Local brokers John D. Messner, Ellis C. Smith, Michael Stolper, and Arthur Lipper III agree that computerized “high-frequency” trading perpetuates market volatility and defeats the primary purpose of the stock market, which is to raise money for business.
  • Local brokers John D. Messner, Ellis C. Smith, Michael Stolper, and Arthur Lipper III agree that computerized “high-frequency” trading perpetuates market volatility and defeats the primary purpose of the stock market, which is to raise money for business.
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When I was in first grade, the school janitor asked what my father did for a living. I said he was a stockbroker. He said, “Oh, one of those gamblers.” I cried all the way home and told my mother what the janitor had said. She couldn’t stifle a laugh.

Now, 70 years later, it’s obvious that the janitor was prescient. About 75 percent of stock transactions in the United States are done through rapid-fire, computer-guided buying and selling, called high-frequency trading. A stock may be bought one second and sold the next. The firms trade all day for penny and nickel profits and then, generally, liquidate their positions at the end of the day. It’s day trading on steroids, involving billions of dollars.

In addition to high-frequency trading, there are other rapid-speed buy-sell games, such as those that occur on bank trading desks. As lightning-fast trading has come to dominate the market, small investors (who put money in mutual funds or buy individual stocks through brokerage houses) have little sway in market activity.

Indeed, the little guys and gals seem to be backing out of stocks. That’s not surprising, because old-style investors know that the Wall Street gambling game, like the one in Las Vegas, is rigged for the house. For example, the high-frequency trading machines can pick up information that has not yet shown up on the news screen. That smacks of front running, which is the unethical practice of a broker buying himself 1000 shares of a stock, knowing that his firm will shortly buy 500,000 shares of it.

Mike Stolper

“The only question is why Sheldon Adelson is not in the high-frequency trading business,” cracks Michael Stolper of Stolper & Co. (Adelson, owner of casinos in Las Vegas, Macao, Singapore, and elsewhere, is the seventh-richest American, worth almost $25 billion, and a big donor to his favorite political candidates.)

With disturbing regularity, glitches erupt on Wall Street. There was the Flash Crash of May 2010. The Dow Jones Industrial Average plummeted almost 1000 points in minutes. Recently, computers of Knight Capital Group spit out numerous false orders; trading went blooey for half an hour. The May 18 Facebook initial public offering debacle is blamed partly on high-frequency traders, although underhanded underwriters may share the blame.

Bill Gross, investment guru for Newport Beach–based Pimco, wonders if people can continue to stand outside a game that is fixed for insiders. Over the past 100 years, stocks have risen 6.6 percent a year in real (inflation-adjusted) terms. But the economy has only grown a real 3.5 percent annually in that century. Why should stocks almost double the rate of growth of the economy? People have been raised to believe that in the long run, stocks always go up. But this is a “commonsensical flaw much like that of a chain letter or, yes — a Ponzi scheme,” writes Gross. He doesn’t mention it, but people also thought real estate values only went up until…well, you know what happened.

Ellis C. Smith

John D. Messner

Defenders of ultrasonic trading say it provides liquidity to the market. Maybe, but the collateral damage might offset any advantage. San Diego’s Messner & Smith money management firm points out that “The stock market has the primary function of raising money for business. [High-frequency trading] does not contribute to raising capital in any form.” The firm warns its clients that one ramification of high-frequency trading is that “volatility of the overall market and individual stocks is likely to remain high.”

Stolper points out that high-frequency trading is fixated on capturing mathematical anomalies and has little or nothing to do with basic functions of markets. “It’s the dark side of all these mathematicians getting interested in finance. But the fact that this has unintended purposes and unsettling effects — what can we do about it?” he asks.

One academic study indicates that superfast trading works best with blue-chip stocks in generally rising markets. In turbulent, falling markets, the strategy doesn’t work so well — in fact, traders may just turn off their machines during a downward cascade.

This suggests that high-frequency trading has a bullish bias. That could in part explain why since early 2009 the economy has grown extremely slowly while stocks have doubled. That possible bullish bias has profound implications. We have seen in the past three years that central banks can run up stocks by hinting of future liquidity or by actually providing it with lower interest rates and other money-gushing strategies. Possibly the high-frequency traders rev up their machines when central banks move or suggest they will move. That could mean central banks are using high-frequency traders to manipulate stocks upward.

Stolper agrees that there could be “less liquidity going south than going north,” but he does not think the Federal Reserve is attempting to pump up stocks artificially.

Arthur Lipper III

Arthur Lipper III of Del Mar, member of a legendary Wall Street family, notes, “Central bankers have always been able to move markets by hinting at or promising future moves. The only difference now is that the professional speculators are much more determinative of market moves than individual investors used to be, and the perspective of the [high-frequency traders] is very, very short-term focused.”

Lipper says that “Markets have always had casino elements,” but not like that which today’s lightning-fast traders are providing. On balance, “I do not see [high-frequency trading] as a positive for individual investors.”

Some say a transaction tax would tame the supersonic trading. Lipper disagrees, saying, “Smart money will go offshore, and many of the rich will follow.” So, that tax wouldn’t work, but he would like to see reinstatement of the Glass-Steagall Act of 1933 that called for separation of banking and securities activities. “Deposit-taking institutions should be banned from principal trading.” Some of the largest banks are high-speed traders.

And they are picking our pockets — in milliseconds. ■

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Comments

Dennis Aug. 22, 2012 @ 10:54 a.m.

And so we should all put our retirement hopes and Social Security dollars into the casino & hope for the big win!

