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San Diego unions push transaction tax

Assembly outside Congressman Darrell Issa’s Vista office called for a tax on Wall Street. - Image by photograph by Lauren Reid/National Nurses United
Assembly outside Congressman Darrell Issa’s Vista office called for a tax on Wall Street.

On September 1, two hundred labor union members assembled at the Vista office of Congressman Darrell Issa to promote the idea of a transaction tax — a tiny assessment on sales of stocks, bonds, currencies, derivatives, and the like. Because there is so much volume in these instruments, a 0.5 percent tax on each trade could raise $350 billion a year in much-needed government revenue. National Nurses United is promoting the idea in the United States. Leaders in Germany and France are also pushing for some kind of transaction tax in Europe.

“Through such a tax, we will make Wall Street pay for the damage it has caused to Main Street,” said one flyer making the rounds in front of Issa’s office. Those backing the idea say it will discourage speculation, the scourge of today’s markets all around the world.

Those are noble objectives that I agree with completely. Wall Street has never been horsewhipped for bringing the world to the edge of the abyss (and threatening to do so again). Gambling in financial instruments is dangerous and damaging, particularly since those on the inside have an advantage on the wee folk. A transaction tax could help level the playing field.

Sentimentally, I am all for a transaction tax. But realistically, I know it ain’t gonna happen. Because of last year’s unsavory Citizens United case, by which the Supreme Court permitted corporations to shower money on the candidates of their choice, Congress is almost 100 percent owned by Wall Street and big business. Before Citizens United, Congress and the White House, too, were only 85 percent in business’s pocket.

UCSD economist Hamilton says global tax necessary, unlikely.

But even if this tax were enacted, I doubt that it would work. First, experts in both Europe and America agree that it would have to be global. If restricted to one country or one region, the trades would simply move to countries without a tax. “It is inconceivable to me that every country would agree to the tax,” says James Hamilton, professor of economics at the University of California San Diego.

Such a tax “would be a great jobs program for [tax havens] Bermuda, the Cayman Islands, and Liechtenstein,” laughs Todd Buchholz, San Diego economist and author who advises hedge funds and runs one of his own. As Buchholz points out, the late banker Walter Wriston sagaciously observed, “Capital goes where it’s wanted and stays where it’s well treated.” That’s why we have tax and secrecy havens such as those Buchholz mentioned and numerous malodorous others. (The Caymans, first sighted by Christopher Columbus, were originally occupied by pirates and still are — pirates in pinstripes. With a population of 56,000, the Caymans are home to more registered companies than people and are the fifth-largest financial center in the world. You can see how the absence of income, capital gains, and corporate taxes, coupled with complete secrecy, attracts the sticky-fingered.)

Professor Starr agrees, says burden would be on investors.

National Nurses United says that the stock exchanges, brokers, institutional investors, and day traders will bear the burden of the tax. That gives Ross Starr, professor of economics at the University of California San Diego, a chuckle. The pain of the tax “will be shifted to public investors. The [promoters of the tax] might think they are taxing Wall Street, but they will be taxing investors.”

Agrees his colleague Hamilton, “It does not matter on whom the tax is officially levied. The incidence of the tax will ultimately fall on all investors.”

Some commentators are wailing that a tax as low as 0.01 percent per transaction would wipe out so-called high-frequency traders. Frankly, nothing would be more desirable for financial stability than the mass extinction of these predators. High-frequency traders, aided by fast-calculating computers, hold a position for minutes, or often seconds. They will make thousands of trades daily, usually ending the day with a zero balance.

A typical profit per trade may be a fraction of a penny — often well below one-hundredth of one percent per transaction. That’s the major reason a wee tax could wipe them out. Also, they account for an astonishing 65 to 70 percent of stock trading in the United States. Their computers are able to pick up information that has not yet crossed the news screens.

“Everyone is confused about why financial markets have allowed high-frequency traders to peek into what is happening to a market a few tenths of a second before anyone else,” says Starr. “They seem to be destroying the level playing field.”

Starr thinks a transaction tax would crimp the high-frequency traders. But they could always go offshore. “There is no reason you have to live in Greenwich, Connecticut. You can live in Trinidad and Tobago,” says the economist.

