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High-Frequency Traders Are the Ultimate Hackers, Says Mark Cuban
An anonymous reader writes "Billionaire Mark Cuban talks in an interview with the Wall Street Journal about how he thinks high-frequency trading can be quite damaging to stock markets. He goes so far as to call high-frequency traders the 'ultimate hackers.' He says, 'They're running software programs that have one goal, and that's to exploit the trading systems as early and often as possible. As someone who wrote software for eight years and who keeps up very closely with the technology world, that scared the hell out of me. The only certainty in the software world is that there is no such thing as bug-free software. When software programs are trying to outsmart other software programs and hack the world's trading platforms, that is a recipe for disaster. ... How many times an hour are there failures across individual equities around the world because of software running algorithms battling each other for supremacy to make a profitable trade? We have no idea. It's not a question of if or when we have meltdowns, it's just a question of how big and where. It's straight out of War Games. And that's before we even get to the possibility of nefarious or sovereign hackers getting involved.'"
This is insulting to hackers.
Mark is currently trending because of the way that he handled ESPN analyst Skip Bayless last week, on live tv. He completely owned.
http://www.youtube.com/watch?v=hv2jqFd2-qI
All trading should be required to be at the hand of a human. No trade should be able to be reversed (buy/sell) in under a minute (if not more).
"National Security is the chief cause of national insecurity." - Celine's First Law
it is pure, unrestrained capitalism. What could possibly go wrong?
The real question here is; just how far can we stretch the definition of the word "hacker."
Basically, he's saying that it's exactly the same thing to use a KeyGen as to write one.
MANY people have complained about program trading before with far better credentials than Mark, yet it's suddenly news because he whines about it? It took him 10+ years to figure this out, or did he take some serious losses and it just whining about losing (something else)?
"But we decide which is right, and which is an illusion"
People like to complain about algo trading and HFT without suggesting how they'd improve it.
Technology and money! Scary!
It is an open market. People use computers to participate now. There are very tricky engineering and social problems involved, but I really don't see anyone suggesting a better way to do things. If a bank needs to exchange dollars for Euros, what should they do? Call someone on the phone because they're afraid of competing in an electronic market?
The HFT programs would slow down a lot if it cost them, say, one cent per share traded. That would not be a burden to average investors, or even the super wealthy, but it dampens the enthusiasm for shifting millions of shares a day to skim tiny fractions.
that they do what is intended to do is pretty scary already.
HF traders in general aren't searching for 'glitches,' but mispricing opportunities. HF traders take the risk of warehousing their views on prices, while providing liquidity and the rest of the world takes full advantage. We often mud-wrestle for less than a penny per share, while being villified for being the downfall of modern economies. In truth, you should be pointing the stinky finger of blame at the institutions making the 'macro' decisions, those with the power to manipulate economies, governments and coporations on a larger scale...
Who wants to eat some astroturf?
just what it needs - a total meltdown of the system, so something else can happen.
It's anti-free market for sure. They're skimming off the system without contributing a damn thing and adding inefficiency and misinformation into the markets. It shouldn't be illegal, but congress should enact a transaction tax on trades that is just big enough to make HFT not worthwhile.
You know, there's a reason why trading servers are still in the borough of Bank in London, on Manhattan island in New York, connected to newly laid fibre optic cable in Sydney etc. And it's not cheap real estate/labour costs. It's the speed of light. Seriously. Sub ms counts in this game.
Science advances one funeral at a time- Max Planck
"If a bank needs to exchange dollars for Euros, what should they do? Call someone on the phone because they're afraid of competing in an electronic market?"
Getting a current exchange rate -- or making an exchange, for that matter -- are not the same things as HFT. Both are quite possible without any HFT at all.
"it is pure, unrestrained capitalism. What could possibly go wrong?"
It is nothing of the sort. Capitalism is a means of producing things. Wall Street produces nothing.
Wall Street isn't "capitalism". It's a government-endorsed casino. There's a pretty big difference.
It's commonly argued that HFT lowers transaction costs overall, presumably that's not such a simpl question, but ..
There are definitely rich people who make a lot less money now that HFT lowers *some* transaction costs. It's therefore worth picking apart the messenger's credentials a bit.
And the SEC, Obama, congress, etc. would actually regulate Wall St. if their lives depended upon it. Instead, they'd simply pass laws making HFT hard for smaller outfits, while granting Goldman-Sacks and Morgan-Stanly increased HFT.
The Christian religion has been and still is the principal enemy of moral progress in the world. -- Bertrand Russell
This just confirms my long-standing suspicion that Mark Cuban is a seriously smart dude.
I have a simple and easy solution.
Ban HFT and algorithmic trading.
problem solved.
If it were coming from anyone else, I might actually pay attention, but coming from Mark Cuban is like hearing Santa talk about Super Computers.
"My immediate reaction is "WTF? What kind of moron doesn't make things 64-bit safe to begin with?" Linus
They can wait about five seconds. Really. That's all it would take to eliminate this problem. A batching system with five-second intervals.
I chatted with some guys on an FPGA forum about this. They were convinced that HFT was good, as it increased the liquidity of the market.
I ran the line that it's bad, as it exploits that over the short term all players in the market do not have complete information on the state of the market, and is therefore a highly sophisticated form of insider trading.
In truth it it is just a mechanism to suck wealth away from those who actually create it (or invest in stocks of companies that create wealth), and does more harm than good.
Much like spam mail, HFT would cease to be an issue if a transaction came with even a tiny overhead. (And in both cases, I doubt it'll ever happen.)
The easiest fix would be to stop the roll-backs when they fuck up. Let a few of them go broke instead of "oh I didn't really mean that, can I have a do-over?" and the rest might have a bit more caution.
Or remove the ability to post a bid then remove it before it can be actioned. Make any bid stand for a minimum time before it can be withdrawn. 10 seconds would be long enough.
On the downside, if you fix it, you don't get all the fancy new superfast internet links.
I'm guessing that wasn't on their radar screen...
No it isn't...Once governments bail out the banks and prop up the system it isn't capitalism at work anymore.
...entities called "market makers" manipulated the market and made sure that they and their cronies made the lion's share of profits. The market is just different today. It is no better or worse than it has ever been. It is still possible for individual investors to make good money in the market but must educate themselves first. Most retail investors who lose money in the market buy when it is obvious the equity or market is topping, all the smart money has gotten out, and they think they can make a "quick buck." That has always been true and still is. A knowledgeable investor, using relatively inexpensive tools, can make >20% yr/yr, almost regardless of market conditions. Most people will not take the time to educate themselves and avoid emotional responses.
"Computers are useless. They can only give you answers."
-- Pablo Picasso
Comment removed based on user account deletion
Improve it by getting rid of it.
The idea of financing a company to share in their future success is fine and doing so is good in general and adds value to the economy. But you add no value to anything by investing in a company for a fraction of a second and then somehow making a profit off of that.
It is no better then theft.
Unless an investment is a long term investment it could not possibly help anyone. Put a minimum length on holding the shares. Be it a minute, an hour, a week, or a month at least it would be a step in the right direction.
Troll is not a replacement for I disagree.
How hard would it be to say:
Stocks/bonds/commodoties have an undodgable tax of 0.2%? This is collected out of the trade automatically and sent to DC in real time.
I'm not in a thinking mood whether this should be on sales or purchase. It would hurt high frequency traders because they'd be paying mad taxes, but people who invest like a sane man for long term the tax is negligable.
God spoke to me
The companies that produce things raise money by selling shares of their company (stocks) or borrowing money (bonds) on Wall Street. So, no, Wall Street doesn't produce anything on its own, but it provides a service that enables others to. It certainly doesn't resemble a casino. In fact, I was outraged when I heard my son's class was using coin flips to determine the winners and losers in the class's "stock market". Investing is not gambling!
What a fool believes, he sees, no wise man has the power to reason away.
I agree...but their seem to be real downsides to having this purely financial component of the economy be so large relative to the part that is production and exchange of actual goods and services.
.: Semper Absurda
Also, do we really want lower transaction costs? They might shave pennies or even dollars off a stock market trade, but if the point of the stock market is investment in a company (rather that shifting wealth around) wouldn't we want incentive to stay vested in a company?
The trouble with HFTs is they siphon money w/o adding value. As near as I can tell they're the definition of an economic parasite. Again, I'm open to being proven otherwise, it's just I don't see what value they add. They don't hold onto the stock long enough for the real investors to use the capital they put into the market. They just seem to drive up the cost for real investors....
As for Obama, he's got his hands full with oil and commodity speculators....
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Didn't he already suggest perhaps a penny per trade fee or half a penny, something like that as a way to curb HFT? In any case, either a money or time constraint added to the mix would probably put an end to it as it is today. But that would never happen because too many people make way too much money on this scam.
So many injustices..so little time..
I'm sorry but have you seen who's working at the Federal Reserve or the FDIC? Bankers and Wallstreet CEOs, that's who. The banks and the government are the same guys and the line between them is no more. Regulation? Hahahahahahahahh... what a quaint notion. We got here through Capitalism... because corporations want power and they can rig the government game in their favor. Its time for something completely different and I don't mean a penguin on the telly!
This is totally correct. Most people now just locate whole junks of their algo platform in the same data center as the exchange (co-location). Once it's there, I've seen people questioning and arguing about minutiae such as which switch its connected to or length of ethernet/fibre cable vs competitors. Tiny fractions of a millisecond are very significant in this game. Then there's the kernel optimizations, assembly in-lining, FPGAs etc.
I think (probably unpopularly) that it's a bit unfair to brand these guys as 'hackers' implying that it's some sort of dirty word. Smart engineers will always find a way to make something faster, better, stronger. To think that people in finance would accept that things "have got fast enough now and we should just stop" is a bit naive. Why should finance technology be any different from any other kind of technology?
Also, bugs ARE of course there and is basic fact of having an imperfect model. These are pretty much immediately exploited in quite a Darwinian way by other market participants. This is why one model makes more money than an other. I'm not sure why the article's author thinks this is some kind of blinding revelation. Even in extreme examples such as during the flash crash, for every stupid model making disastrous trades, there was someone on the other side of each trade making a massive profit. Survival of the fittest, welcome to capitalism.
One final though is that people can't just 'hack' the exchange. Organisations like the FSA exist to ensure that each transaction that occurs is audited to make sure that it has a financially sound objective, not just gaming the system for weaknesses. Market participants can fined very significantly for getting this wrong.
This article is really just uneducated scare-mongering.
Capitalism is about accumulating capital. You can produce things, rent things, trade stocks, whatever.
Capitalism is a method of allocating resources through the private sector and that's precisely what Wall Street does. If I give you money to start your business, did I produce something? How is that any different from a company like facebook (which I hate btw) going public and getting $16B to expand its business?
Capitalism is just one method of allocating resources. Another method of allocating resources is to have the gov't do it - i.e. communism.
Long term investing isn't gambling, but day-trading most certainly is. The number of factors that go into a stock price's short term movements are so numerous as to be incomprehensible. You'd have better luck predicting a coin toss based on starting velocity, wind speed, ambient humidity, etc., than you would predicting a stock's day-to-day movement based on all available data.
it is pure, unrestrained capitalism. What could possibly go wrong?
Well, if you look at the history of capitalism,
this will probably end with the USA invading another country over the price of bananas.
Monkey business I tell you, it's all monkey business.
[Fuck Beta]
o0t!
That's the whole point about it being stored in the courthouse, in the same county as the property, for the lifetime of the loan.
If it is required by law to be a physical document, and that all transactions must be witnessed by an officer of the court, it is pretty damn hard to counterfeit a transaction without the illicit cooperation of an officer of the court.
It is already a matter of public record the ownership history of a property. All I am asking is that it become a matter of public record the history of any past or present loans against the property as well.
If you did that it would make very hard for anybody, home owner and lenders alike, to lie.
Done "correctly," HFC is bad for society because, like insider trading done "correctly," it specifically screws the "have nots" to benefit the "haves."
Yes, the screwed-up trades are a problem, but those are the side-show. The real problem is that those with the ability to do HFC can use that ability to "jump ahead in line" and screw those who don't have this ability.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
That's how things are supposed to work. Reality is not the same.
"If a nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be."
Nope, not working. I wish he wouldn't have used the term 'Hackers' however. The name just keeps getting denigrated more and more. What the Feds can do to fix this however, is spike the system like what was done before. And this time, make them pay for their mistakes.
HFT exists for nothing but to make money for a select, small fraction of traders. It has nothing whatever to do with adding value, providing liquidity, or identifying those corporations that are adding value to our world. It is a completely destructive mechanism, and should be eliminated by the simple expedient of placing a one-second delay in trade executions, the one-second delay being randomly specified as being as low as 0.5 seconds and as high as 1.5 seconds. We need to kill HFT - what we do understand of its consequences indicate that it is of no value to any but its practitioners, and we don't understand at all its negative consequences. See, for example, http://www.wired.com/wiredscience/2012/02/high-speed-trading/.
Day trading is not investing either.
What a fool believes, he sees, no wise man has the power to reason away.
Yup, and that is the system we had. Unfortunately, the companies thought that system moved too slow and had a high transaction cost. So they bullied the regulators to let them keep their own clearing house... which they didn't properly maintain. It's the dumbest concept ever, private companies self-regulate on who owns the land today and then tell the government at their leisure. Little wonder that we are now seeing the benefit of our great grandfather's line of thinking.
As Kenny Rogers said: "You got to know when to hold them, know when to fold them, know when to walk away, know when to run".
I bet other HF trader recounts the day as he just cleaned somebody out of $150M.
He nailed it with the question as to what the stock market is for! Personally I feel that the whole stock market has gone almost completely off the rails. It seems as if a small number of New York finance companies have got an extortion racket going where they have set themselves up as gate keepers who believe they are entitled to a piece of everyone else's pie.
As a developer I have a micro taste of these types at least once a week. Someone sees me making money and decides that they want a taste. They want me to "help" them with their big idea. I'm not sure the offer has even been as good as 50/50 even though the work would be 99/1 and skill 99.999/.001 they usually have to hold back their anger when I recommend a few good C++ books. I can't imagine being in a scenario where people like this could force themselves into my business. They would have no problem saying "You would be nothing without my help." and walking away with their "share".