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Don Bauder Aug. 22, 2012 @ 11:28 a.m.

Actually, I have raised my stake in equities quite a bit. They are now about 37% of my portfolio, up from 10% in 2003. But I am only buying blue chip stocks with excellent yields (mostly more than 4%). Incidentally, today was another example of what this column suggests. The Dow was down around 65 to 70 when it was revealed that the Fed had discussed QE3 (another squirt of liquidity) at its last meeting. The Dow immediately cut its losses more than in half and Nasdaq turned to the upside for the day. My interpretation is that Wall Street knows that any suggestion of more liquidity will turn the high frequency traders to the bullish side; also, some other fast-buck traders, such as on bank trading desks, will also respond to such news, pushing stocks up. Once again, I must remind people that the Fed has no mandate to manipulate the stock market. It is supposed to be concerned only with inflation and employment. But ever since 1987, the Fed has been intrigued by its own ability to run stocks up. On Wall Street, it's known as the "Bernanke put," just as the earlier manipulation was known as the "Greenspan put." Even though I have profited greatly from this central bank strategy, I think it is utterly deplorable. It worsens income inequality greatly and does nothing for unemployment. Now, the Fed should be concerned about jobs, not about running up stocks. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 12:33 a.m.

Markets are supposed to be price-finding mechanisms, and when they're used as casinos instead the mobsters move in.

Unfortunately, they're gambling with public pensions, private savings, government financed loans...OUR money.

Who gets the profits? Not the pensioners, savers, or municipalities that saved or extended credit...only the traders and middlemen who insert themselves between the parties to act as parasites.

These are the people who need to be named and shamed, in public, loudly, with their names, addresses, photos...wanted posters to alert the public to their crimes and to be on the lookout.

The government, instead of coddling these criminals, should put up rewards for their capture or death.

We need to bring back capital punishment for financial crimes. If the government won't do it, the public will...

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Don Bauder Aug. 25, 2012 @ 6:59 a.m.

They need to be named and shamed in public, but won't be as long as they own the politicians. Best, Don Bauder

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Don Bauder Aug. 30, 2012 @ 12:52 p.m.

Good point: I inadvertently left out Big Media. Best, Don Bauder

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tomjohnston Aug. 22, 2012 @ 12:39 p.m.

You find the central bank strategy, which you always seem to write about in a critical manner, to be deplorable. Yet you continue to invest and profit greatly from that same strategy. Isn't that a bit hypocritical? If you're buying stocks and "profiting greatly" from them because of the tactics the Fed is employing how is it not a conflict of interest to then write anything critical of the Fed. It sounds as though you've become a practicioner of the "do as I say, not as I do" philosophy.

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Don Bauder Aug. 22, 2012 @ 1:23 p.m.

I see your point: it sounds hypocritical. But there is an old Wall Street saying: "Don't fight the Fed." The Federal Reserve's moves do affect the direction of stocks. That has been particularly true since the Fed saw how it could manipulate stocks after the 1987 crash. It continued to do so. Government moves, such as the creation of IRAs, the lowering of taxes on dividends and capital gains, etc. mean that the government and the central bank are putting a gun to your head and telling you to buy stocks. I think it is horrible public policy, particularly as it widens the gap between the superrich and the rest of society. But just because I find the practice repugnant doesn't mean I should sit on the sidelines. The government's/Fed's actions are reprehensible, but I cannot fight them. So if you can't fight 'em, join 'em. Go with the flow. Is that hypocritical? Maybe, but investment decisions should be made on cold, hard, statistical calculations, not on emotional factors, such as concern about one's own conscience. Incidentally, stocks took a huge hit in 2008 and early 2009, so the Fed does not have total control. This won't go on forever. At some point, I will get pistol-whipped. Best, Don Bauder

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tomjohnston Aug. 22, 2012 @ 2:08 p.m.

Understand that I'm not disagreeing with you. And we have made a lot of money in the last 2-3 years, much more than our investments were worth pre crash. And I also have no problem taking advantage of the current conditions, though I too have some concerns about the future. I guess the difference is that I don't write about how evil the Fed is or how much Bernanke and Geithner are screwing things up. It's hard for me to read your columns without having a little chuckle, knowing that while your put forth your sting ingcrtitcizms at the same time you're using those very things to your advantage, all in the name of the all-mighty dollar. Maybe a little hypocracy is good for the soul; it's definately good for the bank account and I guess that's the bottom line.

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Don Bauder Aug. 22, 2012 @ 2:44 p.m.

Keep in mind that I could have my head handed to me. The strategy is working well now, but there are no guarantees for the future. Best, Don Bauder

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tomjohnston Aug. 22, 2012 @ 5:18 p.m.

"Keep in mind that I could have my head handed to me." Which has zero relevance. It's the act, not the results. I'm a generation younger, so I have a longer time frame to provide for. Maybe I'm not as greedy as some.We're just about to the point that we have shifted enough assets that another downturn won't have as large an affect as it once would have, not that it's something to look forward. You know the old saying, the only peope who get out at the top are liars and cheaters and I don't consider myself either. I'm more the leave too early rather than stay too late type.

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Don Bauder Aug. 22, 2012 @ 6:32 p.m.

That's good advice: leave too early rather than stay too late. Best, Don Bauder

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Twister Aug. 29, 2012 @ 10:02 p.m.

Those a generation younger don't necessarily have a longer time-frame, and if they are lucky enough to live as long as we older ones, the world we have bequeathed them might not necessarily be better than the one we "enjoyed."

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Don Bauder Aug. 30, 2012 @ 12:51 p.m.