The traders might live in the Caribbean, but their bosses wouldn’t. “Back in the 1950s and 1960s, the islands away from the mainland might as well have been Gilligan’s Island,” says Buchholz. “Now you can set up a high-frequency trading post any place in the world. A lot of hedge funds [and United States–based manufacturers] are domiciled offshore. They may be based in New York, but the accounting and management services could be in Ireland or Bermuda. As an investor, you get a report, but it doesn’t say Madison Avenue. It may say Hamilton, Bermuda.” (Indeed, much of the insurance industry is based in Bermuda.)

There is a big debate now: does high-frequency trading enhance market liquidity or deter it? One study indicates that this rapid-fire, computerized trading makes the market more efficient. “Does it add liquidity or create turbulence? I don’t think anybody knows,” says Starr.

“I am a skeptic about the profitability of high-frequency trading,” says Buchholz. “But I do believe it adds liquidity to the system.” Today the small investor pays a much lower fee per transaction than formerly because of this increased liquidity.

The proponents of a financial transaction tax do have good arguments. The British instituted the so-called stamp tax on financial transactions in 1694. It’s the oldest tax in Great Britain. And while there is leakage — financial transactions taking place away from England — the London Stock Exchange is still the world’s fourth largest. A number of countries have successfully adopted transaction taxes of some kind. After all, there are honest people who pay their taxes, although, admittedly, there are proportionately fewer of them in the financial services industries.

In the United Kingdom, a security can’t be transferred unless the tax is paid; the dealer is responsible for collecting it. Basically, evasion of the tax implies ambiguity of ownership of the security. By and large, investors are willing to pay the small tax to assure their ownership.

There are many compelling reasons for instituting the tax, but I return to my original argument: ain’t gonna happen, thanks greatly to Citizens United.

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Assembly outside Congressman Darrell Issa’s Vista office called for a tax on Wall Street. - Image by photograph by Lauren Reid/National Nurses United
Assembly outside Congressman Darrell Issa’s Vista office called for a tax on Wall Street.

On September 1, two hundred labor union members assembled at the Vista office of Congressman Darrell Issa to promote the idea of a transaction tax — a tiny assessment on sales of stocks, bonds, currencies, derivatives, and the like. Because there is so much volume in these instruments, a 0.5 percent tax on each trade could raise $350 billion a year in much-needed government revenue. National Nurses United is promoting the idea in the United States. Leaders in Germany and France are also pushing for some kind of transaction tax in Europe.

“Through such a tax, we will make Wall Street pay for the damage it has caused to Main Street,” said one flyer making the rounds in front of Issa’s office. Those backing the idea say it will discourage speculation, the scourge of today’s markets all around the world.

Those are noble objectives that I agree with completely. Wall Street has never been horsewhipped for bringing the world to the edge of the abyss (and threatening to do so again). Gambling in financial instruments is dangerous and damaging, particularly since those on the inside have an advantage on the wee folk. A transaction tax could help level the playing field.

Sentimentally, I am all for a transaction tax. But realistically, I know it ain’t gonna happen. Because of last year’s unsavory Citizens United case, by which the Supreme Court permitted corporations to shower money on the candidates of their choice, Congress is almost 100 percent owned by Wall Street and big business. Before Citizens United, Congress and the White House, too, were only 85 percent in business’s pocket.

UCSD economist Hamilton says global tax necessary, unlikely.

But even if this tax were enacted, I doubt that it would work. First, experts in both Europe and America agree that it would have to be global. If restricted to one country or one region, the trades would simply move to countries without a tax. “It is inconceivable to me that every country would agree to the tax,” says James Hamilton, professor of economics at the University of California San Diego.

Such a tax “would be a great jobs program for [tax havens] Bermuda, the Cayman Islands, and Liechtenstein,” laughs Todd Buchholz, San Diego economist and author who advises hedge funds and runs one of his own. As Buchholz points out, the late banker Walter Wriston sagaciously observed, “Capital goes where it’s wanted and stays where it’s well treated.” That’s why we have tax and secrecy havens such as those Buchholz mentioned and numerous malodorous others. (The Caymans, first sighted by Christopher Columbus, were originally occupied by pirates and still are — pirates in pinstripes. With a population of 56,000, the Caymans are home to more registered companies than people and are the fifth-largest financial center in the world. You can see how the absence of income, capital gains, and corporate taxes, coupled with complete secrecy, attracts the sticky-fingered.)

