than in a world where management is dispersed across households. The size of their parent orders, on the other hand, has grown. The basic set up of the market – in terms of a continuous auction limit order book supplemented with ‘upstairs’ solutions –  has not changed. The details of the implementation have adjusted, of course – such as competition in execution venues, new order types,  and greater use of technology.


One of the most significant results of the tension between fewer market participants and larger parent order sizes is that the share of ‘real’ trading volume has declined by around 40% in the last five years. In Exhibit 5, we show the average proportion of quarterly trading volume that is attributable to changes in the 13f filings of each institution. We use this as our definition of ‘real’ trading volume. We also calculate the trading volume from our separate dataset of mutual fund holdings. We aggregate ‘buys’ (positive position changes) and ‘sells’  separately for each institution and mutual fund, on a per-stock basis, and calculate the average percentage of volume across stocks in our universe.

As a result, reports of the market's evaporating volume are not greatly exaggerated.

In our mind, these numbers constitute a lower bound on the amount of ‘real’ trading volume in the market (defined as the trading volume from market participants that hold assets for longer periods).


The share of real trading volume shows three distinct phases. From 2001 to 2006, institutional buys accounted for 27% of total trading volume on average, while sells accounted for 20%7. The asymmetry between buys and sells reflects the growth in the institutional share of ownership over the period (see Exhibit 4). From 2008 to 2011, we see a significantly lower share of trading volume – buys represent just 16%, and sells 13%, a drop in market share of almost 40%.


The 2007/2008 period represents a transition period, with a rapidly declining share of ‘real’ trading volume. This period coincided with rapidly increasing overall trading volume (Exhibit 6) – in 2006, the ADV was 4.8bn shares, while in 2008 it was 8.8bn shares. Volume has since declined again – YTD ADV is 6.9bn shares.

While it will not come as news to any of our regular readers, the disappearance of retail investors has meant the incursion of electronic trading in the form of relentless rise in HFT dominance.

Throughout the last decade, the share of institutional trading volume by each institution type has been remarkably constant (Exhibit 7). This means that the reduction in institutional share of overall trading volume between 2007 and 2008 was not due to a reduction in trading activity by any one institution type, but rather due to the introduction of a new type of trading volume.


A potential reason [for the drop in our measure of the share of ‘real’ institutional trading volume] is that institutional execution strategies have made liquidity more challenging to find. Concentration in assets under management has led to larger order sizes. One of the responses to this has been automation in execution strategies. The algorithms used tend to split parent orders into smaller child orders. As a result, we find that block trades, which made up around 30% of trading volume in 2003, accounted for just over 5% of trading volume in 2011 – see Exhibit 8. At the same time, the average trade size has fallen to around 250, from more than 1,000 back in 2003. Both data series are based on NYSE listed stocks.


Next Morgan Stanley explains precisely why the current market is no longer fit to deal with the existing roster of players, fit for a previous iteration of capital market topology such as that which prevailed when Reg-NMS was conceived, but certainly not the current one, especially if retail continues to withdraw from trading equities and invest its cash forcibly into that other terminally epic bubble - bonds.

In our mind, many of the approaches to algorithmic execution were developed in an environment that is substantially, structurally different from today’s environment. In particular, the early part of the last decade saw households as significant natural liquidity providers as they sold their single stock positions over time to exchange them for institutionally managed products. Adjusting the institutional execution strategy to capture this liquidity was a rational thing to do.


This institutionalization of asset management is mostly done by now, as we showed in Exhibit 4. As a result, execution strategies that were calibrated on the earlier market environment may no longer be optimal. The rise in trading volume since 2007 (when the growth in institutional ownership leveled off) reflects the growing challenges of sourcing liquidity. The way this has been resolved is through the introduction of more ‘market making’ activity in the form of liquidity provider trading.

Let's repeat that for the cheap seats: "As a result, execution strategies that were calibrated on the earlier market environment may no longer be optimal" and we could in theory just end it here. 