Inflation-adjusted incomes for the middle class are falling. Already, people do not have the incomes or quality of life that their parents enjoyed. Best, Don Bauder

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SurfPuppy619 Aug. 22, 2012 @ 11:10 p.m.

The Fed should be shut down. It is out of control and I hope it gets audited as Ron Paul wants to do......

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Don Bauder Aug. 23, 2012 @ 6:52 a.m.

I agree that the Fed should be audited, but I don't think it should be shut down. We need a central bank, as do almost all countries. The alternative to a quasi-independent Fed would be a government-run Fed. I'll take the former. Best, Don Bauder

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SurfPuppy619 Aug. 25, 2012 @ 12:40 a.m.

The Fed is out of control, and if it cannot be controlled then it must be shut down-so either control it or shut it down, one of the two. It's like these TBTF financial institutions, either break them up or stop bailing them out-one of the two.

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Don Bauder Aug. 30, 2012 @ 12:55 p.m.

Agreed: the too-big-to-fail financial institutions (also known as too-big-to-jail institutions) should be broken up. The Fed would be a roadblock to that. Best, Don Bauder

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nokomisjeff Aug. 23, 2012 @ 5:56 a.m.

I laughed out loud when I heard that Bill Gross started to engage in negative campaigning as far as the stock market is concerned. I guess his funds need more participants, but one thing is sure, Gross is talking his own book. Furthermore, the bond market is a largely unregulated market that has the commission built into the price. One does not know if they are paying 500 basis poings on that little General Obligation Bond(That happens a lot to retail investors by the way).

HFT does not bother me and I have discussed this at length in this forum before. That being said, one should study the narrowing of the Bid/Ask spread since specialist books have largely gone electronic and draw your own conclusions. Also, one should look at total transaction costs for buying and selling stocks comparing 1972 to 2012 and draw your own conclusions. One should also look at market friction comparing 1992 and 2012 and draw your own conclusions. If people are worried that the HFT is causing them to pay too much for stocks, then they should use limit orders instead of market orders and the problem will be solved. As far as volatility is concerned, I kind of like the casino atmosphere right now as that means a lot of people are real loose with their money and my tight game should allow me to put some of that loose money in my pocket. At least one has a chance of making a buck in the markets these days. There were entire decades where there was no money to be made in the markets (1900-1910)(1914-1924) (1930-1945)(1970-1981). Now, there's plenty of money around for anyone willing to use their brain.

As far as the Fed goes, I don't care what they do as long as I'm on the same side. Can't fight the Fed.

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Don Bauder Aug. 23, 2012 @ 7 a.m.

Lower commissions on stock trades came in in the 1970s. The SEC was one power behind the move. Have lower commissions been a great help to the market? Good question. Without minuscule commissions, there would be no HFTs, or lightning-fast trading by big bank trading desks. My partial solution is a modest transaction tax. Yes, much trading would shift offshore. But much would stay at home, too. Britain has proved that. The high-speed trading would at least be tamed. And governments would raise a helluva lot of desperately needed tax revenue. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 1:01 a.m.

So, you say that this is good because there are opportunities in the casino for you to take money from suckers...

Then you climb on Ayn Rand's high horse and claim that you practice a superior morality?

I've also written at length in this forum on this issue, calling out your glaring illogic or immorality as needed. Then you were claiming Adam Smith as your justification...when I pointed out that Smith said the opposite you called names.

Now you've bowed to Ayn Rand as your iconoclast. And it's just as clear you haven't read her books either...she'd never defend what you do as honest or moral.

So what we're left with is traders like yourself trying, pathetically, to explain their immoral theft from the rest of us normal people...who you regard only as suckers and victims. (Those are your own words, Jeff.)

We don't buy what you're selling, buddy. You're smart, well read, but superficial and lacking in basic humanity...otherwise you'd change your profession and contribute to the world instead of just plundering as much as you can before the collapse you foresee.

best,

Fred

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Don Bauder Aug. 25, 2012 @ 6:57 a.m.

Fred: Traders (commodities, bonds, stocks, derivatives, whatever) have only one thing in mind: profits. That's always been true. But today, trading is a much higher percentage of our total economy. This is one reason that greed is so pervasive, and destructive. Best, Don Bauder

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Twister Aug. 29, 2012 @ 10:06 p.m.

That "higher percentage of our total economy" is a house of cards. What does that mean for the whole?

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nokomisjeff Aug. 23, 2012 @ 9:15 a.m.

How much tax revenue would a transaction (Robin Hood) tax really raise? Some think none. http://www.forbes.com/sites/timworstall/2012/06/20/the-stupidity-of-the-robin-hood-tax-reaches-america/ Such a tax would kill liquidity, especially at the market maker level. It would not be economical for market makers to be in the middle, the bid/ask spreads would widen, and liquidity and volume would go elsewhere. Studies have shown that alpha increases when transaction taxes are added. But you mention "without miniscule commissions".....Members of the NYSE never had to pay commissions, that's why they bought their seats in the first place, to get a crack at the inside market, pay no commission, buy at the bid and sell at the ask. Even if we had regulated commissions like the old days, HFT could still exist, if it was the exchange members doing it. And you talk about lightning fast trading by big bank trading desks.....I thought that Dodd-Frank stopped big bank trading desks from speculating.....maybe I was wrong???? Then you offer the canard that much trading would shift offshore, but much would stay home. What % would go offshore? What would the dark pools do? What about the electronic exchanges? How would a transaction tax affect an IPO?

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Don Bauder Aug. 23, 2012 @ 10:28 a.m.

