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XMFSinchiruna (27.46)

The Ponzi Market Explains the Flash Crash

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July 15, 2010 – Comments (8) | RELATED TICKERS: LIA.DL , CHT , STL

Although he doesn't specifically address the flash crash, Dan Norcini's insightful commentary on the unsavory structure of today's equity markets speaks volumes on the source of such an event and further events to follow.

Here is a perfect example of what has gone wrong with our financial markets and why they are becoming irreparably destroyed as an indicator of true value. As I have said repeatedly, the influx of hedge fund money under the control of black box algorithms instead of providing liquidity as they falsely claim is actually working to undermine the integrity of our financial markets.

We no longer have a venue where buyers and sellers meet to determine “value” but rather where computers push prices in attempts to generate price movement so that they can create profits out of that movement based on their ability to fire off a series of rapid fire Buy or Sell orders. This has absolutely nothing to do with balancing the forces of supply and demand and everything to do with separating the investing or trading public from their capital who are the minnows swimming in this sea of unethical and unprincipled sharks.

Trader Dan

High-Speed Washing Under Scrutiny In Futures Mkt
Wed Jul 14 14:54:43 2010 EDT

1854 GMT [Dow Jones] Regulators are trying to get a handle on how to make sure electronic trading firms aren’t trading with themselves. At CFTC roundtable on market technology issues, FIA officials warn that trading firms running multiple algorithms sometimes end up unintentionally hitting their own orders, and while exchanges like CME Group (CME) and IntercontinentalExchange (ICE) have made efforts to identify such issues, it’s an ongoing process. Rules around wash trades — riskless transactions that are prohibited in US mkts — may have to be clarified, according to FIA.

 

Also, see my July 2009 post on the inherent inequality of the equity marketplace since the introduction of sophisticated, high-speed computerized trading platforms.

http://caps.fool.com/Blogs/foolish-traders-versus-21st/223140

And my May 2010 post on the flash crash:

http://caps.fool.com/Blogs/now-suddenly-everyone-wants-to/387264

 

You want to talk financial reform? It doesn't even begin until algorithm-led supercomputers are systematically extracted from trading activity. How about ensuring that our equity markets actually function as a pricing mechanism? Wouldn't THAT be nice!?!

Not to mention the massive overhaul of accounting standards required to place the interests of shareholders ahead of those of the corporation:

http://caps.fool.com/Blogs/here-comes-the-flood-of-lies/418911

 

The gold price action this morning and yesterday morning are a pair of identical twins. Strong movement into the market open above $1,215, followed by a telltale abrupt sell-off dropping prices back beneath $1,210. Theses are not huge moves, but honest regulators will be the first to tell you that identical intraday trading patterns are the surest signs of a manipulated market. Those who follow gold and silver's price moves on a daily basis as I have for the past 5+ years will no doubt be well versed in these recognizeable intraday patterns that are the unmistakable signatures of the unscrupulous, price-suppressing bullion banks.

 

Lies, obfuscation, fraud, manipulation, malfeasance, and opacity are present in every corner of this investment landscape: Governments, financial behemoths, corporations, hedge funds, media, etc. Under the circumstances, the odds of success are stacked against the retail investor to a completely unacceptable degree ... and incredibly I encounter very little outrage among investors ... or perhaps it's merely a viral apathy.

The whole situation leaves a nasty taste in my mouth. I hope wisdom and fairness will once again prevail in this country/world ... they each appear to be in limited supply at the moment.

 

 

8 Comments – Post Your Own

#1) On July 15, 2010 at 10:47 AM, russiangambit (29.27) wrote:

"but rather where computers push prices in attempts to generate price movement so that they can create profits out of that movement based on their ability to fire off a series of rapid fire Buy or Sell orders."

You know what this activity reminds me of - warfare. False maneuvres here and there, aimed at distracting and confusing the enemy that would lead to a mistake fromt he enemy so that it can be destriyed. This is what our stock market is - us vs. them. Do whatever it takes to get the guy on the other side to make mistake and get his/ her money. And one side is much more sophistaicted, withmuch mor resources than the other. No wonder retail guys are scared of teh stock market. It is already starting to look like shark-infested ocean where sharks are forced to eat sharks because there isnt't enougth other fish left.

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#2) On July 15, 2010 at 11:01 AM, outoffocus (22.85) wrote:

Lies, obfuscation, fraud, manipulation, malfeasance, and opacity are present in every corner of this investment landscape: Governments, financial behemoths, corporations, hedge funds, media, etc. Under the circumstances, the odds of success are stacked against the retail investor to a completely unacceptable degree ... and incredibly I encounter very little outrage among investors ... or perhaps it's merely a viral apathy.

The fraud is so rampant and blantant, that people don't want to believe its that bad.  You know things are bad when the truth sounds like a crazy conspiracy theory.  People are not longer dismissing wild theories, they are dismissing the truth. Probably because the truth is too difficult to deal with.

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#3) On July 15, 2010 at 11:15 AM, alstry (35.36) wrote:

It is amazing....and people are looking at history to try to compare to the present?

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#4) On July 15, 2010 at 5:55 PM, dinodelaurentis (72.76) wrote:

You know what this activity reminds me of - warfare. False maneuvres here and there, aimed at distracting and confusing the enemy that would lead to a mistake fromt he enemy so that it can be destriyed. This is what our stock market is - us vs. them. Do whatever it takes to get the guy on the other side to make mistake and get his/ her money. And one side is much more sophistaicted, withmuch mor resources than the other. No wonder retail guys are scared of teh stock market. It is already starting to look like shark-infested ocean where sharks are forced to eat sharks because there isnt't enougth other fish left.

 This is it.

Russiangambit has hit it squarely on the head.

Not saber rattling, this is an opening salvo (or positioning if you will) between the real superpowers, corporations and their allies, goverments. A war fought in secret but just as dangerous all the same.

Capital is being annexed. Openings prepared. Weaknesses studied and plotted out. Nobody wants to burn down the factory so they knife fight in the darkness with electronic assassins.

What is the truth that lies at the heart of violence?

Complete and utter destruction of your enemy.

Who is your enemy? Which side do you play for?

What choice do you have in this?

Think about being prepared.

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#5) On July 15, 2010 at 5:56 PM, spellsly (71.30) wrote:

The gold price can be manipulated because there is only a trillion dollars or so worth of bullion in the world, or about 1/14 of US debt, or about 11 months of exports of the world's largest exporter (Germany), or about 18 HOURS turnover of the forex market.

If algorithms could predict the future, then all the computers would come to the same conclusion at the same time. 

 

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#6) On July 15, 2010 at 6:00 PM, ragedmaximus (< 20) wrote:

oh our govt and sec are so honest with joe loser taxpayer,now they wanna save us ha what a joke its election time and the country is about to have a revolution thats the only reason they just wanna keep whos who in there now after november its back to who gives a duck! quack quack

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#7) On July 15, 2010 at 8:02 PM, starbucks4ever (97.42) wrote:

Yes, russiangambit has defined it perfectly.

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#8) On July 15, 2010 at 9:08 PM, Tastylunch (29.26) wrote:

as usual russiangambit speaks the truth

 

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