We all know that the bulk of HFTs close each day flat to avoid overnight holding risk, which they do by increasing churn amongst each other to unprecedented levels, in the process generating massive momentum swings as every player piggybacks on either side of the move. End result: even Moran Stanley admits that churn is not liquidity, and that the inability of HFT to carry inventory and have a longer-term bias is the fatal flaw in the current market topology, precisely as we warned back in April 2009!

The risk-carrying capacity of these providers is limited. If natural liquidity does not materialize, they may trade with another intraday liquidity provider to manage their inventory. This is particularly true if the institutional parent orders are larger and hence typically longer lasting.

From here, everything else follows:

Typical market-making liquidity provisioning strategies can be modeled as mean reversion strategies. If liquidity demand is persistently one-sided (such as in the case of large parent orders), it is rational to flatten the market maker position faster if the risk-carrying capacity is limited. In the absence of natural liquidity on the other side, this will often be through a trade with another intraday liquidity provider.  The net result is that the the amount of trading volume that is attributable to this segment of the market will increase.

Thus: lim investing time horizons approaches 0 as HFT ->  infinity

While the time horizon over which liquidity is provided can range from microseconds to months, it is particularly shorter-term liquidity provisioning that has become more common. This is partially a reflection of the changing nature of the default liquidity provider – ‘High-Frequency Trader’ is a commonly applied term.

Unfortunately, the "High Frequency Trader" is NOT, as explained, a liquidity provider in the conventional sense: it is an ultra-short time horizon churn facilitator and liquidity extractor (when the meager rebate for providing liquidity does not offset the capital holdings risk) and nothing else. Which is why just like the Fed has become the artificial lender of last resort in a regime that is unsustainable and where central banks are forced to grow their assets exponentially (as shown on Zero Hedge) just to preserve the flow so very needed to keep equities from collapsing, so HFT has become the artificial provider of fake liquidity.

The problem is that just like the half lives of central bank intervention, so the incremental benefits of ever greater HFT penetration are becoming less and less.

What happens next? Here Morgan Stanley, while trying to be diplomatically correct, comes to precisely our conclusion - trade while you can.

In our view, many of the changes in the market environment – such as the decline in trading volume – are secular. The trade from household direct share ownership to institutionally managed ownership has happened, removing one of the natural sources of liquidity. At  the same time, the micro-efficiency of the market in identifying and exploiting liquidity demand, exemplified by the growth in intraday liquidity provisioning strategies, is here to stay.


What are the implications for institutional execution strategies? The first implication is a re-evaluation of parent order sizing. Liquidity for institutional trades is now ultimately sourced from other institutions for the most part, rather than from households. The share of trading volume from these institutions has been falling by almost 40% over the last five years. This means that the amount of liquidity we can reasonably expect to source in the market should also fall by a similar amount. For example, we find that the upper limit of the percentage of ADV that can be traded in a VWAP-type strategy without undue price impact is typically around 4-5% now, versus 10-15% in the period before 2007.


The second implication is that execution strategies have to focus on maximizing the likelihood of being a liquidity provider. This has always been the objective of portfolio managers (‘Buy Low, Sell High’). Within the institutional asset management process, that has not always  been as central to the execution strategy. The assumption has been that liquidity will be available in the markets, and that the cost of demanding that liquidity (the market impact cost) was small relative to the alpha potential over time. As the composition of trading volume changes, this assumption has become more problematic. Having urgency constraints (e.g. having to finish a trade at a particular time)  becomes increasingly costly relative to the alpha potential.

Where Morgan Stanley stops short is the logical next question: what will detour this transition to a market driven by quantized incremental binary decision-making, aka RISK ON, RISK OFF, where with every passing day, we get greater and greater volatility shifts? The answer: nothing, unless of course, for some reason retail investors do come back, however with Lehman, the Flash Crash, MF Global, central planning, forced media propaganda telling everyone "it is a once in a lifetime opportunity to buy", even as markets in real terms are still down nearly 40% from 2000, retail has had enough of the rigged stock market casino.