First, any transaction tax would be a very small fraction of the trade. A small transaction tax would curb day trading and HFT among certain players. Actually, the exchanges could tame (in part) the casino aspect of Wall Street by banning such trading. Britain has had a transaction tax for a long time and although there is leakage, a good percentage of trades continue to be done on British exchanges. I mentioned this in an earlier column. A transaction tax would slow down the casino trading atmosphere that is Wall Street. Best, Don Bauder

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ImJustABill Aug. 23, 2012 @ 1:31 p.m.

I think the "Robin Hood" term for a transaction tax is a big misnomer. To me "Robin Hood" implies the primary intent of the tax is to sharply redistribute wealth from the upper classes to the middle and/or lower classes. The proposed 75% income tax rate in France is an example. I think the transaction tax is more specifically geared to curb one particular activity - the way that cigarette taxes are designed to curb smoking.

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Don Bauder Aug. 23, 2012 @ 2:39 p.m.

A transaction tax would bring in a helluva lot of money to empty government coffers -- until the rapid-fire gambling slowed down; then it would bring in less. I would say the revenue is more important than curbing the casino. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 1:04 a.m.

No, Don. The casino, run at our expense, must be shut down.

Otherwise, no matter how much revenue we get we're always at risk for losing everything when the game is rigged against us.

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Don Bauder Aug. 25, 2012 @ 7:03 a.m.

Good point, Fred. Maybe I spoke too soon. Let me ponder that. Best, Don Bauder

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jnojr Aug. 31, 2012 @ 9:59 a.m.

Government coffers are empty only because they cannot stop spending money faster than they bring it in. Increased revenue has done nothing but exacerbate the problem.

But HFT does need to be curbed. It's supposed to be illegal to post an offer to buy or sell with no intent to execute. There are several things that could be done to destroy HFT without levying a tax that winds up coming out of our pockets.

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Fred Williams Aug. 25, 2012 @ 1:06 a.m.

Citing a Forbes opinion piece as a neutral rebuttal on tax policy discussion is laughable.

Please, try to do some research BEFORE coming to your conclusion, not the other way around, Jeff.

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Don Bauder Aug. 25, 2012 @ 7:07 a.m.

Go back 30-50 years, and Forbes was the best of the business magazines. Jim Michaels was the best business/finance editor of the times. Forbes is still good, but I would be careful believing it on tax policy; Steve Forbes is a fanatic on the flat tax. Best, Don Bauder

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SurfPuppy619 Aug. 23, 2012 @ 1:25 p.m.

A tax would actually help the market, b/c much of this so called trading today is just churning to make a quick buck doing nothing to create value or wealth to the company or nation, and doesn't add liquidity to the market, just creates a false bubble.

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Don Bauder Aug. 23, 2012 @ 2:41 p.m.

Agreed: Wall Street has become a gambling casino and is not adding value or wealth to the nation. Well said. Best, Don Bauder

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nokomisjeff Aug. 23, 2012 @ 1:30 p.m.

The UK has had the transaction tax for awhile and my friends over there who were market makers are no longer market makers. London markets are pretty sick. The same taxes that affect daytraders also affect MM's. Have you studied the increase in alpha on the LSE? And the leakage, while you pay lip service, have you quantified the leakage and calculated the leakage such a tax would cause in the USA? How about exemptions? Do you think the big Obama supporters like Goldman Sachs are going to pay a transaction tax on their stock trades? Isn't a tax like that also inflationary?

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Don Bauder Aug. 23, 2012 @ 2:50 p.m.

There are data on the estimated leakage from London. I don't know if anyone has estimated the leakage from U.S. markets, but I am sure opponents have come up with outrageous claims of how much this tax would hurt Wall Street. I also believe that any country, particularly the U.S., should figure a way to punish Wall Street firms that would dodge the tax by doing the transactions offshore. I don't know how that would work, but I'm sure we could come up with something. Glad you mentioned Goldman Sachs. You have an excellent point. Wall Street controls U.S. politicians. Unless things change, such a tax ain't gonna happen. However, I have noticed that Wall Street money is overwhelmingly going to Romney. If Obama is reelected, he won't owe favors to the money changers; he may have latitude to try to reform Wall Street. Best, Don Bauder

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Don Bauder Aug. 23, 2012 @ 5:08 p.m.

There is a general consensus that if Congress fails to act on the fiscal cliff, a recession or significant slowdown will ensue. (We already have painfully slow growth.) Perhaps a recession will develop in any case; the failure to act on the fiscal cliff would exacerbate it. Best, Don Bauder

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jnojr Aug. 31, 2012 @ 10:05 a.m.

We know for a fact that Congress will fail to act, because there are only two possibilities... 1) stop the deficit spending, which will send the economy into a tailspin; or 2) double the taxes that the middle class pays (because "the poor" pay nothing or receive more than anything they pay in, and "the rich" never pay... they're the ones who have the influence over the lawmakers, and who have the ability to duck and weave around any taxes), which will send the economy into a tailspin.

I'm in the house that says stop the spending and take the hit. If you make $50K per year and spend $25K above that on credit cards, you're used to living on $75K At some point, you will be forced to stop spending. You can howl about how unacceptable a 33% reduction in your standard of living (read: GNP) is, but you will have no choice but to adapt to living on the $50K you make.

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Twister Aug. 23, 2012 @ 9:50 p.m.