My other favorite is when MBA types tell successful software companies to get more corporate types and that a board of directors would be a valuable addition. The question that they don't like is "Why are we making too many millions?"
Make all trades and trade-cancel orders "pending" and have the trades actually occur no more often than a few times a minute, in batches.
The idea is that once someone makes a bid to buy or sell, the pending queue and countdown clock before execution begins. As others bid to buy or sell, the execution clock is reset. To prevent gumming up the works, if more than, say, 15 seconds has elapsed since the pending queue was last empty or if the number of pending orders is "too big" to manage, new orders are pushed off until the next go-around. Those with orders in the queue will have an additional second or two to cancel a pending trade, and this "cancel clock" will be reset after each cancellation. It's expected that the stock exchange themselves will impose a very small cost on both placing an order and canceling an order.
Once the cancel clock expires, a computer takes all the orders, bundles them up in a fair way, and executes those trades that can be executed and divides the proceeds up in a fair manner. While different people might disagree on what is "fair," it's expected that a given stock exchange will work with its major traders and listed companies to determine what "fair" is on that exchange.
This pace is still too rapid for human beings to play, but at least it gives program-traders who can't afford to be less than a few fiber-miles away from the exchange an even playing field.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
There are several good - and some not-so-good - suggestions to improve trading in these very /. comments.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Actually currency trading makes up a ton of the HFT. People just don't know about it. There are hundreds (thousands?) of machines around the world that do nothing but look for 1 USD => 0.65 GBP => 0.80 Euro => 1.001 USD. And all those machines will try to instantly trade in that clearing house making pennies till that fund holder is out of cash (seconds).
The benefit of all this is that the system will instantly correct that 0.001 diff to a zero and provide near instant liquidity for someone looking for a particular (openly traded) currency at a fraction of the cost it used to be in the past.
Why should finance technology be any different from any other kind of technology?
No one is against technology. But when computers start trading at a pace that a normal person can't comprehend, that's when I say a line has been crossed. where exactly that line is, no one knows. It'd be nice if a regulatory agency could say that traders need to hold on to a purchased item for at least, e.g. a minute, before selling it off. A minute is probably enough time for a person to give that decision a thought.
I am actually kind of surprised that supercomputer-speed trading of a larger number of stock shares are legal now, considering the fiasco in 1987 when programmed computerized trading in stocks caused that 25% one-day crash. I would not be surprised that such trades may be banned or very strict controls imposed in the near future, because I fear that if the European sovereign debt crisis runs out of control all this computerized flash trading could result in a Dow Jones Industrial Average crash of 1,500 points or more with disastrous consequences.
I guess their Phase Lock Loop failed.
I think Mr. Cuban has a point.
The markets were originally meant to support businesses by allowing folks to invest so that companies could raise capital. Investors could then get returns in the form of dividends etc. Obviously, trading in stocks is an excellent way for folks to make money and this is fully supported by the market paradigm.
The problem with programmed trading at these levels is that it prioritizes arbitrage over the health of the companies the market is supposed to serve. It's a perfect example of the pendulum too far at one end.
Cheers,
Bruce.
"Billionaire Mark Cuban talks in an interview with the Wall Street Journal about how he thinks high-frequency trading can be quite damaging to stock markets. He goes so far as to call high-frequency traders the 'ultimate hackers.'"
... How many times an hour are there failures across individual equities around the world because of software running algorithms battling each other for supremacy to make a profitable trade?"
Not hackers, the people writing such HFT systems are more likely to be undergraduates from some School of Economics, writing the algorithms in Eclipse as that's the easiest IDE out there.
"When software programs are trying to outsmart other software programs and hack the world's trading platforms, that is a recipe for disaster.
Exactly, and as the number of such platforms increases the instability increases, creating huge positive feedback loops. I see it as once there are a critical mass of such systems they will become less usefull and there has been calls to ban HFT platforms outright.
"We have no idea. It's not a question of if or when we have meltdowns, it's just a question of how big and where".
You don't have to wait, it's already happened, see the Flash Crash of 2010, and how HFT Quote Stuffing Caused The Market Crash Of May 6.
AccountKiller
It's simpler than what is done now!
Instead of trading in real-time, they just have to do what the banks have always done: batch processing. Collect buy and sell orders for an hour, and then process them all together in a fair way at the end of the hour.
Do you want to buy a stock? Put a buy order in at 13:45. Does someone want to sell the stock? They put a sell order in at 13:56. At 14:00, you get your stock and they get your money. Or more accurately, the database system will start batch processing at 14:00, and give your stock at 14:03 or something. It doesn't actually matter all that much how fast it all happens.
If you wanted to invest in a company for the next three years, a one hour wait is nothing.
If you wanted to sell your shares in a company that you've held for three years, a one hour wait is nothing.
If you wanted to flip a stock as quickly as possible to make a fraction of a cent on a dollar, then a one hour wait is an eternity.
Buying and selling will still be possible, HFT trading will not.
No new taxes required. No new fees. LESS hardware. SIMPLER software. NO chance of runaway side-effects from software trading 10,000x as fast as a human being's reaction time.
This is a trivial problem to solve. The technology is not the problem, the politics is. A small number of powerful people are making a lot of money by stealing cents on the dollar from the common man. They will not give this up without a fight. They will lie, they will cheat, and I suspect even kill to hold on their income stream. They're certainly not above bribery and vote buying.
Quo vadis?
I get that if an arbitrageur who performs the classic arbitrage of buying a stock on one exchange and selling it on another where it's trading at a higher price is effectively connecting willing buyers and sellers who would agree on a price if they all had access to a common exchange. I also get that arbitrages on derivatives make the prices of related securities more internally consistent (not necessarily better, just more consistent).
What function does HFT serve in the market? The common answer I've heard is that they provide liquidity, that is, that they provide counter parties for trades that other people were looking to make, but if they exit that position within milliseconds by making the reverse trade to someone else, that means they only acted as a middleman between two willing parties that would have found each other in a short time anyway. I don't see how you can provide liquidity without having an openended commitment to sitting on an open long or short position the way a traditional marketmaker does. So how does this HFT provide liquidity that wasn't already there, and if it isn't providing that, what useful function is it serving?
Look the purpose of the stock market is to facilitate the trading of securities. The societal good of that is that it frees up and allocates money to companies that are producing more value , or doing it more efficiently. This is a way to reward smart companies and incentivize new technologies.
This shit has nothing to do with any of that. They're gaming the system for a purpose to which it was never meant to be put and further, they're endangering everyone else while they're at it. Those are just the facts.. none of that was my opinion.
This is where Citizen United matters a lot . Romney is promising to re-Bushify the stock market if he gets elected. That means Wall Street is going Romney. That means huge sums of money are being poured into his campaign and if he wins , the market stands a good chance of cratering the economy again.
Greed has located a positive feedback loop and is exploiting it in a predictably greedy fashion.
The thing is, this is obviously reckless and has nothing to do with free markets. It's as if we threw away any concept of a social good except the servicing of the impulses of richest greediest people our society can produce.
Greed is an innate flaw in human thinking under most circumstances. It's not some magic rocket fuel that impels society towards greater wealth and innovation. That's a bullshit narrative told to you by drug addicts who don't want to be separated from their drug . And nothing more.
The thing is, the fanaticism on the right is also in a positive feedback loop with the right wing noise machine. Even though their economic deregulatory policies cratered the economy, they are taught how to deny that fact by the right wing noise machine. This clears them to vote more of the same into office.
We've effectively turned our economy over to people with a a group of compulsive gamblers and risk junkies. This is a completely different thing than supporting risk taking entrepreneurs.
Look societies live, grow and die. They die because they become captive to an entrenched minority who games the social cultural political system and secures for itself some positive feedback loop that reinforces their power and permits them to write the rules of society to their personal, narrow advantage. Thenceforward, at every decision point, their local, short terms needs are serviced first and in our case, almost exclusively.
We may be living in a dying society that will catastrophically implode . Our refusal to address global warming in more of the same dynamic with the oil and coal companies finding a positive feedback loop in their campaign contributions and right wing noise machine.
Citizen's United matters more than you think. SCOTUS overturned a hundred years of hard won lessons about politics and money and democracy this week in their Montana decision , which is nothing more than en extension of their Citizen's United decision. This from a political wing which claims to abhor the ideologically driven, no-nothing meddling of Big Government into the policies of the States and of business and other boots-on-the-ground forms of hard won, real world knowledge.
Money isn't speech and corporations aren't people. These are two more -in-your-face patent absurdities that future generations, if there are any, will laugh out loud at in middle school classes and serve as the Cliff Notes on Why America Collapsed 101.
You have to understand that rational thinking and reasoning about even the basic, obvious facts of the world does NOT come naturally to people. As proof of this I offer a recent story about an ongoing cause for mass murder in Africa- Penis Shrinkage Through Sorcery.
I 'll link to the Reuters story because otherwise you might suppose I am accidentally reporting satire.
http://www.reuters.com/article/2008/04/23/us-witchcraft-idUSN2319603620080423
Long story short, m
Let's just re-parse that sentence:
Bottom-feeding scum are the ultimate hackers.
Therefore, a good hacker should aspire to become bottom-feeding scum?
This sounds like an insult to hackers everywhere.
"Nine times out of ten, starting a fire is not the best way to solve the problem." - my wife
The companies that produce things raise money by selling shares of their company (stocks) or borrowing money (bonds) on Wall Street. So, no, Wall Street doesn't produce anything on its own, but it provides a service that enables others to. It certainly doesn't resemble a casino.
This BS is +5 Insightful?
Wall Street today, especially the HFT programs, exactly resembles a casino! When you're making million dollar trades, not based on valuations, assets or long-term business strategic planning but based on automatic triggers in a market with irrational herd mentality it is EXACTLY like blowing a wad of cash on a "hot streak" at the craps table or roulette wheel. There are thousands of HFT programs interacting in an unpredictable manner with each other in the market. There is no possible way to track that volatility and rationally invest in the short-term in such a market.
In fact, I was outraged when I heard my son's class was using coin flips to determine the winners and losers in the class's "stock market". Investing is not gambling!
Why are you mad? Your son's class is smarter than you, apparently. Or did you not know that the hedge fund managers being paid millions in fees can outperform monkeys throwing darts at stocks only 61 out of 100 times when tested? (That was run by the Wall Street Journal, by the way.) Or that the professional managers outperformed the Dow Jones Average index only 51 out of 100 times? Short-term investing certainly is gambling!
Light a fire for a man and he'll be warm for a day. Light a man on fire and he'll be warm for the rest of his life.
CAPITAL-ism is a system for deciding what gets produced, based on the private ownership of capital, and private individuals and groups deciding what to do with their capital. Stock markets such as we have aren't absolutely critical to that, but they're pretty close. "Wall street," the investment of privately held capital, is the epitome of capitalism.
That's not to say that HFT is a necessary part of capitalism, but stock trading IS.
Organisations like the FSA exist to ensure that each transaction that occurs is audited to make sure that it has a financially sound objective, not just gaming the system for weaknesses. Market participants can fined very significantly for getting this wrong.
I find this assertion laughable, FSA clearly is more concerned with soy futures. Hold on, from you spelling of organization you must be referring to the ths FSA which is likely just as understaffed as its US equivalent and no doubt run by individuals hopping to get gigs in private industry. IAAMBA (I am a MBA) so I know pointed-headed-ness.
-Long time lurker first time coward.
"Or that the professional managers outperformed the Dow Jones Average index only 51 out of 100 times?"
Since the DJIA goes up over time, on average, matching it makes money, over the long term. If a trader, high frequency or otherwise, is making money on average, he is participating in something that is very much NOT like a casino.
All that effort for so little value to society...
It's anti-free market for sure. They're skimming off the system without contributing a damn thing and adding inefficiency and misinformation into the markets
How is that anti-free-market? I thought "free market" simply meant the government wasn't regulating it.
So start your own stock exchange using your rules and see how popular it is. You'll make billions, right?
Oh wait, you mean people who are customers for stock exchanges don't actually prefer a stock exchange like that? Hmmm... maybe you should ask yourself why...
How about stuff like limit orders, like knowing what price you can sell a stock at right now, instead of a guess about an hour from now?
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
"Actually currency trading makes up a ton of the HFT. "
You completely missed my point. Read the final sentence again, please. What I stated was that getting a current exchange rate need not require HFT. And further, it is, plain and simple, not good for the system to work such that the exchange rate fluctuates that rapidly.
That is exactly the kind of recipe for disaster that we are referring to. If people in government and finance fail to realize that, then we should replace them ASAP.
It's stupid to allow this.
Maybe corporations should begin to control their price on the stock exchange. If enough shareholder want to sell, they could vote to lower the price, and if they want to hold they cold vote to raise it. Then the corporation would set the exchange price from day to day (rather than ms to ms) and a lot less trading would happen in general.
There are two rather different versions of the free market:
The one they assured us that we would get (that one requires minimal but good regulation) and
the one that occurs under no regulation.
The GP is referring to the former and what the US currently has is neither.
"Or that the professional managers outperformed the Dow Jones Average index only 51 out of 100 times?"
Since the DJIA goes up over time, on average, matching it makes money, over the long term. If a trader, high frequency or otherwise, is making money on average, he is participating in something that is very much NOT like a casino.
Fallacious logic. And the same logic that led mass hordes of people to think that investing in housing will ALWAYS make money on average. The OP supposes that actively investing is a skill set, and not based on random luck. Therefore, professional investors who have spent years training and being educated on investing should be able to consistently beat (A) monkeys throwing darts at stocks and (B) beat an index based on a LISTING of stocks, not on professional predictions of how well they're going to do in the future! They can only do (A) 61% of the time... and doesn't it worry you that they can't beat the monkeys 99% of the time? And they can't beat a LISTING of the biggest stocks more than 51% of the time!
So what happens when the index listings themselves come crashing down? I certainly hope you're not expecting those professional fund managers to exercise those wonderful "skill sets" and pull your retirement out of the fire...