Simply said: they are done.

Hence HFT will have no choice but to become a greater and greater role in equity trading, pardon, churning. Until one day, by logical extrapolation, only HFT is the marginal setter of prices, with no regard for value, logic or analysis, and a price-determining function set purely by historical precedent yet a precedent which will be no longer applicable in the least as the paradigm shift to a conceptually different "market" will have then happened. Or said otherwise: "large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades"... just as we predicted back in April 2009.

Just as simply said: with its advent, HFT sowed the seeds of its own self-cannibalization.

Which also goes back to another key concept, and arguably the biggest flaw in all of modern economics: it is never about the stock. It is all, and always has been, about the flow. Last week Goldman tacitly acknowledged it for the first time. Expect more and more economic hacks to follow suit.

The irony that ties it all together, is that if indeed for some reason retail investors do come back, and do pile their over $8.1 trillion in fungible money currently stored under the electronic cushion as we described in This Is Where "The Money" Really Is - Be Careful What You Wish For, which in turn would also unleash the titanic wall of money hidden behind the Shadow Banking dam wall (at last count about $35 trillion contained among the custodial holders of all securities why are quietly swept into the shadow banking system's re-re-rehypothecated pseudo asset pyramid and regulated by exactly nobody), which no conventional economic theories account for, yet which as Ben Bernanke this week, and Zero Hedge for the past 2 years, has been warning is the real catalyst of the (hyper) inflationary spark, then the Fed will be powerless to stop the biggest avalanche of empty artificially created fiat currency ones and zeros to ever hit the monetary system in the history of the world since Weimar. Only this time it will have the added benefit of HFT to accentuate every move imaginable as cash transitions from an inert form to an active, asset managed one.

But this is far beyond what one learns in Econ 101, which is why we will have to wait at least another 3 years before the Morgan Stanleys and all other bandwagon chasers of the world close the loop on what we are (and have been for a while) warning right now.

In the meantime, we are confident readers will enjoy the supreme irony: in their attempt to perpetuate the insolvent status quo farce, the central planners are now forced to choose between the terminal Scylla and Charybdis: a pyrrhic Schrödinger [alive|dead] market, or an even more pyrrhic Schrödinger [alive|dead] monetary regime.

We hope they choose wisely.

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These are the articles I live for.

Thanx Tyler

apberusdisvet's picture

For the umpteenth time, I will still stick to my prediction of a 1:1 Dow/gold ratio.  Bears or Bulls  each may have an epiphany; will it be at 4000 or 40,000?

Yen Cross's picture

Hopefully, I'll never witness that day? That would confirm North Koreas' "Ballistic Missile"  prowess!

dow2000's picture

Doesn't matter where it is if you're long gold / short equities, either way you're right

LowProfile's picture


In the meantime, we are confident readers will enjoy the supreme irony: in their attempt to perpetuate the insolvent status quo farce, the central planners are now forced to choose between the terminal Scylla and Charbydis: a pyrrhic Schrödinger [alive|dead] market, or an even more pyrrhic Schrödinger [alive|dead] monetary regime.


We hope they choose wisely.

I guess that means either they choose to save the currency, or they choose to save the system?

If so:  Then they will "save" the system.

resurger's picture

The system passed the rubicon

Libertarian777's picture

too bad the currency IS the system.

dow2000's picture

Spot on! That's why they can' t do shit about this mess, either way they lose...only question now is WHEN?

catch edge ghost's picture

When I read stuff like this, all I can think is it's part of the larger central plan and not unintended consequence. 

It's a price fixing scheme like everything else they've done. Once it is perfected, they'll be able to legislate mandatory savings without fear. That will mark the end of the Social Security system as you know it and you'll all become ETF buyers whether you wanted to or not.