Time was, businessmen were in the business of PRODUCING. Then came the boy-wonders, MBA's who really thought they could MANAGE anything, whether or not they knew anything about the business. There were TRADERS, but they were conservative about trades. Now we have algorithms and metrosexuals of both sexes GAMBLING on quick-buck margins, driving prices up and down, faster and faster and faster. It's not even about SELLING anything of VALUE. ("Americans know the price of everything, but the value of nothing." --W. Churchill).

But waaaay out there on the margins where the wheel actually meets the road, consumers are evaporating, drinking lattes for now, and watching blockbusters, disposable, but indispensable. But the millisecond "traders" know nothing of this and care nothing of this. (For some reason I see the computer-generated sign in the window above Wall Street proudly proclaiming to the protesters, the "99%" below: We ARE the 1 percent!

It's ALL very naive. Welcome to "The Cowardly New World."

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Don Bauder Aug. 24, 2012 @ 7:41 a.m.

Your thesis is accurate and pithily stated. Over the decades, we have gone from more than 20% manufacturing to less than 10%. Over the same period, we have gone from less than 10% financial to more than 20%. This is at the heart of our economic troubles. This phenomenon has led to our incredibly twisted priorities: Wall Street hopes that Main Street suffers so the Fed will pump in more money that will send stocks up. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 1:14 a.m.

Twister, you know I agree. In a fantasy world where my opinion amounted to more than a weak fart, I'd eliminate the following:

  • High Frequency Trading
  • MBA degrees
  • Commodities Trading (except for actual participants in the market)
  • Mortgage Tax Deductions
  • Any inheritance greater than 1000% of the average mean national income
  • Legacy scholarships and Semi-Pro Sports at Universities (how about education instead?)

...oh this list could go on and on...militarized police who think they are at "war" with the citizens...religious fanatics...professional politicians and their enablers...

...but my comment is mere wind, blowing ever so gently, stirring not even a butterfly's wings. I do not now, nor ever will have the power or position to enact any of these changes, and I don't expect to see them in my life time.

I do, however, expect to see America continue to decline the longer these institutions and circumstances endure. It's a pity...used to be a nice country.

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Don Bauder Aug. 25, 2012 @ 7:11 a.m.

You might see MBAs go in your lifetime. Well, not disappear. But sink in prominence. They are already stumbling noticeably. They can't get jobs, and deservedly so. Many are frauds, quacks, crooks. Best, Don Bauder

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nokomisjeff Aug. 24, 2012 @ 7:31 a.m.

"The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice" Ayn Rand

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Don Bauder Aug. 24, 2012 @ 7:47 a.m.

I am delighted to espouse ideas that are the opposite of those of Ayn Rand. Show me a trader who is a man of justice and I will show you a loser. Wall Street is a sea of mendacity. For the society as a whole, traders are traitors. Best, Don Bauder

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ImJustABill Aug. 24, 2012 @ 11:37 a.m.

"I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine." - John Galt in Atlas Shrugged by Ayn Rand.

Lots of people believe in the first part of that pledge. Not too many believe in the second.

Ayn proposed a moral code which is more than just purely take whatever you can get by any means. However, very few leading traders or Wall Street executives truly believe in the entirety of Ayn Rand's moral code. If the leaders on Wall Street believed in the pledge above then they would have adamantly refused any bailouts.

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nokomisjeff Aug. 24, 2012 @ 11:43 a.m.

Just a bill, Rand is extremely popular with traders. In fact, at every exchange, in every clearing firm(and I mean every) you will find two books Rand's "Atlas Shrugged" and Frank Harris "My Life and Loves." And the leaders on Wall Street are usually not traders.....Wall Street leaders usually come out of the back office, M&A, etc...., not off the trading desks.

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ImJustABill Aug. 24, 2012 @ 1:56 p.m.

Just saying I think the bailouts were very much against the principles of Rand. I can't imagine John Galt or Howard Roark accepting a bailout - they would have died first.

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Don Bauder Aug. 24, 2012 @ 4:35 p.m.

Maybe the traders rake in so much money they don't want to bother to be in management. Best, Don Bauder

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Don Bauder Aug. 24, 2012 @ 4:42 p.m.

Not only would the Wall Street traders under Rand's code have refused bailouts; they wouldn't have concocted recondite derivatives and peddled them to people and institutions that didn't understand them. In fact, if those traders followed ANY ethical code, they wouldn't belong on the Street. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 1:16 a.m.

Jeff is copy/pasting from Rand.

He doesn't believe in this, or understand it, any more than he believes or understands what Adam Smith wrote.

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Don Bauder Aug. 25, 2012 @ 7:14 a.m.

Ah, copy/pasting. Was Ayn Rand ever a Playmate of the Month? Best, Don Bader

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nokomisjeff Aug. 24, 2012 @ 8:31 a.m.

Don, Don, Don....,such hyperbole. Why don't you see what Rand means by justice. Her idea of justice is probably much different than yours. I know mine is.

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Don Bauder Aug. 24, 2012 @ 10:05 a.m.

I assume Rand's meaning of justice is not the common one. That means to understand her idea of justice, I would have to read her garbage. I have resisted that since the 1950s, when her ideas were sweeping college campuses. As Krugman says this morning, boys fall in love with Rand's philosophies, but most outgrow them. Best, Don Bauder

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nokomisjeff Aug. 24, 2012 @ 11:48 a.m.

So you haven't read Rand yet you make sweeping pronouncements and judgements about her work. Did they teach you to do that in J School? And here's my favorite Krugman Quote; "This is hard to get people to do, much better, obviously, to build bridges and roads and healthcare clinics and schools. But my proposed, I actually have a serious proposal which is that we have to get a bunch of scientists to tell us that we’re facing a threatened alien invasion, and in order to be prepared for that alien invasion we have to do things like build high-speed rail. And the, once we’ve recovered, we can say, “Look, there were no aliens.” Total gibberish and yet you discuss Rand without having read her works. Beautiful.