Light a fire for a man and he'll be warm for a day. Light a man on fire and he'll be warm for the rest of his life.
That would be a direct tax, and require apportionment among the states.
You'd have better luck predicting a coin toss based on starting velocity, wind speed, ambient humidity, etc., than you would predicting a stock's day-to-day movement based on all available data.
How does efficient market theory explain all the millionaire and billionaire stock traders Manhattan and London? People who claim it's impossible to make money trading simply don't know how to trade. With the exception of Communism, Milton Friedman's BS theories on efficient unrestrained capitalism have done more to destroy the world economy than any other intellectual movement in modern history.
Stay skeptical, my friends.
Mr. Cuban has a point indeed.
It's exactly the same point that has been given by anybody remotely knowledgeable about software development ever since this high frequency trading started.
It's probably a similar point given by any economists who understands the concept of "long term".
Let's hope stock exchanges listen to a billionaire.
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
"It certainly doesn't resemble a casino."
It most definitely does. But let me clarify a bit what I meant.
TRADITIONALLY, stock investment helped raise capital for large projects. (Which was also the reason for the formation of corporations: large projects could be funded that even rich individuals could not afford to undertake.)
But even given that, stock trading is still indeed gambling. There is no justification for calling it anything BUT. You put out your cash and hope it grows. But it may not. If you trade at random, given many transactions you should have about a 50/50 chance of staying even. BUT... just like a casino, there is a house advantage here too: there are usually percentages or fees charged for each transaction. So again, if you assume randomness, odds are you will actually end up in the red.
There is nothing about this scheme that differs from gambling. Not... one... single... thing.
And just as with gambling, corruption has been (is) rampant.
But even aside from that, what I was getting at is: the majority of wall street investment today is in one or another form of derivative. And a derivative is, quite literally, betting on other people's bets. Unlike regular stock investment, it produces nothing, and does not finance production. It simply finances the financiers.
You can argue with me all you like about that, but it doesn't change the facts. For the most part, Wall Street today has very little to do with actual capitalism. Instead it has to do with Corporatism and Governmentism (which, put together, were defined by Benito Mussolini as "fascism"). There is very little resemblance, even superficially, to actual "capitalism" to be had there.
"Capitalism is a method of allocating resources through the private sector and that's precisely what Wall Street does."
This is precisely where you are wrong.
That is what Wall Street was originally designed to do. That does not mean that's what it does now.
Wall Street today is little more than a Fed <-> Bank <-> Finance Company <-> Government circle jerk. While at the same time, "regular" investors get no love.
"Stock markets such as we have aren't absolutely critical to that, but they're pretty close."
Yes, but what you aren't taking into account is that Wall Street today isn't much about straight (or even legitimate) stock trading. Instead, it's money markets and derivatives, which don't fund capital projects. It all goes into fat cat pockets.
I wasn't deriding stock trading. I was blasting Wall Street. Two very different things.
Which is why I've always considered high-frequency trading to essentially be a timing attack on stock market servers.
"How does efficient market theory explain all the millionaire and billionaire stock traders Manhattan and London?"
It doesn't, of course. But... given hundreds of years of solid evidence, it should. So... what is the difference? How did those things happen?
A few were smart. A few got lucky. Many of them already HAD family money.
Most of the rest is due to market-fixing, cronyism, insider trading, etc.
When the free market is allowed to work, it works. But we have over 100 years now of government and insider interference in the free markers, to the extent that they can hardly be called free anymore.
Sorry, but you can't point to a system that has been almost hopelessly corrupted, and call that evidence that the system as designed doesn't work. That's a logical fallacy.
Today's Wall Street is very, very far from a "free market".
Stock exchanges could institute a limit on how often one may trade. Perhaps once per second, or even once per minute. Shouldn't affect human trades. May have to be legislated.
Is it time for the Turing Police?
I have no doubt that the market is hopelessly corrupt. I used to be a trader and a stock broker and have seen the good, the bad, and the truly ugly. The entire financial system is built on convincing average people to give money to mutual funds with no questions asked. In 30 to 40 years, the money you were promised may or may not be there, but those who sold you the investments are long retired to their private islands. All the meanwhile, traders such as myself are siphoning money off every trade these mutal funds make. The only way we can fight the Wall Street's growing power is to vote with our pocketbooks. Invest in retirement yourself instead of giving it to money managers. If you don't understand the market, buy hard assets like art and real estate. If you don't understand that, then sock it in a CD.
Stay skeptical, my friends.
I take it you're not the "real" Vernor Vinge?
The problem with programmed trading at these levels is that it prioritizes arbitrage over the health of the companies the market is supposed to serve.
Exploiting actual arbitrage opportunities would contribute to the health of the market itself, surely! But what makes you think that is what trading bots are doing? Aren't they simply scalping miniscule price movements at extremely high frequency?
I think that Cuban is wrong when he dismisses arguments that high frequency traders are providing markets with liquidity, clearly they are. And I think that software bugs in trading programs would sound primarily in reduced profits for their operators. However, I think he is correct to be concerned. As trading is increasingly conducted on the basis of tiny price movements without any regard to the underlying equities, and that at higher frequency and quantity, markets are being exposed to mass phenomena and feedbacks which have the potential to dislodge the performance of equities from the underlying performance of the actual companies, perhaps to disastrous consequences.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
Simple solution has already be proposed. Queue trade requests in such a way that a random delay is inserted. The delay will be negligible and go unnoticed for humans but it would definitely screw up milliseconds traders.
Everything I write is lies, read between the lines.
The companies that produce things raise money by selling shares of their company (stocks) or borrowing money (bonds) on Wall Street.
Sort of...
Very simply... the first time the stock sells, that money goes to the company. From then on, however, the shares go from trader to trader, with the money made and lost by the traders. (Oversimplified)
An analogy might be baseball trading cards: When the card sells in the store, that money goes to the card company. But from then on, the kids on the playground trade, and buy, and sell them based on desirability, rarity, etc.
When some card eventually sells for thousands of dollars, it doesn't benefit the card company.
Jane, I forgot to answer you question.
So you would rather live in the world of the robber barons, child labor, 14 hour work days, and unrestrained pollution? Or better yet, to 1929, when the goverment also ceded complete control of the economy to the private sector. You need to brush up on your Econ 101, missy.
Unrestrained capitalism is a force that favors monopoly as an outcome. No one wins except for the monopolist. Efficiency is the result of goverment actively regulating the economy to allow competition to flourish.
We've grown fat and lazy off TV and potato chips, and have stopped fighting for our democracy. The monopolists are close to complete control of our government, and I only pray it's not too late to fight back. I do agree with you, the government is
Stay skeptical, my friends.
I do agree with you, the government is stacking the chips against us. Friedman's school of thought has turned two generations of capitalists against healthy and necessary regulation that is needed for their own protection.
Stay skeptical, my friends.
Smart engineers will always find a way to make something faster, better, stronger. To think that people in finance would accept that things "have got fast enough now and we should just stop" is a bit naive. Why should finance technology be any different from any other kind of technology?
But if that something is (more or less) "gaming the system", it's usually not leading to something desireable.
bickerdyke
"Friedman's school of thought has turned two generations of capitalists against healthy and necessary regulation that is needed for their own protection."
Everyday events put the lie to this assertion. There is more government regulation of markets right now than ever before in history, yet our economy is simultaneously in one of the worst positions it has ever been in history.
How do you reconcile this? Facts that are extremely easy to verify directly contradict what you say.
Having said that, I will amend it:
Even Adam Smith recognized that a reasonable body of antitrust laws would be necessary to keep capitalists playing within the system. Consider antitrust laws to be the "meta-rules" that keep people playing within the regular rules.
And it is also true, that when antitrust laws have been relaxed, monopolists have tended to take advantage. I do not dispute this.
But the vast majority of government regulation does not qualify as "antitrust" regulation. It is mostly interference that leads to inefficiency. Once again: antitrust regulation is now at a historic low, while other government intervention is at a historic high... and our economy currently sucks very hard.
I like this Stickerboy person. He has logic on his side.
It's a good thing that competing exchanges are allowed. The rules set by various exchanges can vary and evolve (although they are constrained by SEC regulation).
If Cuban is right, he should take over an exchange or start one with more suitable rules (according to his evaluation). We'll see if market participants agree that this is an important issue and Cuban's set of rules is indeed better, and Cuban can take away market share from the marketplaces that use weak rules.
These comments are mine; I do not speak for my employer.
It's exactly the same point that has been given by anybody remotely knowledgeable about linear systems ever since this high frequency trading started.
FTFY.
The trading rules was set on a time when the technology was not able to abuse the primary intend in a such big way. The rules needs to be adapted. A proposition is to use a quantum of time, for example a few minutes, between the calculation and publication of new quotation. The transaction queue must remain secret for everyone.
I don't expect that the states will be able to impose such rules, but new stock exchange place, with more fair rules, can start up and attract companies. Old one will then look like poisoned by fast trading parasites.
Depends on the millionaire:
Some get rich by good ole fashioned buy-and-hold strategies, which are entirely legitimate and good for the economy.
Some get rich through facilitating, for example noting that a stock is priced too low and buy it, then sell it when someone who actually wants it comes along. Again, this serves a valuable role in the economy, as it means that someone who wants to sell their stock now can do so, and doesn't need to wait to find a long term buyer.
Some get rich through dumb luck, which they mistake for their own skill. If enough people gamble, some are bound to win. No one likes to think that they got rich by dumb luck, so they tell themselves it was because they're just that awesome.
Some get rich by skimming the retirement accounts of regular folks. These are your mutual fund managers, for example, who provide no apparent benefit over randomly picking stocks from the index, and yet charge a nice hefty fee for their services.
And then, of course, some get rich through straight-up crime. Insider trading, for example.
"Greed is an innate flaw in human thinking under most circumstances. It's not some magic rocket fuel that impels society towards greater wealth and innovation. That's a bullshit narrative told to you by drug addicts who don't want to be separated from their drug . And nothing more."
Bingo. Greed is manifestation of survival instinct, hyperbolised by emotions and feelings and "know how" around in your society. How it come that most greedy people are from societies who are created by people most in need? Because they are *afraid* to go where they once were. Hunger and feeling of being poor and misarble is something what kicks survival instinct into berzerk mode. US was created by poor but determined people to live better. Determination isn't bad in it's case, but overlooking wider implications of despair and our instincts, thinking that only they matter, is problem. Problem is that people who learn to live this way usually also fuel their positive loop that they can't be wrong with fully trusting their survival instinct.
user@ubuntubox:~$ stfu This server is going down for shutdown NOW!
That *is* a bit of an oversimplification, because in most cases, the vast majority of the stock is retained by the company. So when the stock price rises, the value of the company does as well.
While contemporary economic theory has become a bit more sophisticated than old Keynesian theory (thank Grid), there is much to be said for the Keynesian idea that simply maximizing share value is equivalent to maximizing the value (and therefore buyout price) of the corporation itself.
So, no. Each time the stock sells, it produces a price signal in the marketplace. That influences what others will buy or sell for, and when you put them all together, a balance is reached. (This is essentially Adam Smith's definition of a free market.)
So if the initial public offering is a share for $10, and a few years later those shares go for $1000, then yes, "the company", that is to say the shareholders, profit indeed. Very, very much. Because "the company" owns most of that stock.
So your card analogy is false. Cards are not automatically attached to any value of the originator. They are sold as a commodity... a common, usually cheap item.
Stocks, on the other hand, are attached to the worth of the company, because the company retains the majority of the stock (if you didn't, you screwed up).
Also, bugs ARE of course there and is basic fact of having an imperfect model. These are pretty much immediately exploited in quite a Darwinian way by other market participants.
Except that the only market participants that are allowed to exploit bugs in this way are the established ones. A new upstart tried exploiting limitations in the existing big players' trading algorithms intelligence and was found to be acting illegally in doing so; I think people went to jail over it.
And we do have an idea of what's actually going on. Here's a detailed example of the recent Facebook IPO problems: http://www.nanex.net/aqck/3099.html.
And a derivative is, quite literally, betting on other people's bets. Unlike regular stock investment, it produces nothing, and does not finance production. It simply finances the financiers.
There's so much rubbish being written on this thread but I thought I'd reply to this one.
Derivatives, HFT, the works all have legitimate, valuable reasons for existing. That they *can* be abused for gambling isn't a good reason for getting rid of them completely. Until you understand why they are *needed* saying it's all crap and should just be banned is idiotic.
Derivatives form an essential part of any large multi-national company that needs to hedge exposure to commodity or fx price movements. And once you've got people who want to hedge their exposure, it's *required* to find someone else who will take the opposite bet.
I'm going to receive EUR in six months time and I'm going to pay you in USD. Are you willing to gamble that I can actually afford to pay you when the bill becomes due? I want to find someone who will take that bet and I really don't care if it's one person taking a six month bet or 16 million people each taking a one second bet.
Someone *has* to take the bet - either that or we cannot do business.
Tim.
God said, "div D = rho, div B = 0, curl E = -@B/@t, curl H = J + @D/@t," and there was light.
Only non-programmers use the term "software programs".
Regulation isn't fungible. What units do you measure it in?
To say there's more or less is asinine.
I won't say it would have prevented the crisis (we can never know for sure) but if Glass Steagall had still been in place it probably couldn't have made it worse.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Although I'm skeptical about HFT, re: money isn't speech--
Do you propose that people can only exercise their first amendment rights by talking (creating sound from their vocal chords)?
The moment you use anything beyond that (TV ad, pamphlets, booklets, books, DVDs, even a bullhorn), you're spending money.
So how do you propose to allow people to exercise their free speech rights without spending money?
I'm not a lawyer, but I play one on the Internet. Blog
But without some kind of secondary market, many would be deterred from investing in the first place. People like to know that they can cash out quickly and easily if they wish (or need) to.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Slow trades down to the human scale.
lets say trades have to be processed in "ticks"... and the ticks could be once a second or once a minute. But the idea is that trades are ONLY processed in the ticks. You can queue trades between ticks but the trades only happen in the ticks.