People'sRepublicof CT's picture

In the 1980's Peter Steidlmayer and Kevin Koy wrote extensivelly about the need for healthy markets to have participation from short, medium, and longer term time frame players. The domination of the HFT of the short term time frame increased intra-day volatility as medium term (retail) and longer term (pesnion fund + mutual fund et al) sought the safety of cash since the Lehman defaut.  HF Short term traders trading only with other HF short term traders is the market's version of masturbation. 

valley chick's picture


But this is far beyond what one learns in Econ 101, which is why we will have to wait at least another 3 years before the Morgan Stanleys and all other bandwagon chasers of the world close the loop on what we are (and have been for a while) warning right now.


Another 3 years? 

ekm's picture

Future events can be predicted as far as the event is concerned. It's all a matter of willingness to be crudely realistic.

However, as to Timing of Events, this one belongs to theology. Unless one is a prophet (there are few hundreds of years we haven't heard of any), it's otherwise impossible. Remember Meredith Whitney?

It could happen tomorrow, it could happen 3 years from now. On a logic based on being crudely realistic, the longer it takes, the deeper the fall, hence the larger the payback. Patience and solvency become two extremely important factors, solvency being number 1.

slewie the pi-rat's picture

well, tyler is pure tyler here

from the intro:    "we now note that none other than Morgan S[a]tanley's Quantitative and Dreivative Strategies relaeased a note which, with a three year delay, effectively predicts the end of capital markets..."

thanks for your comment;  these are very 'similar' to the arguments tyler has been putting forth from DayOne

so, they are three years behind the zH curve, but are now on topic, for a fuking change;  so in three more years, you see...


toadold's picture

So information technology has given the central banking/central planned economy cabal the means to string out their three card monte game? However information technology is slowly showing the surviving punters that the game is rigged. So when the the crash comes it will be come even faster due to IT.

The Morgan Stanley report, it seems to me, is leaving out the possibility of outside swans disrupting things. The system gets more fragile with every passing day and my gut feeling is it won't last three more years.

Winston Churchill's picture

My gut tells me this year.

From September onwards,but maybe before.

Bring it on.

BidnessMan's picture

When hedge funds are worried about their servers being a couple of hundred yards further from the exchange than other servers - because their trades will lag by the speed of light times a couple of hundred yards -- it is blindingly obvious that no human being can compete.  Anyone who thinks a human can compete in an HFT world is a terminally naive sucker asking to be fleeced. There can't be enough idiot trust fund babies and trophy widows left to make a difference for much longer.  Anyone with enough money to make a difference surely has put their money with a hedge fund doing HFT already.  My gut says the implosion is months not years.    

Waterfallsparkles's picture

Stock prices trade at a price determined by whoever sets the price in the Computer for the day.  I know we all have watched a stock sell down sharply to be brought right back up within a very short time frame. 

I agree that prices are not set by a fair exchange between Buyers and Sellers but by what the big firms program in their computers for the day.  Like when they have a large order to Buy or Sell they will set the Computer to churn at a certain price, sometimes for days.  How can the markets be free markets when Computers control Trading and set prices where ever they may chose.

Or maybe program the Computer to ramp a stock price up for half the day so they can buy Puts cheep and then program the computer to sell the stock off in the afternoon so they can cash in on their Puts.  Or visa versa.

It is not natural for humans to be competing with Computers.  I know of no one that can compete with a Computer.  I remember John Najarian of Fast Money saying he broke his finger trying to trade with the Computers.

I think that most individuals can see that the market is rigged and they are not a part of the rigging they are just the target of the looting.

How Computers that can be programed to the whim of the Owner cannot be considered Market Manipulation is beyond my comprehension.  Yet, the SEC turns a blind eye as the Banks with their Computer Trading are able to Rob the public blind.

falak pema's picture

I said this since 2011, the editorial heading; the price of Reaganomics and its momentum now is the death of the free market; just as the Catholic God died in 1492, when Borgia became Pope and push went to shove. Reaganomics introduced that hubrisitic mantra of going the whole hog to AMerican hegemony, and there is no coming back. History repeats, the Dogma of market like Abrahamic God is now naked, victim of those who distorted the original message into something narcissistic and self-fulfilling-- greed is good! We've crossed a Rubicon, if you prefer Caesar to the Pope. 