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Don Bauder Aug. 24, 2012 @ 4:47 p.m.

I refuse to read her works but have no problem condemning them because in grad school I had to listen to people rave about the wonders of Atlas Shrugged, The Fountainhead, etc. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 12:16 a.m.

Jeff, you clearly haven't read Ayn Rand either.

The key to her philosophy was integrity. Telling the truth. Not deceiving others (since that is only sacrificing your independence to what they think) or living from the work of others.

But that's what you do for a living. You play tricks, game the system, and since you trade commodities without performing any work related to them whatsoever, you are living from the work and efforts of others.

So knock off the Ayn Rand quotes...you don't have any standing to use them. You are the biggest parasite commenting here, and from your own admission you've never produced anything yourself.

Please, since you consider yourself to be Atlas, shrug away Jeff. No one will notice the removal of yourself and your friends to Galt Gulch....a few years later we might see the article about how you all descended into cannibalism and survival of the richest, but it won't distract we the living from our continuing pursuit of happiness free of the arrogant and immature followers of a half-baked philosophy that Ayn Rand herself followed least of all.

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Don Bauder Aug. 25, 2012 @ 6:51 a.m.

Back in the mid-60s, I interviewed an executive whose company, as I recall, published Ayn Rand. (Either that or was close to her in some way.) In any case, he got to talking about Rand's husband. I can still remember him saying, "She was a very strong, opinionated woman." The implication was that Ayn Rand's husband had to walk some tightropes to keep peace in the family. Best, Don Bauder

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ImJustABill Aug. 24, 2012 @ 8:45 p.m.

This is all speculation on my part, but I think possibly the largest error in judgement Alan Greenspan may have made is placing too much faith in Wall Street and the financial industry to honor the second part of Galt's pledge "nor ask another man to live for mine". The thinking was that great financial firms would self-regulate and never take risks that could potentially require taxpayer bailouts - because that would require having the government use force to ask other men to sacrifice for the financial firms - gravely immoral by the Rand code (at least my understanding of it).

Of course, this is all my own spin on things and maybe I'm not understanding or remembering the philosophy correctly - it's been a long time since I've read AS, Fountainhead, and Anthem.

But to me, I think at times the financial industry looks less like a Rand hero - who attains wealth by industriusness (sp?) and without using the force of the governement and looks more like a Rand villian - who attains wealth and power by manipulation and the force of government.

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Don Bauder Aug. 25, 2012 @ 7:19 a.m.

Greenspan has already admitted that he had naive faith in financial institutions. In my own opinion, Greenspan didn't understand the grip that greed has on our society. He had blind faith in markets but didn't realize how rigged so many markets are. (He, too, was a Rand acolyte.) That blind faith in markets also hurts the credibility of the Austrian and University of Chicago economic schools. Best, Don Bauder

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Fred Williams Aug. 25, 2012 @ 12:22 a.m.

A transaction tax would go a long way toward addressing the corruption enabled by the advent of high frequency trading.

No legitimate trader would suffer, liquidity would be exactly the same as today, and the penny-gamblers would be shut out.

Markets are supposed to be about honest and transparent price discovery. They've been turned into casinos where the rubes are ripped off by professionals in expensive suits.

The thieves and their paid political prostitutes can do this voluntarily, but they won't. Look at reaction from deluded "traders" like Jeff...they really think they're doing "god's work".

So eventually this will be done with force. Either officially, or unofficially.

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Don Bauder Aug. 25, 2012 @ 9:38 a.m.

A transaction tax would curb high-speed gambling, and also fill government coffers. Best, Don Bauder

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SurfPuppy619 Aug. 25, 2012 @ 2:30 p.m.

Fred I agree with you 100%, transaction tax will STOP nd curb the abuses.

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Don Bauder Aug. 25, 2012 @ 3:21 p.m.

I favor a transaction tax, but I realize it will escalate one abuse: the moving of trading to offshore tax and secrecy havens. This in turn will cause all kinds of related mischief -- tax dodging, regulation evasion, etc. Best, Don Bauder

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Fred Williams Sept. 4, 2012 @ 3:35 p.m.

Don...how would moving the trading somewhere else really hurt the USA in the long run?

I understand there would be a drop in revenue, possibly, from the move...but society as a whole would be better off, and reducing the amount of money wasted on Wall Street gambling can only be a good thing.

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Twister Aug. 25, 2012 @ 9:22 p.m.

Rand was apparently driven cuckoo (a nest parasite) by the Soviets, so I sympathize with that paranoia. Her first novel, "We, the Living" wasn't all that bad, and "The Fountainhead" had its merits. But she got SO into believing her own fantasies that she went over the top. Demagoguery requires a coating of truth to get people to swallow the bullshit. Richard Neutra built a house for her in the San Fernando Valley that had a steel wall facing the street with searchlights and machine-gun mounts. Her converts were a bunch of hero-worshiping ribbon-clerks of pappyier-mashy so obsessed with individualism that they had no individuality. It would be ironic were it not for the absurdity of her higher Hitlerish demand of absolute fealty. The little creeps who step so carefully into her footprints are about as far from the Rand heroes as one could imagine, and unable to read between the lines or recognize any crucial distinction, they must rely upon quoting her. Why is this ringing in my ears? ". . . Roark was a friend of mine, and you're no J. Galt!"