If you have a system that a milisecond faster then anyone else it won't really matter that way. The trade won't happen until the tick processes.
Once a second is still pretty fast. Once a minute is more reasonable. But because a tick is an arbitrary time span we can change it to be whatever you want. It can be once every ten seconds. Or once every five seconds.
What's important here is that it's slow enough that people can follow it.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
They are the same old banker overlords, who just hired some programmers.
east india company rule sure as fuck wasn't free market.
in the case of the stocks, it's the stock exchanges which are taking the role of the government. you think just anyone can get their trading machine on the same switch as the exchange operates on?? fuck no. it's as if ping times made you invincible in wow, blizzard gave preferential access to several of their cronies and it was played for real money!
world was created 5 seconds before this post as it is.
Wouldn't a HFT box work around the previous three suggestions by buying put/call orders?
I think that Cuban is wrong when he dismisses arguments that high frequency traders are providing markets with liquidity, clearly they are. And I think that software bugs in trading programs would sound primarily in reduced profits for their operators.
*Cough* - Remember the flash crash? If anything, it showed that HFT is the market. Trading volumes have grown exponentially since derivatives and HFT went mainstream. It's not going to end well.
Plus, how HFT screws casual traders is absolutely abject. Joe wants to sell X for $9.99, Jack wants to buy it at $10.01. Instead of letting Joe and Jack do their trade normally, allowing Joe to pocket an extra $0.02, the algo (which is located at the market maker's premesis, to get the info in advance) discovers Joe's price by issuing tiny trades, and buys at $10 from Joe. It then immediately sells to Jack at $10.01, discovering his price in the same manner. People should be running around with pitchforks over this.
Just a small correction. Bank is not a borough of London. The area you are referring to in located in the the City of London(or The City or Square Mile as it is commonly called). Bank is a local area in The City near the end of Threadneedle St roughly.
Simple solution has already be proposed. Queue trade requests in such a way that a random delay is inserted. The delay will be negligible and go unnoticed for humans but it would definitely screw up milliseconds traders.
Why not take it a bit further and bring trading back to normal human capacity by introducing a delay of an hour?
blindly antisocialist = antisocial
"There is nothing about this scheme that differs from gambling. Not... one... single... thing." ... and this is why you don't know what you're talking about.
Gambling, by definition, is seeking to profit from a random event that is generated SPECIFICALLY so people can bet on it. Why do horses run around a track? So people can bet on it. Why do people throw dice at a craps table? So people can bet on it. Why does the blackjack dealer distribute 2 cards to each player? So people can bet on it.
Compare that to a futures trader. The risk that the price of corn is going to go up or down has NOTHING to do with the fact there is a futures exchange. Because of the business they are in, farmers are shouldered with that risk, like it or not. It exists. The futures trader is willing to assume that pre-existing risk in the interest of making money, while the farmer is happy to have someone to take that risk off their hands. The risk has always been there, but a futures exchange allows people to transfer that risk.
actually, hft colo systems are NOT in manhattan. there are no exchange datacenters on the island because the real estate is too valuable. they're all in jersey. directedge is in "ny4", which is actually in secaucus (the stinkiest part of) nj. nyse is in mahwah nj. i believe bats is in weehawken nj (nj3 datacenter). nasdaq is in carteret nj.
so actually, colo isn't all that expensive because the exchanges are all in previously undeveloped swamp land. the problem, of course, is deciding which ONE exchange you're going to colo with, because they're all a few miles apart.
Wave upon wave of demented avengers March cheerfully out of obscurity into the dream
If capitalism is functioning correctly, costs are minimized via competition. Wall Street is composed strictly of "middle men". These institutions should be squeezed for profit like every other part of the economy. Instead, they have become the gate keepers, and now skim the bulk of the profits for themselves. The entire economic order has been altered so that Wall Street (and the other global banking institutions) make money without regard to results. Heads they win, tails we loose.
HFT is just one of the skimming methods. It starkly illustrates that the insiders have a strategic advantage and open competition is a myth. How can there be a level playing field when the privileged few who can install their HFT trading hardware right next to the NYSE machines have an intrinsic edge? Effectively, it is a casino and they are the house and everyone else is has a sucker bet. (Don't bother to respond that "anyone can make an investment that indirectly taps into this capability". You and I have to go though so many middle men that we see no meaningful profit.)
Bain Capital is another example. They structured their deals so the Bain insiders always came out ahead. By definition hedge funds use other peoples money. They are not taking the risk, the investors are. If hedge fund insiders come out ahead of investors, it is another case of insiders stripping assets from everyone else. Note that this is a completely separate issue from the impact of Bain on the companies that they acquired.
So suppose you go to Fidelity to invest, and they sell you one of their high end managed portfolios. It's composed of multiple funds also managed by Fidelity. Besides the fee to be in the portfolio (4% annually), each of the funds also charges a fee. The funds trade through the Fidelity brokerage, which also charges a fee. This is at least triple dipping. All the name brand investment firms are the same. If you have a 401K it is almost certain that you have been subjected to this scam.
Beyond this, the bailout from the 2008 crash rewarded the corrupt investment bankers that caused the problem in the first place. The general public in the US saw it's net worth reduced to mid 1990's levels while the stock market has gone up to record highs. This is, in effect, a transfer of wealth from the productive part of the economy to the corrupt insiders. There is class warfare in the US, and the ultra wealthy are winning.
There are two things to keep in mind:
The game is rigged.
All animals are equal, but some are more equal then others.
Why is Snark Required?
This article is really just uneducated scare-mongering.
Stock markets are for investment, not speculation.
Sub-ms speeds for trades implies algorithms are doing the trading, not humans, as humans obviously can't keep up at that speed - they set the algorithms in motion, but cannot control them except by unrolling deals (which happens a scary amount on our current exchanges after flash crashes etc). So the only people benefiting from this market 'liquidity' are speculators trying to take a share of each transaction by ending up in the middle, or manipulate the market to their advantage (being on the right side of a flash crash in the example you cite). Theres nothing wrong with middlemen when they are tightly regulated, but at this speed of transactions they are providing negative worth to the other market participants, and limits should be set on their behaviour, just as we have limits on insider dealing and other abuses of the market mechanisms which would be vastly profitable for the participants (but not for the companies being traded).
If you accept that markets are for investment in companies, it follows we should limit HFT and other abuses of the market - instead of technical limits I would simply impose a tax on each transaction - that would soon remove those market participants who are only there to skim off tiny percentages on tiny deals performed millions of times per second, while not introducing the distortions and workarounds which would be inevitable with some sort of hard limit to transactions or clever system to limit frequency. It would also let us remove some of the obscene wealth generated by the participants in financial markets and use it to support other parts of our civilisation.
HFT is faster, but it is not better or stronger except in some crude darwinian sense of nature red in tooth and claw - that's not something I agree our markets should try to emulate. HFT and algorithmic trading are potentially very dangerous and abstract the products traded until what is being traded hardly matters, which is entirely the wrong direction for our markets. We need more regulation in place to stop this sort of control of the market by a few major players who play everyone else for suckers, just as we should have had regulations on CDOs, CDSs, and the incredibly corrupt ratings agencies who are at the heart of our financial breakdown. We've had far too little regulation of the financial markets for far too long.
My biggest problem with HFT is when the algos screw up AND the exchange rolls back/cancels the trades (presumably if the party that screwed up is favoured by the exchange).
It's easy to make money if your biggest trading mistakes were rolled back.
Trades should only be rolled back if the casino aka exchange screws up, not if the players screw up.
Live by the sword, die by the sword.
There was also a time when HFTs engaged in what was practically front-running (even if legally not considered front-running)- they got a 30 milliseconds headstart to peek at what everyone else was about to do. I suspect in a casino that would be considered cheating.
Considering that the purpose of the exercise is a "man in the middle attack" by definition (using information to buy the shares somebody wants first, bump up the price, and then sell it on to them before they can get it from the initial seller), I think the comparison with black hat crackers is accurate.
An hour might be a tad overkill. I'm thinking that 1-5 minutes is reasonably human-scale.
Someone mentioned not letting machines do the bidding. I disagree. I don't have a problem with that, but, I do believe that the trades should be human-scale.
www.wavefront-av.com
Wikipedia has an interesting article on this idea: https://en.wikipedia.org/wiki/Tobin_tax
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
It is gambling if you go in without information.
Long term investing isn't gambling, but day-trading most certainly is.
Why? You invest money with the hope that conditions are favorable and your investment will increase in value. Sounds like gambling to me regardless of the holding period.
Forget the hacking component, high speed trading is legalized theft. Think about it, the essence of equitable trade is a wealth transfer in which both parties contribute something: I give you money, you give me a loaf of bread, and we both come out ahead. Or in the case of stock you give me partial ownership in a company.
Granted stock trading has always had a certain element of gambling to it, but when it's humans it's still a matter of "I think this company is under-valued and want to buy in before anyone else realizes it". Basically it's a form of risk-management. High speed trading is essentially a man-in-the-middle attack - whereas normally stockholder A would sell buyer B their stock when they felt the market was overpriced, now they sell to speed trader S at a slightly lower price, and person B buys at a slightly higher price. Both A and B, the people actually looking at the market and weighing risks and benefits, have lost some of the value of their trade. Meanwhile the speed trader has profited by that value difference without contributing anything whatsoever to the transaction. They're parasites upon the market, adding costs and instability and giving nothing back - the sooner we ban them the better.
To hear them talk you could build a mid-ocean trading center along the data-lines as just pull money out of the air, making money from nothing. Here's a hint - if it sounds too good to be true it probably is: It's not pulled out of the air, it's pulled out of the pockets of people that are actually doing the risk-management the market was created for.
--- Most topics have many sides worth arguing, allow me to take one opposite you.
Good idea, but why does it need to be a random delay? If every order was valid for a fixed amount of time, say 15 seconds, wouldn't it serve the same purpose?
They could also assess a minuscule fee/penalty for every X # of orders which don't execute. The idea being that the bots who submit and then immediately cancel millions of orders pay a price that a human trader wouldn't notice.
The previous way of doing things involved a specialist taking a minimum of 12 cents on every share traded. That was sooooo much better!
One of the issues in my mind is the algorithms that constantly make offers to buy or sell, just to see what the market will bear, with no real intent to close a deal. Impose a cost for taking back those offers, or force them to make the trade if someone accepts, or prevent the buy and sell offers from being pulled back for a few minutes, or, probably, some combination of the above.
I studied under Laura Tyson and professors who administered the S&L bailout in the 80s. Unlike you, I did do my research.
You failed to mention if you would like to go back to the robber barons days with no regulation. I'm sure you think your clean drinking water, 8 hour work days, safe work places, blue skies, Social Security and Medicare, and civil rights just magically appeared out of thin air?
The reason there are so many problems with government programs is because of rent seeking, people who seek unjustified profits through controlling government contracts and programs. You tea baggers and efficient market theorists do nothing but stand in the way of making reasonable fixes to our problems. When will you learn that government is a necessary evil? The sooner you stop frothing at the mouth and start being part of the solution, the sooner we can get this country back on track.
Stay skeptical, my friends.
If it was the same fixed amount of time, then essentially nothing would change. It's still a race, albeit a race in which all competitors legs are weighted. If the weights were randomly interspersed with air sacs instead of lead, then that would make the race no longer to anyone's benefit to even run.
The eternal struggle of good vs. evil begins within one's self.
Thank you for being open minded. It's a rare quality these days. The market is not efficient, never has been, never will be. As long as we can agree upon that point, there is hope for this country yet.
Stay skeptical, my friends.
One of the purposes of a "market" is to provide a mechanism for price discovery. The markets have instead morphed into a giant scam operation which has nothing to do with this.
There is rampant insider trading. For example, check out the purchase of 'short' positions on JPM the day before the announcement of their big loss. It's blatantly obvious that someone got the info in advance. The federal government has an army of regulators as well as the FBI, and they do nothing to stop this theft.
I've pulled all of my investment $$$ out of the markets, except the equity funds I've got in my 401K., and I'm on the verge of biting the bullet and pulling that out as well.
Sorry, but you can't point to a system that has been almost hopelessly corrupted, and call that evidence that the system as designed doesn't work. That's a logical fallacy.
The irony of a libertarian saying this... Any market success is evidence the market works and any failure is because the government interfered.
Wish I had mod points today. This post says everything you need to know about the stock market -- which is, if you're not the 1% you should GET OUT, lick your wounds and keep your money elsewhere.
If telephones are outlawed, then only outlaws will have telephones.
"Scalping miniscule price movements" thousands of times an hour, if not per minute. - this is essentially theft.
Let's take a drastically oversimplified example, just as a starting point: You want to sell a stock at $30 or more. I want to buy the same stock at $31 or less. In a fair market, our transactions meet and I buy your stock. Depending on how things are set up, the $1 difference in prices goes to one or the other of us, or maybe we split it. The basic goal of HFT and other such technologies is to insert themselves into the middle of other people's transactions. They buy your stock for $30 and sell it to me at $31. You get $30 for you stock, I pay $31, and they get $1 for free.
How is this not theft?
Enjoy life! This is not a dress rehearsal.
Actually the Flash Crash was even worse.
After HFTs lost a lot of money, they manage to get all the transactions reverse.
So this is not a market at all. If they win they keep the money, if they loose they also keep the money.
This is plain and simple stealing.
There's a simpler solution, and it relates to the robot hand playing RPS. When your opponent cheats by being inhumanly faster than you, stop playing the game.
The SEC regulates "public" companies. The FSA regulates trading. Tax-break accounts (401Ks/IRAs) cause more investing than a free market (unbiased taxing) would otherwise have. 401Ks contribute to passive trading. All of these are government manipulations on the market. Just because you can't identify a regulation on a specific trade doesn't mean that it isn't directly or indirectly regulated already.
Citizens United v. FEC has nothing to do with corporate personhood. That concept has been around since the late 1800s.
"Congress shall make no law ... abridging the freedom of speech"
A law which prohibits an organization from running a TV ad about a politician is a clear violation. Remember, the SCOTUS doesn't "legislate" or weigh the predicted results of the decision. They interpret the Constitution, and they made the right decision.
