Wall Street's High-Speed Gambling

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.
— August 24, 2012 11:43 a.m.

Wall Street's High-Speed Gambling

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.
— August 24, 2012 8:31 a.m.

Wall Street's High-Speed Gambling

"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
— August 24, 2012 7:31 a.m.

Wall Street's High-Speed Gambling

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?
— August 23, 2012 1:30 p.m.

Wall Street's High-Speed Gambling

How much tax revenue would a transaction (Robin Hood) tax really raise? Some think none. http://www.forbes.com/sites/timworstall/2012/06/2… 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?
— August 23, 2012 9:15 a.m.

Wall Street's High-Speed Gambling

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.
— August 23, 2012 5:56 a.m.

UCSD's Gary Jacobson and Keith T. Poole predict political peace

Don, I wrote a great response to your excellent post, but the internet swallowed it up. I am going out for dinner right now, but will be sure to answer sometime this weekend.\Jeff
— August 17, 2012 2:55 p.m.

UCSD's Gary Jacobson and Keith T. Poole predict political peace

Worst case is that the bubbles are similar to the action in 1921-1923 Weimar. Very possible. Looking at the gold/platinum spread, gold has been premium to platinum for almost a year and a half and that spells trouble right there. I'm really surprised that commodities haven't rallied more.....but the commercial interests seem to be selling into the rallies. Bonds....where do you expect bonds to be with rates so low? Bubble in bonds, I don't think so. Stocks are up because Europe sucks and the currencies are being debased as we speak.Stocks also went up in 1922 Weimar. Some real estate is doing well.....Farm land is at an all time high. I am loathe to predict how long the weak economic growth will linger because that's way above my pay grade. Have noticed a tendency in all margins of all sorts getting thinner, and much of that is a function of the increase in productivity we've seen since 1980. I don't think cash is king and I spend it as soon as I make it. Cash is a negative asset. I am worried about the possibility of a war and have been constructing models and algorithms for a game plan. If there is a war with Iran, bonds, dollar, oil, and gold will be the place to be. The options market prices in oil and gold already have an implied war premium in the next few months. Calls are not cheap, that's for sure.
— August 17, 2012 11:38 a.m.

UCSD's Gary Jacobson and Keith T. Poole predict political peace

Actually, things are so bad, we hit the point of no return back in 2010. Nothing the government or Fed does will benefit the economy as a whole. Expect broad based debasement of the dollar, much more than the 30% planned debasement of the dollar(St.Louis Fed operating paper) in the next 10 years. The market is already giving very good signals of what lies ahead.
— August 17, 2012 8:33 a.m.

Screw U: The Next Bubble May Be Higher Education

Lots of good bargains in San Bernardino's Muni Bonds right now, but not for long.
— August 5, 2012 1:33 p.m.