Entropy achieved its final state of anarchistic, feudal, uber-alles 1% ideology, disguised as 'reason of state-God's word'. Choose your own definition of it. People's supreme interest, Founding Father's faith, now a sick joke, like the Evangelists of old under the Pope's shoes that everybody HAD to kiss. 

Now we need a Reformist who nails his 95 theses to the door of the capitalist church; today we call it the Market. Concomittantly we need those who are NOT there to reform the hegemonical church but who preach the humanist tradition of the Renaissance. We are there again in Western civilization and nothing can stop it...Pax Americana like the Catholic church has to go back stage. One terrible lesson of the past is that Men of God don't die easy, it will take the blood of the people to resuscitate the new european order of that age, renaissance led to enlightenment and revolution. The new world order of today; requires a brave new world that learns from the past, we stay the eternal optimists. 

Never say die, Michael Angelo and all the others built a new horizon... and, don't be scared of that carbon copy of Pope, the muslim Ayatollah/mufti clone, sterile reincarnation of a dead ideology that feeds the worms. Old hat. Socrates would kick their butts to kingdom come! 

GeneMarchbanks's picture

'Now we need a Reformist who nails his 95 theses to the door of the capitalist church; today we call it the Market. Concomittantly we need those who are NOT there to reform the hegemonical church but who preach the humanist tradition of the Renaissance.'

Humanists have had their chance many times past, failing more often than not ultimately. They, at best, can enlarge awareness unhypocritically while alive. Beyond that, they have no answers. A new mythology isn't needed to lure men forth, nor revolt. Take Kant's honest path forth... you can't make a mistake that way.

falak pema's picture

you reek of infallible german logic; good for you !

I stay humanist; logic and humanity make good bed fellows, ...for a week! Then its all downhill, c'est la vie! (the week is a time frame on the geological scale, not to be taken literally)

Entropy, hubris, illogical destiny, call it what you like, Sisyphus's legacy, is as good as anything else. Aphrodite's nipple! Would sum it up well!

GeneMarchbanks's picture

Always the same with you, isn't it? Clinging to 'logic' so much you strangle the very word. You're living in an ideological cul-de-sac, my dear Self-Taught Man. Come out soon, you'll suffocate in there.

falak pema's picture

show me the way sir! I'm all ears!

Always easier to criticise than to lead. I put my principles and my analysis on the line. Being a critic without having a constructive approach based on reality is not a reply.

Put your historical perspective of the issues and we'll see where you stand on :

Pax Americana, the future of capitalism, the future of energy conundrum, and the future of the european construct. 

That would be a beginning. I've made my case, right or wrong, its there in the archives of this blogsite. 

I'm not saying BTW to come up with the answer, I'm just saying come up with pertinent questions, based on past trends and what we've learnt from them. And, contrary to what you have said here repeatedly, the past is the best guide to understanding the future. Aristotle taught us that.  So its not all self-taught logic. And I'm not suffocating from it. 

and, here is a good guideline why sterile criticism is not a reply to real issus :

The Art of Being Right - Wikipedia, the free encyclopedia

GeneMarchbanks's picture

Sterile criticism? falak, I'm a critic of any and all who make the claim that:

'And, contrary to what you have said here repeatedly, the past is the best guide to understanding the future.'

because it's false. Philosophy, science and art have seen major shifts since Antiquity, I can only suggest you get yourself caught up. When you speak of 'history' what you mean is your version of history. The one you've read, the one you haven't read is apparently immaterial. You continue to be a sucker for Platonicity at your own peril.

That being said, you're right, it's too easy to be a critic. On a personal level I have nothing against you; I even enjoy some of your lyrical rants. Now, you want my version of the GUT? The grand solution(s) to the West's socioeconomic ills? I thought I laid it out very simply, I have no grand solution except my own personal one -- it is both particular and universal simultaneously -- ambiguous, like all things human far from a panacea that you seek.