Financial de-regulation is a red herring. The politicians want you to believe deregulation was the problem for a multitude of reasons. First, the people that did it are long gone so there's nobody to vote out. Second, it gives the appearance that no laws were broken, and third, the fix is easy. More regulation. It's BS.
Government has at least 4 agencies specifically to regulate the financial sector and the FBI to investigate. They have all the regulations and evidence they need. The problem is that the feds literally will NOT enforce the existing laws.
"Money is Not Speech"
You guys DEFINITELY need a better meme. That statement is completely meaningless. IMO, it gives the impression that only word-of-mouth is immune from government infringement.
Of-course it is a casino. The reason it is a casino though is 'free' money - fake cash (credit) handed out by the Fed to the preferred banks and non-existing interest rates. The real reason for existence of this phenomena is that Nixon defaulted on the dollar in 1971, and since then the money stopped meaning anything.
This default and growth of inflation (money printing) and the resulting growth of gov't and gov't power caused massive outflow of real savings and investments and thus productive capacity to other countries.
Left with only fake money that the world is still willing to take (I wonder for how much longer this will go on, can't be much longer now, the Fed is pretty much out of bullets to keep interest rates down except printing, and thus more and more inflation, which will further diminish desire of people to sell for US dollars), so left only with fake money and no production and a huge gov't apparatus, the sectors that became big are all sectors connected to the government - from banks to military to insurance to energy, and such.
The Wall Street it a giant casino, but it's only a casino because the money is fake and gov't guarantees losses.
You can't handle the truth.
But the money isn't speech. The ad, pamphlet, etc is. Citizens' United decided that corporations had a Constitutional right to free speech. If they did have such a right, then it wouldn't be fair to limit their expenditures. But the obvious problem with that ruling is that corporations don't - and shouldn't! - have a right to free speech.
Corporations have to be people so they can own things and we can sue them. That's a well-established legal fiction. But they don't inherently get any human rights because of that. I, and many-to-most other people, think that granting corporations human rights is a mistake. What's next - the right to bear arms?
I have developed a truly marvelous proof of this comment, which this signature is too narrow to contain.
We got here through Capitalism... because corporations want power and they can rig the government game in their favor.
- we got here through people always wanting to get something for nothing, and thus they kept electing guys who promised something for nothing. From Theodore Roosevelt and Hoover and FDR all the way to Obama, and everybody in between actually.
Free bread and circuses - people vote for politicians who promise this nonsense, that's how government grows, gets out of the bounds and limitations imposed by the law above gov't - Constitution, that's how gov't corrupts the entire system.
It shouldn't be a surprise that individuals fight back (and I mean businesses, they fight back), they come to politicians with money to buy that power. But politicians were and are stilling that power only so that they could sell it and it's the people who allowed the politicians to steal that power.
Once the power is stolen, it will be sold, there is nothing that can stop that.
You can't handle the truth.
The reason as to why companies do not pay dividends but instead stocks are traded only for arbitrage is that the corporate bonds don't have to compete with gov't bonds - the interest rates are artificially low, thank the Fed.
You can't handle the truth.
Millisecond trading bots buy and sell in a period of time sometimes as short as 50 ms or even less. A 0.5 to 2 seconds random delay is more than plenty to screw them up and still keep every conventional trader happy. More delay would raise opposition amongst conventional traders that order from their office, not in a data center next door from the stock exchange.
Everything I write is lies, read between the lines.
By the way your example doesn't show any real problem.
Both, Joe and Jack are willing participants in the trade, both got their preferred prices, the 0.02 cents was cut out of their trade, but it didn't do anything to hurt them that a little bit more bargaining wouldn't have.
The problem with HFT is not that it does what you describe, it's that there is no free market and so people can't just start their own legal stock exchanges and set their own rules.
You can't handle the truth.
The real problem with FB IPO was that FB wasn't allowed to trade their stock earlier, they weren't allowed to trade on the open market in 2010, when the prices were still not crazy, and so the gov't "protected" the general public from the "dangers" of buying a stock, whose price is still NOT manipulated by the system. People should be able to offer their stock without having to comply with nonsensical gov't regulations, it's up to the market to do research and buy or avoid a stock, gov't shouldn't be 'protecting' people. The only thing gov't is good at protecting people from is actually being able to build up savings and have meaningful investments, and governments do it with regulations, inflation (money printing), fake interest rates, taxes, etc.
You can't handle the truth.
OK a bit of a pet peeve here. WTF is wrong with the US. Why the Frell do they have have things like SCOTUS, and POTUS, etc... it is stupid. We get it. You live in or are talking about the US. I don't need a stupid short form for that. Also it is a stupid short form, as you take "O" from "of" for %^# sakes and "T" from "the". Call it the Supreme Court or the President for the love of all that is holy like every other country in the entire world.
I don't call it SCOC or PMOC if I live in Canada. Do you know why? Because I'm not an idiot, that's why!
Whew. OK rant done.
I don't think anyone is saying that speech is limited to what comes out of your vocal chords, or that only individuals have the right to free speech. A political group (political party, PTA, group of concerned neighbors) have a right to speak with one voice. But, I don't believe that a "Corporate Entity" should have the same rights as these sorts of political groups. A corporation has as it's sole motivating factor profit. It's voice in the political system will only pursue governmental action that promotes its own interest ie profit. Profit motive can and does often lead to actions that are detrimental to the society as a whole. Examples of this are everywhere toxic dumps, lead paint in toys, slave labor in the east, promoting monopoly power and on and on. We cannot allow corporations political speech and expect that everything will work out. Government should be the instrument of the People. It should restrain the actions of corporate entities not be their tool.
No sigs in BETA. Beta SUCKS.
Wildly inaccurate. The typical spread (prior to decimalization) for actively traded issues was more like 6.25cents (a sixteenth), which was the difference between the bid and ask prices. A market-maker (or specialist) would typically kick back some of the spread to both market participants in the form of "price improvement", so the actual spread pocketed by the market-maker was probably more like 3-4cents.
For this, the market-maker assumed risk by committing capital to maintain a position in a security, and also was responsible for "maintaining an orderly market" in the securities in which it made markets. (In practice, NYSE specialists were much more accountable than NASDAQ market-makers).
In retrospect, this appears to have been a small price to pay.
Romney is promising to re-Bushify the stock market if he gets elected. That means Wall Street is going Romney. That means huge sums of money are being poured into his campaign and if he wins , the market stands a good chance of cratering the economy again.
And how many times do you fall into a promise by a politician? How many times a politician keeps their promise if ever? Whenever the time comes, every single politician would have an excuse to their promise. One of excuses I have heard (a lot) is that it is not on the top of the priority and would get to in the "second" term. I would call it a big BS whenever a politician makes a promise. Those who believe in their promise are dreamers and submissive believers.
Using the roulette wheel analogy, I would say HFT is like all of us normal people having to place our bets before the wheel spins while the HFT guys (or at least whichever one has the the least latency/best algorithm) gets to place the bet just as the ball is about to stop moving.
Yes this, it is insane to hear people rant against the government (military spending, PATRIOT ACT, SOPA etc) in one breath then say there needs to be more government regulation of stuff in the next. It really is just incoherent. Both major US political parties have incoherent platforms. You want to have limited government but a strong military? Guess what, eventually everyone will be working for the military and receiving VA healthcare and government pensions
Also, incorporation is literally a product the government sells to people. You give the government money and then you can have protection from it's justice system. If you have a problem with corporations you have a problem with government.
In many physical problems (like the study of water waves) there are multiple length and time scales, each of which can be approximated separately. See
http://en.wikipedia.org/wiki/Method_of_multiple_scales
In equity trading there appears to be at least three time scales. Fundamental analysis functions over a period of months. Technical analysis (used by day traders) works over periods of minutes and seconds. And then there is high frequency trading (accounting for over 70% of equity trades in the US in 2010) which works on the millisecond or microsecond scale.
Some persons in this forum has suggested that the millisecond scale be eliminated.
http://en.wikipedia.org/wiki/Front_running
Front running has been illegal for a long time in the USA, but as long as the second trade is made after the initial trade (even a microsecond later) it is legal. My problem with HFT is that if a person does not have access to a millisecond trading, then for all practical purposes the second trade is front running.
The SEC needs to step in and regulate this inequity. Let the HFT bitch and moan. A one second one trade rule would eliminate an advantage of a nearby server.
You only need to beat 50-50 to make it profitable to trade as frequently as possible
Yea I get that. What are some successful examples of reform? Have the same laws/regulations used to implement the reform later been used against the best interest of the same people who supported them?
Why not trade once every thousand years, if speed of market doesn't matter?
Because it matters to a human timescale. STM isn't like a medical procedure, where seconds or even milliseconds may count.
You're not going to beat out a competitor by getting your product out a few seconds earlier. Probably not a few minutes earlier either.
Hours? Maybe
Days? Getting more likely...
But milliseconds or microseconds?
Until we get a race of sentient androids purchasing their own stuff in bulk volumes... probably not.
That's not true at all. Stock is for investment. Stock markets are for speculation on future value of stocks (sometimes including dividends). This is the fundamental purpose of stock markets.
Sure, I agree that HFT presents a problem, but not just because of the frequency of trades, but because the HFTs have different access to information in the market than other investors. It's the information asymmetry that allows HFTs to take a cut on almost every transaction -- and only the big boys with mountains of cash can afford the co-lo and setup to get the information advantage.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Simple solution has already be proposed. Queue trade requests in such a way that a random delay is inserted. The delay will be negligible and go unnoticed for humans but it would definitely screw up milliseconds traders.
There is always an easy solution to every human problem — neat, plausible, and wrong.
-- Henry Louis Mencken, "The Divine Afflatus"
The issue here is not technical but rather political: the people in the position to do something about the problem are those who benefit from it (either directly or indirectly).
HFT, insane "Intellectual Property" laws, Hollywood accounting -- they all benefit "those that matter" (or those that benefit those that matter).
They will never be fixed because, in the eyes of those that could fix them, they are not broken.
Yes this, it is insane to hear people rant against the government (military spending, PATRIOT ACT, SOPA etc) in one breath then say there needs to be more government regulation of stuff in the next.
- yes, it's insane, I have never said in my life that there should be more government in anything, I challenge you to find a comment like that of mine.
You can't handle the truth.
I'm going to go out on a limb here, but I'd say they probably decrease the buy/sell spread. I'm not sure it's a suitable trade off, but there it is.
I won't join Slashcott. OTOH, If Beta goes live, I just won't be back until it's fixed. Sorry Dice.
I don't believe I would.
What benefit does this kind of trading provide to society, or even to the companies whose stock is being traded?
Seems to me that this is the kind of thing that's run up the price of oil, food, and a lot of other things, which hit me, personally (I don't expect a good percentage of slashdotters consider their wallet, the Freeness of the Market overriding their own "enlightened self-interest").
A real tax on assets held under, say, a week would provide a *lot* of money to provide social programs needed by the folks who've been screwed by the traders who engage in this.
mark
"Derivatives, HFT, the works all have legitimate, valuable reasons for existing."
Craps tables have reasons for existing, too, as do back-alley dice games. They all have good reasons for existing.
But if you were a bank, in which many innocent people had deposited their money, should you be allowed to "invest" it in a back-alley dice game?
The fact that there may be reasons behind them does not mean they are appropriate investments by just anybody, nor does it mean they are good for the economy. Nor does it make them "capitalism".
Capitalism is the investment of capital for the purposes of profit. Cut the situational re-definitions.
Analogies don't equal equalities, they are merely somewhat analogous.
It is not fallacious logic.
1. It doesn't worry me that professionals don't do better than index funds or monkeys - it's why I don't pay a professional investor to invest for me. It's not worth it. However, putting my money in the stock market is NOT the same as paying roulette in Vegas. In the stock market I have an expected return greater than zero (formally, E(r) > 0, or the market goes up on average). At Vegas, the expected return is less than zero (E(r) 0 (to high probability over sufficiently long periods)
E(rVegas) 0 and E(rPro) > E(rVegas)
2. Asking what happens when the index listings themselves come crashing down doesn't mean more than asking what happens when you have a lucky streak in Vegas. The market as a whole drops sometimes. You will lose money if you buy then sell at those times. Sometimes you win money in Vegas too. It doesn't mean that the market is a casino anymore than it means Vegas is a sound investment strategy.
Professional investors appear to be leeches - they demand high salaries but don't add any value, except perhaps for insulating individuals from making emotional trades, which is certainly not worth what they're paid. That DOESN'T mean that the stock market is a casino.
"Gambling, by definition, is seeking to profit from a random event that is generated SPECIFICALLY so people can bet on it."
Okay, but so what? The reasons behind it don't change the way it works, one little bit.
"The risk that the price of corn is going to go up or down has NOTHING to do with the fact there is a futures exchange."
Bullshit. Of course it does. IT'S A GAMBLE. Some people will win, and in a commodities market that means some people will lose. You are making a bet. Plain and simple.
"The futures trader is willing to assume that pre-existing risk in the interest of making money, while the farmer is happy to have someone to take that risk off their hands."
Of course. But again: the reasons behind it don't change the fact that it's essentially gambling on the part of the investors.
"The risk has always been there, but a futures exchange allows people to transfer that risk."
Yep. By letting others bet on it.
Quite clearly king's unilaterally making shit happen doesn't count as regulation and purchasing power per unit of currenc trumps every other measure of efficiency.
Analogies don't equal equalities, they are merely somewhat analogous.
Meh. Slashdot ate my math. Good thing I didn't paste MathML.
"Unlike you, I did do my research."
Haha. You didn't do it very well.
"You failed to mention if you would like to go back to the robber barons days with no regulation. "
actually done your research, you would know that the days of the "robber barons" were among the biggest economic booms in all of history. Further, the so-called Robber Barons themselves, while admittedly growing rich, stimulated the economy so much in the process we have seldom seen the equal. (Source: "The Politically Incorrect Guide to American History", by Thomas E. Woods. Woods is a noted Harvard-educated historian, and unlike you, he gets his facts straight.)