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Don Bauder Aug. 25, 2012 @ 10 p.m.

As I said earlier, Alan Greenspan was one of her acolytes. Paul Ryan was a latter-day worshipper of Rand. Best, Don Bauder

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Twister Aug. 30, 2012 @ 8:55 p.m.

To correct myself (if I now recall correctly), the house was built for Marlene Dietrich, and Rand bought it from her.

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Don Bauder Aug. 30, 2012 @ 9:35 p.m.

Physically, Ayn Rand was no Marlene Dietrich. Cerebrally, you have to give it to Rand unless there is something about Dietrich I don't know. Best, Don Bauder

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Twister Aug. 31, 2012 @ 10 p.m.

I think Dietrich was afraid the Nazis would assassinate her, but Rand was afraid of the Soviets. Both may have been paranoid, but maybe they were out to get them. I don't know whether or not the house is still there or, but it's worth seeing. Neutra gave good lectures, and his buildings were, in many ways, better than Wrights.

Dietrich never appealed to me either, and I love most all women. I've loved beautiful ones and ugly ones--what matters most is what's inside, but I've frequently been a very, very lucky man and gotten both soul and physical beauty in the same package--been with the same one for forty years now, and while I still keep looking, I haven't found one as good or prettier. And while she is far from perfect, she should get a medal for putting up with me . . .

Oops! My memory failed me again. Maybe Dietrich was only a guest see http://en.wikipedia.org/wiki/Von_Ster...

I saw the house in the mid-fifties; apparently is is no longer there. Seems like it was near Jack Warner's ranch . . . but don't trust my memory.

One of Neutra's real masterpieces is still there (or was five years ago); the LA county building.

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Don Bauder Sept. 1, 2012 @ 7:19 a.m.

I don't really know much about Marlene Dietrich, but there are so many other subjects that I need to brush up on that I simply don't have time to read up on her. Best, Don Bauder

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Twister Sept. 2, 2012 @ 3:43 p.m.

Nor do I. The original subject was Rand. A tangent worth noting in my note it the LA county building. Neutra used stressed concrete panels that shifted with the sun to shade the windows while creating a convection current that sucked cooler air in from the shady side--a kind of natural air conditioning. Those interested in efficient architecture may want to take note if economist don't.

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Don Bauder Sept. 4, 2012 @ 11:29 a.m.

Let's talk about Marlene Dietrich. Best, Don Bauder

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tomjohnston Sept. 4, 2012 @ 11:24 a.m.

"been with the same one for forty years now, and while I still keep looking, I haven't found one as good or prettier. And while she is far from perfect, she should get a medal for putting up with me . . ." So even after 40 yrs together, you're still looking for someone as good or prettier? Well that explains a lot. How does your "current" feel about that. My wife and I have been married 36 yrs as of this past May, But we have been together almost 44 yrs. I never needed to stop looking because I never started in the first place.

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SurfPuppy619 Sept. 4, 2012 @ 2:02 p.m.

I have been with my dog for 14 years now, I never needed to stop looking either, I found true luv! She had me at "woof".

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tomjohnston Sept. 1, 2012 @ 10:40 a.m.

I'm sure you are referring to the house that was at 10000 Tampa Avenue in Northridge. It is/was pretty well known to anybody who grew up in the Valley back in the 50's-60's. It wasn't built for Marlena Dietrich. It was built for Josef Von Sternberg, who,if your not familiar, was a director. You may have heard of him because of 2 of his students while teaching at UCLA., a couple of guys name Morrison Manzarek. Von Sternberg and Deitrich made several films together; the first film h directed her in, The Blue Angel, is the film that made her a star. I don't believe she ever lived in the house. Von Sternberg sold the house right around the beginning of WWII and Rand bought it a couple of years later. The house was on a fairly good sized piece of land. It was sold and demoed to make way for a housing tract in the early '70's.

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Don Bauder Sept. 1, 2012 @ 11:33 a.m.

Thanks for the Hollywood information. It's not a subject that comes up much on this blog. Maybe it should. Best, Don Bauder

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tomjohnston Sept. 1, 2012 @ 1:33 p.m.

My wife was in the entertainment industry for close to 25 yrs. Trust me when I say that people in "Hollywood" are the biggest gamblers you'll ever find, both literally and figuratively, in almost every way imaginable. And they lose way more frequently than most people would imagine.

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Don Bauder Sept. 1, 2012 @ 6:27 p.m.

They also have sticky fingers. It's a crooked industry, as people who sell scripts to movie companies, and others, find out. Best, Don Bauder

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tomjohnston Sept. 1, 2012 @ 8:41 p.m.

Is there an indusrty that you DON'T think is crooked?? LOL

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Don Bauder Sept. 2, 2012 @ 6:06 p.m.

Every industry cuts ethical corners in some way. Many larger consumer-oriented businesses such as department stores, some other retailers, and consumer goods manufacturers such as P&G and J&J breach fewer ethics rules. On the other hand, some of the most crooked industries such as multi-level marketing organizations sell to consumers. Best, Don Bauder

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Twister Sept. 1, 2012 @ 11:47 p.m.

Yes, but there may be a story lurking in there somewhere. Where did you get the '50's era aerial pix?

Yes, Don, the subject at hand is Rand, and I would like to know how the percentage of Randites has varied over the years. Has it truly gone up or have they just gotten louder?

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Don Bauder Sept. 4, 2012 @ 11:27 a.m.

I think Rand was resurrected with the Tea Party movement. Best, Don Bauder

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Twister Sept. 4, 2012 @ 3:16 p.m.