Forget Pax-Anything. It's over in all but perception. Put away your history books, especially the European ones. The future of Heroism will be the avoidance of catastrophe; the negation of disaster prone action. Sadly, for essentialists like yourself, this new Heroism will go unnoticed, unseen since there won't be a crowd present to cheer.

ekm's picture

Wow. Great exchange.

Are each of you looking for disciples to teach?

GeneMarchbanks's picture

Only if they are Orthodox Albanian soccer players that reside in Canada.

ekm's picture


How about this one, that I live by:

The past is gone, the future hasn't happened yet, let's live God's day today.

falak pema's picture

No I read both sides of the argument to wit :

On the Crusades : there were three parties ; Crusaders, Moslems and Greeks. Also many sub splinter groups. I read them all and in my novels I analyse ALL their footprints on history.

On the Fight towards Secular culture in the Medieval age : I look both at those who said God wills it, they won, and those who said like Abelard, Arnaud de Brescia and Jan Hus, no church can survive where Pope is infallible and Dogma dominates reason. These guys lost until the Renaissance and reform. But they won from then on. Finding that thread and explaining it is history. Historical interpretation is trying to understand what happened knowing that human atavism makes people repeat the same errors in simiar situations. And it happens again and again.

I'm not a determinist, but I'm not a sophist or a cynic.

Understanding why PAx Americana is going where its going can be explained by one  limpid example of actuality :

The Pak -india Indus water treaty. It was on the point of being negotiated in 1956. It wasn't because the USA offered military aid and organised a coup to follow up in 1957, to Pakistan; in keeping with JF Dulles's mantra of 'roll back' which meant he was gunning for all third world leaders who sat on the Bandung 'third world' fence; aka J Nehru. He scuttled the deal then to destabilise Nehru. He didnt succeed as in Indonesia, Iran , and his successors elsewhere.

That is Pax Americana legacy at work on a specific detail. As world leaders they have hundreds of such details in their sixty year history as top dogs.  If you understand that mindset you understand how it will play out to the end. 'Cos the mind set has not changed; since NWO days of 1991 it has gotten worse.  Just look at what military Pakistan has morphed into since 1956, and its spilt over into Afgh; and it will fester for a long time.  And the way out is EXACTLY what happened in the middle ages of Europe. People from within will have to kick the butts of these obscurantists who are today playing in the eyes of local popuation; thanks to Pax Americana hubris and criminality; as the PATRIOTS; like Ho chi minh's forces in Vietnam! The US learnt nothing there! 

That's just an example of history repeat; of divide and rule and the cancer of Hubris. I don't have my head up my ass when I say look back and you'll see whats up ahead. Human nature is quite simple; and it conditions all human power play.

The house of Atreus rules today in Greece as it has for three thousand years; the irony and tragedy of greek history. They gave us modern man.

Yen Cross's picture

 Great tune/ Scorpions " Love Drive" ...  Merkel to Sarkozy!

  I love the Germans!

Goldtoothchimp09's picture

It all comes down to this -- the MYTH -- that HFT as marketmakers provide liquidity -- they are liquidity TAKERS.  It really is that simple.

HFT frontruns orders and liquidity flows.  FUCKING PARASITES nothing less.

Just another 'banker's tax' to the real producers and economic participants of the world.  

barroter's picture

Agreed. Bankers and their ilk are scum.

Joebloinvestor's picture

Flash crash can't be explained.

MFG can't be explained.

JPM and manipulation charges.

Bonuses for fabrications.

Inept "guardians", SEC, FINRA, CFTC, CME, to name a few.

And they wonder why the market interest in on the wane.

mendigo's picture

Greetings fellow bag-head.
Excellent points.
The question should be why play this market.

Omen IV's picture

"Bonuses for fabrication" .... the only place  USA real estate is being bid up to "auction status" with multiple bids is - Manhattan and Brooklyn - what does that tell you?

mendigo's picture

Capital markets:
Insider Info
No Accountability
No intrinsic value
Creative accounting
No dividends
Over valued
Fake regulation

but I guess liquidity is a concern.

ekm's picture

I strongly recommend ZH to add a feature of "saving articles" for future multiple reading.