More twisted history:
"You tea baggers and efficient market theorists do nothing but stand in the way of making reasonable fixes to our problems."
Fact: the more "fixes" that have been imposed by government, the worse the economy has been invariably. There is a very clear, easily visible when charted, NEGATIVE correlation.
And you sit there and tell me you "did your research". Hah. What a joke.
I do see your point, but I still disagree. The money market is the epitome of capitalism. Essentially, the money market is a way to move capital, very very quickly, with a minimum of impediments. People who make money off the money market are profiting purely from their ownership (or borrowing, or managing for someone else) of capital. Do I think it's a good thing? No. But then I've studied what unfettered capitalism actually means.
The situation actually has interesting parallels to the problem of absentee landlords - both occurred when too much of the capital was concentrated in the hands of a very few, those few were very isolated from actual production (and the people doing it), and were instead concentrating on growing capital purely through controlling capital.
Further, if I were you, I wouldn't go around bragging that you studied with Laura Tyson.
She was influential in supporting GATT, which since its implementation has arguably had the opposite effect of what she predicted.
She was a board member of Kodak, which folded quite famously due to its market blunders. She has been on the board of Morgan Stanley (hardly a recommendation these days), and a member of the CFR (never a recommendation on the best of days).
In short, precisely the same kind of consistently wrong -- and likely corrupt -- person as those others who have been behind the economic MESS we have been in.
And you cite her as a mentor. Hahahahahahaha!
One reason for lesser capital gains taxes is investing supposedly creates jobs. By that line, we start lower capital gains taxation when the money has stayed in that business for a full year - reasoning that a year is certainly time enough to create a significant job. Making this a more explicit principle of gains taxation would mean several changes:
1. The money would have to be invested in businesses that create jobs in this country (the USA in my case - non US slashdot readers may want to compare what I'm describing with the way their markets and tax systems work), and probably we would have to set a threshold, such as 50% of the jobs, or 50% of the payroll, or something like that.
2. You couldn't get the better capital gains rate for a mutual fund unless it had kept its investment portfolio so it overall met the same rule as though it was an individual stock. Yes, that could get very complex, with a muni for example, investing more in a company that has 80% US employment just to get some flexability in selling off some other low performing but profitable stocks earlier - but note that particular complexity is something that might be good in itself. We don't really want investors to be looking for ccompanies with 50% of their employees in the US, but ignoring ones with 60%, 70% or more because it more than meets the minimum required, not if more than meeting the minimum is beneficial to the rest of the country.
2a. You probably can write the rules so individual investors can get the same ability to count some investments in offsetting others as for mutual funds and institutions, but I'm leaving that as an exercise for the reader.
3. Since you dont pay gains taxes on an actual loss, this doesn't stop investors from selling off losses without a waiting period. By itself, such a system doesn't change the laws about claiming losses to offset profits on your taxes either. That might be a good thing, in that we aren't tweaking both ends of a feedback loop at the same time.
4. Obviously, microtrading would be the exact opposite of this system, and likely the first thing banned. However, if you cannot get the better capital gains rate on hyperfast transactions in such a system, most, if not all, of the allure is gone, so maybe the law doesn't have to specifically ban anything. People might still use HST in selected circumstances to deal with such issues as needing to free up funds for a more profitable investment they anticipate, for example - it's just they would generally be beaten in the market by the people who rely on holding on for the long term, unless their market projection was very, very good.
5. There's a lot more involved in crafting such a system for the real world, such as how business bankruptcy and recovery of assets by shareholders affects such a system.
Who is John Cabal?
Well I do not think it is fare to say that investing in a company creates jobs in general. It could, but participially, if that company is set on staying in the US then there is a good chance that the money would be used statically more often to increase automation and fire workers then to hire new ones.
Troll is not a replacement for I disagree.
I do believe Taleb calls such things Black Swan Events. Whenever people start saying something will always to continue to happen and they begin to invest like it will always continue to happen, it will stop happening. Usually these events are spectacular.
Mod Parent UP.
"Maintaining orderly markets" is something that HFT will eventually settle into as the technology hits a fundamental level.
Prices have come down since the days of specialists, and this is something that people conveniently forget.
The goal of capitalism is to make money doing absolutely nothing of value? shuffling millions of fractions of imagined pennies back and forth in the ether, with a computer program at near light speed?
No wonder so many people have lost faith in capitalism! It has clearly become a shadow of its former self if "this is capitalism" as you say.
As a potential lottery winner, I totally support tax cuts for the wealthy
And by the way (you didn't answer, but I think I know the answer):
In the barely possible but highly unlikely event you are the "real" Vernor Vinge: I loved "A Fire Upon The Deep". Very unique premise.
Didn't care much for the prequel, though.
Gambling, by definition, is seeking to profit from a random event that is generated SPECIFICALLY so people can bet on it. Why do horses run around a track? So people can bet on it. Why do people throw dice at a craps table? So people can bet on it. Why does the blackjack dealer distribute 2 cards to each player? So people can bet on it.
So you are trying to tell us that betting on a boxing match or the world series is not gambling because the event was going to happen anyway? You sound like you are in denial about what you do!
-- ssoorrrryy,, dduupplleexx sswwiittcchh oonn.. -Quote found on actual fortune cookie.
I recommend everyone watch this TED talk about how the current stock market works. People don't even know what's going on in the market anymore, it's a completely uncontrolled environment.
Yes it is insane to keep trying the same thing over and over if it doesn't work. It's even a cliche.
Speaking off the cuff, with no research on hand.
However...I must admit that when someone says "oh, we're bad now, but if we hadn't done X, we'd be much much worse", my first reaction is to judge that statement with about five tons of salt.
I wasn't so much thinking of putting in a fixed delay in execution, as I was thinking to have the executions all take place at a specific time, say, the top of the minute. The smaller traders you refer to can prepare a batch of trades and send them, and at the top of the minute, they are all executed with everyone else's.
It works for electricity traders at five-minute intervals, so why not?
www.wavefront-av.com
The point I don't understand is, "Who cares?"
My company needs to raise some money, so the board decides to issue some stock. Mr. Wall M. Street give me $100/share for it. After that, it enters the machine, and these guy's programs tell each other that it ranges from $80 to $120/share, and they pass imaginary money back and forth while doing it. Meanwhile, my company is using the money it collected to build a new data center. The E level company officers might care, because their bonuses are based on what the imaginary price is today, but why should I?
Aah, change is good. -- Rafiki
Yeah, but it ain't easy. -- Simba
Also it's easier to cut a important piece of fiber connecting your servers to the exchange when it's in Ohio vs NYC.
$10 per transaction that takes 2-3 seconds to execute because the high speed trading algorithms need to figure out how to best manipulate the price you pay/get before your order actually gets executed.
http://www.nanex.net/aqck/3099.html
Nasdaq was totally F*d when Facebook opened, and yes it is thought that tons of HFTs pouring in caused this. What effects not being able to sell or buy correctly on opening day had on the stock are unknowable. It might have tanked faster, or it may have went up, but when the market acts spooky traders get spooked.
Now, personally, I do believe the facebook stock was a turd ready to tank and any position long held long enough would lose money, but there were serious execution problems on opening that could have very well caused his losses.
"It's clear you are not able to accept the fact that much of the quality of life you have right now is due to some level of government 'interference' in the free market. "
Yes, you are quite correct. I admit that I have trouble swallowing bullshit that is provably contradicted by the actual historical record.
"You offer no alternatives to the current system either."
The discussion wasn't about alternatives. I certainly do have them, as do many economists who haven't been taken in by Keynes and Government money-mongering.
I agree. This debate is concluded. I offered a source for evidence of my claims, you have not.
Don't worry, wall street makes outlandish profits from art, real estate, and CDs too.
Man, you really need that seminar!
Right. We have a word for a "person" who is solely concerned for profit and whose "speech" is only concerned with inducing others to give them money.
That word is sociopath.
Since corporations are people entitled to free speech, it's instructive to compare the requirement that corporations MUST invest their money and conduct themselves ONLY for the the purpose of maximizing profits for themselves and their shareholders , as opposed to helping other people or serving some abstract good::
http://www.litigationandtrial.com/2010/09/articles/series/special-comment/ebay-v-newmark-al-franken-was-right-corporations-are-legally-required-to-maximize-profits/
with the definition of sociopath:
From http://medical-dictionary.thefreedictionary.com/Sociopathic+personality+disorder
A condition characterized by repetitive behavioral patterns that are contrary to usual moral and ethical standards and cause a person to experience continuous conflict with society.
Symptoms include aggression, callousness, impulsiveness, irresponsibility, hostility, a low frustration level, marked emotional immaturity, and poor judgment.
A person who has this disorder overlooks the rights of others, is incapable of loyalty to others or to social values, is unable to experience guilt or to learn from past behaviors, is impervious to punishment, and tends to rationalize his or her behavior or to blame it on others. Also called antisocial reaction ...
Oh and one more thing that differentiates this sociopath from real humans- it's rich beyond 99.9999% of humans and it never dies.
In a more romantic time, Mary Shelly called this Frankenstein.
Why should a privileged third party -- other than the market maker -- be entitled to making a buck as joe and jack complete their trade? Where does this third party add the slightest value?
No one is saying you cannot exercise your free speech rights, you just can't donate unlimited money for the purpose of electing your candidate. If we're not all limited in spending some amount of money .that a large majority of people could, with some pain, conceivably spend then you get elections which are warped by the voices of a minority. That is a fact about the world. Trumping this issue up into First Principles and trying to muster a defense of it there is a the thinnest of thin veils behind which anti-democratic forces are hiding.
Laws have consequences, and if those consequences have patently ridiculous consequences in the real world which strongly to pervert democracy, then the law or decision is by definition bad, and there is no other definition we need to appeal to.
We live in the real world, not an Aristotlean hypothetical construct. In the real world, people have limited lifespans during which they have a right to expect achieve a decent life. Citizens v FEC is a decision on par with the Dred Scott decision . A complete and utter perversion of justice and reasoning, an incendiary partisan stroke which has the effect of ripping the country apart and pushing us further towards civil war. This is exactly what Citizens v FEC does, since it gives effectively unlimited power to just those voices who are littering our public discourse with outright lies about the one issue that WILL send this country into civil war- global warming.
Reality is one way, not many ways, not as many ways as there are opinions. That reality can be personified as a son of a bitch with a bad attitude and a 14 inch strap on. You really don't want to get into an argument with reality, because the consequences are both horrendous and inescapable. But that's exactly what these power brokers are doing and the Citizens United decision is the force of law they needed to continue to elect their candidates to office in exchange for the continued denial of a reality that will not be denied.
Citizens United will truly go down as one of the landmark events that led the United States of America into its Second Civil War.
So make the batch time quanta smaller - from a couple of seconds to a few times per second, or whatever is technically feasible. The net effect still ends up being the same, and investors can still react quickly to news and other factors that may legitimately influence prices. The idea is to attempt to put the entire market on a level playing field, where no one participant has information ahead of time that isn't available to everyone.
Please stand clear of the doors, por favor mantenganse alejado de las puertas
You simply restated your opinion without providing any backing and ignored my example. So are you saying that facebook raising $16B in their IPO via Wall Street is not an example of capitalism?
We make laws and the entire concept of a limited liability corporation is a fiction on our part springing from our creative minds and not nature or Ayn Rand's crotch or any other such place.
We decide what properties a corporation will and wont' have . The whole idea of a corporation came about for a purely utilitarian- no ideological- purpose. Even rich people won't invest in ventures which would benefit society if they risk that venture's failure bankrupting them personally. So we developed this FICTION of limited liability entity which to render the useful effect of forming a legal bulwark against financial claims against corporate investors and officers.
To listen to the Republicans tell the story, God Herself came down and created the corporation right after he was done with Adam and Eve and a corporation MUST of biological and moral necessity have all the rights of a natural person.
OK now go online and make yourself a bumper sticker and tell everyone you saw it here on good old Slashdot first:
Corporations are not people and you're not my friend.
"Corporations aren't people and you're not my friend"
into the public domain and the publishing of this comment by slashdot shall serve as a binding legal agreement to the above.
Here is the problem with your thinking: you think greed is bad, inherently terrible and humans are irrational, but then immediately you want to give more power to the government by reducing freedoms of individuals (and while corporations are fiction, not real entities, people behind them - the owners, they are real) to use all of their abilities and property to fight the system and get the best outcome in this rigged environment. So people are irrational and greedy, but government will be rational and selfless for the benefit of all?
Get real. Yes the government is a deliberative body that acts slowly and after debate and until lately, compromise. and yes now very imperfectly but that's a HELL of a lot different than the forces that govern the actions of individual humans.
Sorry but the rule of law, the administration of law, the courts, the process of lawmaking and our government are awesome creations of the human mind on par with any science or technology you care to point to.
People without government has a name- it's called Somolia.
You VASTLY underestimate the complexity of what it is the government deals with every day and the types of problems is solves. Humans and the regulation of human conduct and intercourse including the calculated limiting of opportunities for individual and group despotism is by FAR a more complex undertaking than ANYTHING in any hard science since it itself is the end product of the collective effects of all those sciences and , frankly, all the good experiments on society and people which would would give clear results are immoral and illegal, and rightly so.
I am still reading your post and THIS is some unintended irony on your part:
and it's always worse for people when it's their government, that abuses power over the people, than any particular individual or company, because individuals and companies do not have legal standing to abuse you
Yeah and just exactly why do you think that is? Because government , the collective we, makes laws that prevents them from abusing you and behind those laws are men and women with guns and a legal system with jails.
I think people have a hard time imagining what their reality would be if we all actually did a Ron Paul and just let the greedheads and corporations and the rich and powerful rip.
In some sense all this kind of thinking is some form of sign the Tea Partier was holding which read:
. "Keep your government hands off my social security. !!!"
Also, incorporation is literally a product the government sells to people. You give the government money and then you can have protection from it's justice system. If you have a problem with corporations you have a problem with government.
No, actually, I can approve of some government actions and policies and disapprove of others.