Thanks for the correction. When I visited the house ca1956, I was told that Dietrich was the previous owner--or at least that's how I now remember it. I don't doubt the information you supplied, as that's what the Wikipedia page on Rand said. However, both can be considered rumor until evidence is consulted and cited. If someone would check out the property records, that would be authoritative. Do I presume correctly that you have done this?

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tomjohnston Sept. 4, 2012 @ 5:52 p.m.

First off, your original comment was that Neutra built the house for Rand, which you changed to having the house built for Marlena Dietrich and Rand buying it from her. I think it has been established that Neutra built the house for Von Sternberg. Now your contention is that Dietrich was merely the “previous owner” from whom Rand bought the house, based on a 1956 conversation? Why presume that I checked property records? First off, had I done so I would have included that information in my post. Secondly, why would I bother when there is no indication that Marlena Dietrich either owned the home or lived there? Other than your assertion that she did, based on a conversation in 1956, on what basis do you make the claim. And finally, it’s just a comment on blog, not a doctoral dissertation. I can however, relate to you that Wikipedia wasn't the source of any of my information. The ownership citations were from several different sources, for example a 2001 article on Richard Neutra in Architectural Digest and a couple of different Modernist Architecture websites and the LA Times archive. A quote in the LA times: "He could not get gas for the Rolls," says Meri Von Sternberg, the director's widow, now living in Westwood. Meri Von Sternberg, who married the director in 1948, says he told her there were other problems, as well--his Japanese servants had been placed in internment camps, and pilots training locally for the Royal Canadian Air Force used the isolated house as a mock target. "He was getting divebombed every night," she says. "It was driving him crazy." The house was briefly occupied by a jeweler named Lou Bach, who sold it to Rand and her husband, actor Frank O'Connor.” Information is also available at the Neutra Institute for Survival Through Design, where you could also purchase floor plans of the Von Sternberg house if you were so inclined. There are also references to Rand's purchase of the home in some writings about Julius Shulman's work (no mention of Dietrich). He photographed the Von Sternberg house, in 1946 if I remember correctly, and I have included one of his photos of Neutra and Rand together outside in the front patio. I have come across no references anywhere to Marlena Dietrich having owned the property. But I have found many references to her work raising money for war bonds and her travels with the USO. They all seem to indicate that Dietrich was not even in the country during the period between the time Von Sternberg sold the house and Rand bought it. Property records?? Nah, I don’t think so. It may not be “authoritative“, but its good enough for me. But hey, if it’s that big of a deal to you, feel free to knock yourself out. Also' here's a link to 3 other pics of Rand at the house: http://www.aynrand.org/site/PageServer?pagename=support_premium_items

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SurfPuppy619 Sept. 4, 2012 @ 9:15 p.m.

...and pilots training locally for the Royal Canadian Air Force used the isolated house as a mock target. "He was getting divebombed every night," she says. "It was driving him crazy."

LOL, that is so funny! I mean I know at the time it was serious, but relating the story today is funnyyyyy!!! I do like that courtyard pic.....

I can tell everyone now, that I know NOTHING about Rand.

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SurfPuppy619 Sept. 2, 2012 @ 12:50 a.m.

OK, where is the HOUSE in the pic? I dont think that is an old pic, but a newer one, so the house woud have been gone by then but I would still like to know where it was-I found Tampa Ave and that was it

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tomjohnston Sept. 2, 2012 @ 2 a.m.

In which pic the 1952 pic or the 2003 pic? The house is obviously gone in one, but if you know what it looks like, it's plainly visible in the other.

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Twister Sept. 2, 2012 @ 3:08 p.m.

I'm asking where you got the '52 pic . . .

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Twister Sept. 5, 2012 @ 3:25 p.m.

Yup, that's it, pretty much as I saw it in the mid-fifties. I don't doubt your word, and your information seems good. I'm always open to the possibility that my memory is mixed up or that the information I recall receiving was inaccurate. I attended Neutra lectures in the fifties and sixties. I remember that his wife could sing and play the cello at the same time. You seem to be a first-rate scholar; do you have any references on the location of Neutra buildings? Any info on the Los Angeles County Building.

Re: tomjohnston Sept. 4, 2012 @ 5:52 p.m.

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tomjohnston Sept. 5, 2012 @ 4 p.m.

Well, according to what I've read, Neutra designed over 300 buildings in the LA area alone. There are several modernist architecture websites the have some good information. I found http://www.trianglemodernisthouses.com/neutra.htm
to be helpful; listed chronologically, most with pictures or renderings. You could also use the list on Neutra's wiki page. or perhaps even the Neutra Institute for Survival Through Design. When you refer to the Los Angeles County Building, I assume you mean the LA county Hall of Records. It has definitely seen better days because of the lack of routine maintenance. For example, those aluminum louvers the Neutra designed to move with the sun and keep the offices inside shaded haven't worked in at least 20 yrs. It's not even use as the hall of records anymore. It's basically just general offices space for a bunch of county departments. here's a link I forgot to include yesterday. The quality of the video is pretty bad, but at the very beginning you can make out the metal fence around the front patio. http://vimeo.com/14281872

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Twister Sept. 7, 2012 @ 11:56 p.m.

I'm impressed at your command of the subject and your research abilities--thanks!

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Twister Sept. 8, 2012 @ 8:26 a.m.

Back to the original subject: The truth hurts the liars, the owners of "The Big Club," and "you ain't in it."

http://www.brasschecktv.com/videos/campaign-2012-1/brasscheck-convention-speech-.html

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