This one is so fantastic, particularly if associated with the Flow article few days ago. It is mandatory to re-read this one at least 7 times.

I have a two word description for what's happening: LIQUIDITY CURSE!


Yen Cross's picture

Air Conditioning is my 'M<antra!Hence Liquidity is lacking flow.   Sideways into may.> then KAA- BOOM!

ekm's picture


Are you sure about May? Which prophet did you consult with?

If it's one these 10, you may be right. Let me know.

Yen Cross's picture

Really simple. people take vacations. May day/ Memorial day/ 4th of July...ect

ekm's picture

Well, if you're taking the whole week off for the 4th of July, you may want to combine it with this one.



Yen Cross's picture


jomama's picture

my bookmarks are full of ZH articles ._.

earleflorida's picture

the financial universe of the past reminds me of a theoretical 'white hole', while the present universe [financial] portrays a massive 'black hole'. why these analogies to physics is relevant now - simply to quantify einstein's theory of 'relativity', applicable to just about any logical,rational explanation of what's happening today in our infinite universe [finite financial hft?].

hear me out,... a black hole is nothing more than a colossal vacuum cleaner [what turns them on/off is still a mystery?] present in all galaxies, and abundant in our ever expanding universe as long as there are stars to implode [hft?]? its main functions is to suck up excess mass [money?] so as to feed the ever expanding universe dark [pol of money?] energy, that creates mass [lets forget about time for its not relevant?]. this energy-loophole [wormhole / money?] finds itself back in the past re-energizing the ever expanding [financial?] future [?] universe.

but, unfortunately as the universe keeps expanding, mass becomes more obsolete, or simply irrelevant, as gravity and space/time are so far into the future [hft's evolution?] having had the universe expanding exponentially that 'black [corrections?] holes' become almost non-existent? no mass, but a whole lot of dark energy, means that the universe will eventually burn itself out as our known [financial/hft?] universe is void of energy *{e=mc2}* [money?]. oh, the horror! thus, the financial universe collapses into a big bang [wwiii], or something like that??? 

like our financial markets, the physical universe is a large elastic band that has strict laws / parameters, that must be acknowledged - like it or not?

Ps. couldn't help writing this whack`d-out hypothesis ;-()-   http://en.wikipedia.org/wiki/White_hole

mrdenis's picture

Thanks to the man whos name bears the pharase  ...the MARKET HAS BEEN CORZINED !

orangegeek's picture

Cash is king.  The USD is the global currency.  If gold replaces this, owning gold won't be your problem - think Mad Max scenario.  Gold is just another metal that  has a USD price attached to it - like silver and copper.


If you have to eat, you won't be taking your gold to the grocery store to buy bread.  Likely because the store will be looted and on fire.


So these HFT houses control the show and day trade - fair enough - message here - avoid day trading and stick to daily charts and trends.  Day trading can include some wild a$$ swings.  But the day charts rarely do.


Have a look for yourself:  http://bullandbearmash.com/index/djia/daily/                http://bullandbearmash.com/index/sp-500/daily/


chinaboy's picture

Did dinosars extinct with ice age? If so, we are looking at dinosars and fear of upcoming ice age of equity market.

the 300000000th percent's picture

Soon there will nobody in the casino, nobody to play uncle Ben's slot machines. They are moving the casino to Asia. Just like a roaming carnival.

Weisbrot's picture

This site seems to be a good place to bounce around the "what if" questions.

I make this statement as most of what I read here lately seems to either be decades ahead of its time or fantasy.

Only Madlibs could be more entertaining. Thank You All for the stories intertwined with just enough bits of iformation to make so much of what I have read on this site, to seem not only plausible, but real.



bluebare's picture

I can't wait until they're gone.  Only then can we start rebuilding the broken country they're leaving us.