Hope I.... I don't know.... broadened your mind and thinking here today
Gaming the system isn't a problem as long as there is a way for other people in the economy to set up competing systems and set their own rules, try and do that today.
Uh, no. Gaming the system is an English language phrase which denotes a negative consequence has in fact been reached through devious means .
What your're saying is they are not gaming the system, they're playing by the rules and it's not a real problem.
Always say what you mean.
With over hundred thousand regulations in banking, finance and investment industries, with things like the Federal reserve with its fake money spigot, fake interest rates, fake insurance by gov't (like FDIC, FHA, SS, Medicare, etc.),
Oh yes as opposed to REAL money and REAL interest rates and REAL insurance.
All these things are fictions in their very nature, as is money itself. "fake money" is money that people don't agree to treat as money. All others are REAL including that which issues from the Fed.
Here is the problem with your thinking: you think greed is bad, inherently terrible and humans are irrational, but then immediately you want to give more power to the government
Here is the problem with your thinking. You don't realize that people behave differently depending on what context they're put in. If you're a CEO then that's one context and you make decisions based on one set of values as we've been discussing here. If you're a lawmaker or a judge or a congressperson, then you make decisions based on other definitions of value. We only have humans to work with, so the challenge is to create and then make structural those contingencies which tend to cause humans to behave in pro-social ways.
We're all bad under some set of contingencies - rewards and punishments- and all good under other sets of contingencies, where "all" really means the vast vast majority of us.
The people who are now operating outside of those would be contingencies and are currently being incentivized by things those contingencies would forbid FIGHT LIKE CRAZY to stop those contingencies from being put in place. They're like junkies or crack heads who want to keep feeling good in just the way they've become addicted to, no matter the consequences for everyone else.
The agenda is always the same- learn - through various means experience, and science being the best ones , how to construct contingencies in society so that pro-social ends are achieved by the everyday economic and social activity of humans. Then make those contingencies structural by passing laws. There is no other way to organize society.
So people are irrational and greedy, but government will be rational and selfless for the benefit of all?
It works that way MORE when there's democratic government and LESS when there is not democractic government, that's what we can say.
I don't think so, I disagree with you, history disagrees with you, there is no example in history where the government with power was not abusing it,
Strictly speaking, there is no population of individuals who has not abused another population to the limits of what they think they can get away with with or without government. As we organize more closely and democratic governments and the democracy they make possible take hold. there is LESS violence, LESS war and LESS human conflict and MORE progress . Non democratic governance schemes based on irrational beleif systems- Communism, Bolshvism, North Korea etc etc cannot be compared to democracies. The forgoing in fact are what human life devolves into when there is no strong democratic government. When there is, you get Finland.
Stop reading Rousseau- we now know he was just wrong.
I don't trust government, I don't trust people, I don't trust people in government. I much rather see the same people that I
No, I disagree. Prior to HFT, rich people, countries, and those with connections made out best. Historically if a big bank or big business wanted to change their currency holding to alter their risk exposure, they had to partner up with foreign entities or branches. And the liquidity was limited cause there were so few buyers and sellers.
For small businesses, banks, and regular people this translated to very high costs in currency transactions. Simply put, the big guys were taking higher risks that massive fluctuations could occur. They hedged this risk with inefficient methods of keeping vast amounts of foreign currencies, limiting the percentage of currency transfers, or bullying their partners to pay in specific currencies. And that wasn't even taking into consideration of what politicians felt like doing Monday morning.
With HFTs, the information of every movement of currency is instantly instilled into the various clearing houses and the global exchange rate is reflective of the new information. Additionally, they could predict the decision making of politicians and compensate for it. Basically spreading the Monday's massive price differential over a period of 1-6 months. What results is less price variation over time compared to the past. Yes, it fluctuates a LOT, but do we care how much it does when its within a 0.01% range? So the regular Joes can send something as little as $1000 over to many countries with NO transaction costs and a 0.05% variance from the current exchange rate. This was NOT possible in the old days. This only happens cause of the level of liquidity and price stabilization in the global markets. You STILL see this when you go to foreign Airports and see the currency exchange counters. Match it up to your iPhone brokerage App and see the spread those counters need to keep the risk down cause they handle slow moving physical cash that they must hedge on the back end. Compare them to counters from the old days which had even larger spreads.
Take Greece, we worry about it and get prepared for either path they take. We couldn't do this 50 years ago. We had to wait till Monday 9am to find out what to do and if it was the drachma, hope we got to the bank windows by 1pm else they ran out of Euros. Only the politicians and those connected spent Friday setting their affairs straight. With HFTs, it is still bad but it evens the playing field between the rich and poor. Every transaction is treated equally and accumulates in setting the exchange rates globally for the two currencies. You already know what is going to happen Monday based on the politicians "secret" preparations for Friday on Thursday!
That is how I used to think actually, until I broadened my perspective to see governments for what they are. All a government can offer you is throwing shitloads of money at a problem or use violence (lock people in cages or kill them). I won't say it is never in my best interest to have this around...but from what I have seen, more often than not government solutions cause more problems than they solve.
Uh, no. Gaming the system is an English language phrase which denotes a negative consequence has in fact been reached through devious means
- well, you put those words out there - 'gaming the system'. The system is already broken, before anybody introduced HFT, because the system does not allow competition in the market, and so gaming it may carry negative consequences in your mind, but AFAIC it is just a consequence of the previous 'gaming' that was going on. As I said: in a free market economy, without gov't meddling, 'gaming' is not a problem. That's right, somebody doing something negative in a free market environment is only part of the overall economy, and they will not be able to destroy the economy in a free market by gaming some part of it, because a free market economy is self correcting, and somebody abusing part of it will not cause a catastrophe, it may cause some damage to some people, but it's always limited, it doesn't propagate throughout the entire market where there is no gov't intervention.
All these things are fictions in their very nature, as is money itself. "fake money" is money that people don't agree to treat as money. All others are REAL including that which issues from the Fed.
- real money is something that is not manipulated by the gov't and it keeps its value, real money is gold, paper is not.
Here is the problem with your thinking. You don't realize that people behave differently depending on what context they're put in.
- false, that's not a problem with me, a market free of gov't meddling is exactly the admission that meddling is counter-productive because gov't cannot see beyond its direct action.
Do you know how many people lose their jobs or end up without jobs and how the economy suffers because of gov't intervention, gov't caused inflation, meddling with the market? Do you know it? Can you understand the unintended consequences? Do you know that every piece of legislation that is created backfires specifically because of the fact that people modify their behaviour?
When taxes are increased in some brackets, less is collected in those brackets, not because the money flow is decreased there, but because people modify their behaviour and the way the money is paid out. People who prefer free markets prefer them specifically because they understand that people modify behaviour as a response to the force applied to them - rules, laws, regulations, taxes, inflation, these are all game changers, they cause people to find ways to avoid this damage.
Internet routes around the damage, same thing with economy - people route around gov't caused damage.
It works that way MORE when there's democratic government and LESS when there is not democractic government, that's what we can say.
- aha, because the voters are so well informed and they care not about their immediate gain but instead they care about long term sustainability, so they don't elect people into office just for promises of free stuff.....
oh wait, that's the exact opposite of the truth. The truth is that democracy leads to tyranny because it gives people ability to exchange their real freedoms for some promises of free bread, circuses and convenience.
Oh, I never read any Rousseau, stop pretending you understand why I think the way I do.
Good so don't go into government . Most of the problems with our government happen when people who don't believe in it go into it.
- no, if I went to gov't I would only go there to take it apart and destroy it, that's why I don't go into it and that's why I won't be allowed to. Most problems with gov't are because people don't understand the principles of governance, and so they allow the gov't to rule them instead of serving them. People want free shit, that's all there is to it, it's not more complex than that. They vote for crooks that promise free shit.
Th
You can't handle the truth.
Cuban is right, as is this poster. Algorithmic progrm trading is simply the insiders gaming the system at the expense of the ordinary players, and they will leave the market when they realize this. How long do you think any other gambling casino would last if it let some players do this?
In old capitalism, you hard labours were exploited by the guy that owned the mine or owned everything in town. That guy was essentially doing nothing too. I'm not saying the current system is perfect, but I don't think a lot has changed.
I totally agree with you. That's bullshit in my opinion too.
Then should we roll back all limits on campaign contributions by individuals also? Is that next for this Supreme Court of the United States (for my Canadian friend who does not like the SCOTUS POTUS designations)
I don't get why we have to make ourselves artificially stupid when we consider these things. As a matter of fact, campaign contributions ARE a form of quid pro quo between government and corporations because corporations are PROHIBITED by law from spending their money on other than maximizing revenue.
So the corporation gets laws passed that help its corporate officers get rich and the politician gets re-elected. What can possibly be the problem here?
Someone tell me why society should be compelled I have to act as though it doesn't know this true fact about the world. You know what you call a person who ignores reality in favor of some narrow unyielding doctrinaire interpretation of events? A fanatic.
Elections should be publicly financed from tax dollars. Corporations are a legal fiction to begin with and a specific embodiment of of "association of people" with very specific and unique properties. There are all kinds of laws that prohibit, limit and require what they can and cannot do don't apply to real "associations of people" . The reason for this is because society understands that corporations are not merely "associations of people", but something with unique characteristics which need to be addressed in law.
The argument put forth here and in the ruling, that corporations are merely free associations of people and as such has all the free speech rights as any other association of people is a joke on the face of it.
Under this interpretation, a church is free is to tell it's parishioners who to vote for also. Is that next?
Sorry, I cant will myself to be simply stupid about the world. For people like Clarence Thomas who nearly NEVER says ANYTHING at all from the bench because he KNOWS what's likely to come out of his mouth prove to all how absolutely unfit he is for his position, I understand that there is no effort needed to will yourself into stupidity and ignorance, it comes quite easily and is in fact your natural state.
Publicly financed elections. That's the solution.
I'm really curious how you think you know this- As I said: in a free market economy, without gov't meddling, 'gaming' is not a problem.
This is a statement about the real world and how it operates. So how do you know it's true?
Also you can kick around notions like "free market" but it really has no definition that reasonable can agree on in its specific details. It's just a complex, aggregate noun phrase with no specific real world referent.
People act as though the mere naming of an imaginary abstract entity somehow makes that entity a real thing. Like unicorn.
I know that in the real world 'gaming the system' is irrelevant to the health of the economy, because it is limited to the people who are involved, and in the free market there are no 'too big to fail' banks, there are no monopolies, there are economies of scale, but no monopolies. In the free market somebody CAN game the system, they can steal your money, but they can't keep at it for too long, as people discover the problem they just stop dealing with that individual or business.
This is the polar opposite when gov't is involved - it doesn't matter if you figure out that the gov't is stealing, you can't stop dealing with the gov't, you can't stop SS, you can't stop Medicare, you can't stop undeclared wars, you can't stop EI, you can't stop Medicaid, you can't stop welfare state, you can't stop labour laws and business regulations, you can't stop income taxes, etc.etc.
The good thing about the free market is that it is stronger than any government and any given economy, so eventually everything rebalances and the offenders (nations, countries, economies) will be crushed and then rebalanced again, so it is a self-correcting problem in the long run.
The bad thing is that instead of trying to fix it by allowing the free market to work and run a normal course -recession, depression, recovery, the gov't wants to prevent any of these restructuring activities from taking place, it's political suicide, so the gov't fights the free market forces the only ways it knows how: fake money, fake low interest rates, wars, totalitarianism.
Eventually all of it will crush, but unfortunately it will cause massive damage before it's restructured, the longer the gov't continues propping up its fake economy, the worse the crush will be and the longer the recovery will take.
As to what Free Market is - it's only a matter of not having government regulations, capitalism, individual freedom, respect for private property. Free market means market free from government meddling.
I was born in a place that was antithetical to the free market - former USSR. The system was fighting the market forces for 75 years, eventually it crushed of-course, and the recovery is taking a very long time.
You can't handle the truth.
History proves you wrong. 19th century US couldn't self correct itself and it got destroyed by people gaming the system.
- well, you just said something that made absolutely no sense at all. 19th century, especially the time after the gov't trying to push paper money onto everybody because of war, was the time when USA created its economy, USA became world's largest producer, exporter and creditor nation, which of-course took huge amounts of savings, investments, competition, innovation, infrastructure building, all done in private sector, all done in free market - market free from government intervention.
1800 to 1913, dollar gained value by a factor of 2. 1913 - 2012, dollar lost almost 99% of its value.
You clearly don't know anything on the topic, so bugger off.
You can't handle the truth.
Help me out here. What do you think stops the consolidation of corporate power? What do you think stops banks from getting too big to fail and monopolies from forming ?
The problem is it's not their money, its their investor's money because we deregulated the banks from having to separate investing from savings.
We permitted AIG to say that their derivatives were not a form of insurance and thus evade the regulation which exists to insure that insurers are themselves good for the debts under all circumstances. This was clearly a situation where AIG should have been regulated but they gamed the system to get out of it.
So you want to do away with taxes also? So no CDC for you!
Do you know what life was like under the feudal lords in Europe? Do you have any idea about that time in history at all?
The truth is that democracy leads to tyranny
I love it when Ron Paul and libertarians and corporate supremicists drop the veil and accidentally let everyone see what they're really angling for.
You'll get my democracy from me when you pry it from my cold, dead hands...
Help me out here. What do you think stops the consolidation of corporate power? What do you think stops banks from getting too big to fail and monopolies from forming ?
- competition and absence of laws that prevent competition.
You have a successful company building widgets, I am looking at you and I want to repeat that success. I take my savings or I ask a number of people to participate, we start producing widgets. If it is true that my hunch is correct and that I can be more efficient than you, I start making profits.
If we are successful enough, we can either sell our company to you, a good exit strategy, or we can run it ourselves.
The more successful you are with your widget production, the more profits you make, the more incentives other people see to enter the same market. If they are right, and if they can produce cheaper, better, whatever, they'll be your competition, this forces the market prices to drop, so you'll lower your prices.
If we are all wrong, and you are already at the edge of efficiency that economy of scale allows you to have, then we'll likely lose in that game, so you have an economy of scale that is best at providing the customers with widgets, so customers are best served with just your company, but normally there is space for more than one company in the market and there is one or two or a few biggest economies of scale and a few smaller players.
People love to bring the false example of Standard Oil to show that gov't destroyed a monopoly, but they don't realise that by 1911 Standard Oil had 150 competitors and it provided the lowest price since 1869. In 1869 SO had 4% of the market, and one gallon of refined oil sold at 30 cents.
By 1899 SO sold one gallon of oil for UNDER 6 cents (5.9 or 5.8), so in 30 years the prices dropped by over 80%.
Once SO was broken up, prices never went down again, indeed they started gradually going up.
The problem is it's not their money, its their investor's money because we deregulated the banks from having to separate investing from savings.
- gov't shouldn't be in business regulating banks and money in the first place, it's the moral hazard of gov't intervention that created this problem.
FDIC is a huge part of the problem - it's a moral hazard of fake gov't guarantee. Fake, because there are no assets there to guarantee anything, it'll be bailed out by the Fed once the time comes. Moral hazard, because it means ppl don't care who they are lending their money to. That's right, giving money to a banker means lending him your money, unless it's a deposit box basically, where you pay fees to keep your money in that box and you don't want anybody to loan that out.
Banks used to be just in business of keeping your money for a fee and only lending it out and investing it if you agreed to that, and you wouldn't have to pay the monthly fees then, you'd make a few percent, the bankers used to be safe keepers and investment managers, that's all, that was their function BEFORE the gov't took over and created all the moral hazards of the Fed (fake money, fake interest rates) and later FDIC (moral hazard of people not caring who they are lending to).
We permitted AIG to say that their derivatives were not a form of insurance and thus evade the regulation which exists to insure that insurers are themselves good for the debts under all circumstances. This was clearly a situation where AIG should have been regulated but they gamed the system to get out of it.
- gov't shouldn't be allowed to regulate businesses, including insurance, which is just another business.
There is nothing special about insurance (or health care or education for that matter) that requires gov't there. Gov't got into insurance business, creating a huge and impossible to compete with system - a system based on non-existing reserves and fake money.
How can an insurance company compete with an entity that PRINT
You can't handle the truth.
The answer you're giving me as to how you know these things is .... you have a theory!!!! Your theory involves this and that and it makes sense to you ,and that's how you know.
Do you understand the difference in the validity of knowledge derived from a theory and that arrived at by an empirical experiment that gives you a result? The last one is a valid form of gaining knowledge, the former is what Scholastics did during the Middle Ages and it produces NO knowledge about reality whatsoever, at best it produces only more or less self consistent didactically-based (or so they thought) Theories Of Everything. That is the meaning of Ivory Tower thinking and it's worthless.
Once you want to start arguing about gas prices, you're just citing the merest correlation of multicausal events. In fact, correlation is not causation and presenting a correlation as a manifestation of the workings of empty didactic theorizing does not bring that correlation one inch closer to causation
You know how so many of the world's problems are caused by people who don't know how to reason? I'm sure you do. Yeah, you're one of those people.
1. Gold is a real resource, not printed by men, it's scarce enough to be mostly inflation neutral, it requires actual work to be done in order to be extracted, and thus there is work attached to its value.
It has intrinsic properties that make it a good store of value - people always exchange for it. Model-T Ford cost 20 ounces in 1914, today a car can be bought for about that much, a cheap car can be bought for a fraction of that, so gold not only keeps value, but it grows in value because of the productivity in the economy.
Gold is not subject to human desire to print it, it is non-volatile, it's safe to handle, not a gas, not radioactive, not poisonous, not explosive, easy to melt down, turn into bars, coins, any small parts. It can be stored for long periods of time, retrieved, and it is still unchanged. It is easily recognised, it's easy to test, it's universally desired.
Sure sure, eventually we may come up with better alternatives, who knows, but for now I will put my bet on gold as opposed to any paper, any and all fiat money disappeared on this planet over time, gold is still here.
By the way, once a gov't wants to gain control over money, it introduces wage and price and capital controls, including controls over gold transactions, that's done for a reason - gov't understands these simple principles, you seem to dismiss them, well, it's your loss.
The answer you're giving me as to how you know these things is .... you have a theory!!!! Your theory involves this and that and it makes sense to you ,and that's how you know.
- it's history, it's not a theory that comes out of sitting in a closet, thinking about how the world should work. That's how the Krugmans of the world operate. Austrian school of thought operates on understanding history and human behaviour, and we have plenty of examples to look at and everywhere we look, we see that it is a real world model.
Keynesians would have you believe that unemployment and rising levels of inflation are incompatible, so they avoid looking at simple counterexamples of stagflation (USA had that in the seventies). Monetarists believe in gov't controlling the interest rates and setting 'targets', thus denying the market to set market interest rates, and when this leads to inflation and hyper-inflation, well, I guess the 'wrong people' were in charge of government, so if only we can find those 'right people'.
Again, in my country of origin they thought they have conjured up the 'right people' and they destroyed the economy by running it command style - totalitarian socialism, no market, no individual freedoms, but plenty of statists, statisticians and plenty of gov't spending. Well, all spending was government spending.
USA OTOH has added to the world's history a period of time, when moderate deflation combine with lack of government regulations created the most productive nation on the planet, turning a former afterthought to the European countries into the biggest producer, exporter and thus creditor nation. All of that happened without gov't regulations and without income or corporate taxes, without any type of fake gov't insurance, without money regulations, without fake interest rates, printing of cash, without stimulus and bailouts, with almost no gov't spending.
All that infrastructure built by private interests, simply because they wanted to make a buck. Today China is the best approximation to that type of economy unfortunately, and they are doing it without even absolute protections to the individual rights, but at least they violate the rights of individuals to do business so little in practice, that the Chinese economy still pulled more people out of poverty over 30 years, than the rest of the world combined over the last century.
BTW., if you think I can't reason, you don't have to argue with me, what would be the point, right?
You can't handle the truth.
1. Gold is a real resource, not printed by men, it's scarce enough to be mostly inflation neutral, it requires actual work to be done in order to be extracted, and thus there is work attached to its value.
Sneer. Although abundance can make something less valuable, scarcity does not make something valuable unless people want it. Neither does the work it takes to get it make it valuable. So you have really yet to tell me why, beyond an implicit agreement that people WILL treat it as a store of value, why it is valuable to the average person. Maybe you have another idea. I am interested in that idea, but actually, I don't think you do. Gold is valuable because its value is an agreed upon lie and that is why it has always been valuable.
When Cortez went crazy for the stuff in Mexico and started killing everyone in sight for it, the Aztecs couldn't grasp what it was all about .. sure it was pretty and desirable and all but it had no superlative value to them the way it did to the Europeans. That's because the Europeans had discovered something abstract- that something not too abundant can serve as a store of value that is independent of its "real" value. That's what money is, and that's also why we fight counterfeiters BTW.
It has intrinsic properties that make it a good store of value - people always exchange for it.
From the above, we can conclude that you apparently are not familiar with the idea of "circular logic".
- it's history, it's not a theory that comes out of sitting in a closet, thinking about how the world should work. That's how the Krugmans of the world operate. Austrian school of thought operates on understanding history and human behaviour, and we have plenty of examples to look at and everywhere we look, we see that it is a real world model.
That's what every Marxist says. You're no different Here's a clue- history is not an experiment. It's a one time unrepeatable complex set series of events all of which effect each other and whose causality is not determinable. So you can draw whatever lesson from history you want, and you still haven't done even one second of science and your conclusions are no more valid than the conclusions of the people who read history the opposite way as you and draw the opposite conclusions.
All that infrastructure built by private interests, simply because they wanted to make a buck. Today China is the best approximation to that type of economy
I love it. China is a state run communist command economy where factories get built where and when the Party says they will.
As far as talking to you goes, I am curious to talk to people I consider to be extreme because I am curious about their thinking processes. So I talk to you to elicit responses to questions which highlight the bugs in your thinking.
For instance, you've done nothing whatsoever , I mean zero, to defend the idea that gold has some intrinsic value beyond people's willingness to treat it as though it were valuable, just like paper money . You've said a lot about the wonderful properties of gold and related to everything but the kitchen sink and all this but you've failed to rebut in any way at all the point I made. The answer is , gold is valuable only because people agree to treat it as valuable. It's value is an agreed upon, highly useful lie, like other abstract things such as your rights.
Now the question is, can you see that you've failed to defend this idea or are you blind to it? That's what's interesting.
When people run up against a contradiction in their thinking , in the set of ideas they hold, and blink past it or just deny it- even though they could see it if they wanted to, then that is interesting and it's interesting to watch the mechanisms they use to do it with. You intellectualize your failure and pull what I call a Wall Of Words .. you're
First: gold is valuable because HISTORY shows that it is valuable.
You are 'sneering', show me one piece of paper currency that is older than gold. Forget it, show me a piece of fiat currency that is older than 200 years. How about a piece of fiat currency that is older than 150 years? I can continue.
There is an expression - not worth a Continental. I wonder if 'not worth a Federal will be within my lifetime (and I only wonder because I don't know if I'll still be around in 5 years from now).
OTOH gold has PROVEN to be a good store of value, it is a good unit of account and it works as means of exchange. Today on this planet people trade for gold instead of paper money in places like Zimbabwe, and they wrap their gold dust in Trillion Zimbabwe dollar notes.
So again, you are trying very hard to show how stupid gold is supposedly, while completely dismissing the simple historic truth - gold is still here, it's still money, paper and other types of fiat always disappear, they don't last too long.
You want to be in US dollars or Euro for much longer? Hey, it's not problem. You think it's circular logic that gold is valuable? We know gold is valuable, we still have mining companies extracting it, thus it is valuable to us.
Gold is not air, water, food or clothing if that is what you mean, because they only things we truly can't survive without is air, water, food and clothing - but we do want to have savings beyond the immediate air, water, food and clothing that we need, because that's how we improve our lives - build up savings, invest, make more stuff with investments, store value in certain things, gold works, history shows it works, maybe you like paper, it's your life.
You probably haven't done business with China, so you don't know, I don't have to teach you everything, but factories in China are mostly built privately, stores are all private, the country is giving a good name to communism while being most free market capitalists in the world.
Anyway, you can keep enjoying your mental masturbation if you like, I have to sleep.
You can't handle the truth.
Yeah what you originally said was paper money was fake money , that's what you said, in fact here it is:
with things like the Federal reserve with its fake money spigot, fake interest rates, fake insurance by gov't (like FDIC, FHA, SS, Medicare, etc.
and then you said it here:
- a system based on non-existing reserves and fake money.
Then I pointed out that gold and paper money are both only worth something because people agree to treat it as valuable, and for no other reason; they're both "fake" abstractions.
Then you tried to defend gold as "not fake" by rooting around in a sewer and tossing up some totally irrelevant facts about gold each and everyone one of which had no bearing on the fact that the value people attach to gold is, 100%, an abstract fiction, just like money.
Thus from you: Gold is a real resource, not printed by men, and it's scarce enough to be mostly inflation neutral, and it requires actual work to be done in order to be extracted, and thus there is work attached to its value. and Gold is not subject to human desire to print it, and it is non-volatile, and it's safe to handle, and not a gas, and not radioactive, and not poisonous, and not explosive, and easy to melt down, turn into bars, coins, any small parts. and It can be stored for long periods of time, retrieved, and it is still unchanged. and It is easily recognised, and it's easy to test, and it's universally desired.
none of which, except the last one has any bearing on anything at all about why people are willing to treat it as money , and the last one is merely a circular reference to the fact that people are agreed to treat it like money, which is why they want it.
Finally you try this:
Which is not a different way of saying that gold is valuable because people have agreed to the fiction that it's valuable for a long time now....
So in fact, after dragging our poor readers on through very many posts, (if we have any readers left) you punish our stalwart readers by plopping them down only where we all started from. which is the great fact that the value of gold is nothing more than an abstract idea which people have agreed to.
Just like the value of paper money.
See, the foundational beliefs which supposedly animate you are completely vacuous and void of any real point. You rail against "fake money" over and over without ever realizing that gold is as fake as anything and in fact the very concept of money is fake fake fake to its very core as is the concept that your life or your freedom have any intrinsic value.
In fact, throughout most of history, which . you yourself have attempted to make the final arbitrator of what is "real", your precious "freedom" did not exist for the vast vast vast vast majority of people and their lives were essentially worthless to the very few who called the shots, who took said lives on a whim.
The law of the jungle, which according to history is what's "real" , is not something to be longing after.
So this is just another contradiction you have in your libertarian "thinking"- that "what's real" is what history tells us is real.
The things history actually counts as "real": slavery, the worthlessness of individual liberty and rights , are exactly what you ALSO say you're against.
Society is based on a series of very "fake" things and the "faker" they get, the better all our lives become.
So where are we? Well we've exposed the obsession that "goobmint hatin' ", culturally and philosophically retarded libertarians have about gold is self-contradictory at its very core and also that your love of "what history teaches
HFTers should compete with HFTers.
Investors should compete with Investors.
Casteism
What clean drinking water - the one with hydrocracking fluid seasoning? It's processed anyway, and not well enough apparently. Best use a personal reverse osmosis machine. Just add electricity. 8 hour work days? By the letter of the law, yes - but I can still get fired for not taking unpaid overtime, and if I take it up in the courts, I'll be at bigger loss still. Overpopulation, overambition undermine labour value - demand/supply, remember? Legislated, or not, the only way you are getting real 8 h. days is if most workers are offering their labour in that form. Same goes for workplace safety. And blue skies. Social security? How about I open a plain old investment account - and you can keep that toxic nanny state tit? Medicare? Doesn't that program hold the world record in inefficiency?
I know tobacco is bad for you, so I smoke weed with crack.
Oh - agreed! (I did say it was oversimplified...)
I'm sure kids would not buy as many baseball cards if they could not trade them with their friends later.
I just wanted to point out that (other than it's own stock that a company holds) the sale of stock only benefits the company on the original sale.
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