Professor Starr agrees, says burden would be on investors.

National Nurses United says that the stock exchanges, brokers, institutional investors, and day traders will bear the burden of the tax. That gives Ross Starr, professor of economics at the University of California San Diego, a chuckle. The pain of the tax “will be shifted to public investors. The [promoters of the tax] might think they are taxing Wall Street, but they will be taxing investors.”

Agrees his colleague Hamilton, “It does not matter on whom the tax is officially levied. The incidence of the tax will ultimately fall on all investors.”

Some commentators are wailing that a tax as low as 0.01 percent per transaction would wipe out so-called high-frequency traders. Frankly, nothing would be more desirable for financial stability than the mass extinction of these predators. High-frequency traders, aided by fast-calculating computers, hold a position for minutes, or often seconds. They will make thousands of trades daily, usually ending the day with a zero balance.

A typical profit per trade may be a fraction of a penny — often well below one-hundredth of one percent per transaction. That’s the major reason a wee tax could wipe them out. Also, they account for an astonishing 65 to 70 percent of stock trading in the United States. Their computers are able to pick up information that has not yet crossed the news screens.

“Everyone is confused about why financial markets have allowed high-frequency traders to peek into what is happening to a market a few tenths of a second before anyone else,” says Starr. “They seem to be destroying the level playing field.”

Starr thinks a transaction tax would crimp the high-frequency traders. But they could always go offshore. “There is no reason you have to live in Greenwich, Connecticut. You can live in Trinidad and Tobago,” says the economist.

The traders might live in the Caribbean, but their bosses wouldn’t. “Back in the 1950s and 1960s, the islands away from the mainland might as well have been Gilligan’s Island,” says Buchholz. “Now you can set up a high-frequency trading post any place in the world. A lot of hedge funds [and United States–based manufacturers] are domiciled offshore. They may be based in New York, but the accounting and management services could be in Ireland or Bermuda. As an investor, you get a report, but it doesn’t say Madison Avenue. It may say Hamilton, Bermuda.” (Indeed, much of the insurance industry is based in Bermuda.)

There is a big debate now: does high-frequency trading enhance market liquidity or deter it? One study indicates that this rapid-fire, computerized trading makes the market more efficient. “Does it add liquidity or create turbulence? I don’t think anybody knows,” says Starr.

“I am a skeptic about the profitability of high-frequency trading,” says Buchholz. “But I do believe it adds liquidity to the system.” Today the small investor pays a much lower fee per transaction than formerly because of this increased liquidity.

The proponents of a financial transaction tax do have good arguments. The British instituted the so-called stamp tax on financial transactions in 1694. It’s the oldest tax in Great Britain. And while there is leakage — financial transactions taking place away from England — the London Stock Exchange is still the world’s fourth largest. A number of countries have successfully adopted transaction taxes of some kind. After all, there are honest people who pay their taxes, although, admittedly, there are proportionately fewer of them in the financial services industries.

In the United Kingdom, a security can’t be transferred unless the tax is paid; the dealer is responsible for collecting it. Basically, evasion of the tax implies ambiguity of ownership of the security. By and large, investors are willing to pay the small tax to assure their ownership.

There are many compelling reasons for instituting the tax, but I return to my original argument: ain’t gonna happen, thanks greatly to Citizens United.

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Comments
361

You can set up a high frequency trading operation any place in the world - but your competitors who set up shop near the exchange's computers so they can use the same node will have a lower latency (faster) connection to the exchange, and will be a few milliseconds ahead of you.

Would liquidity be harmed so much if electronic exchanges were set up to clear tranactions all at once in one batch every, say, 10 seconds? The exchange could store bids for most of that time, match bid/ ask to create trades with the smallest spreads, then execute in the 10th second. To deal with ties between brokers that have each sent in thousands of bids over the course of a few seconds: give the first bid a broker sends the highest priority, the second bid that broker sends a lower priority, the third bid a lower priority still, etc. Higher priority bids get cleared before lower priority bids. If there are still ties, choose a winner at random instead of first come, first served.

Or simpler still: collect bids/asks for one second, randomize their order, and then execute all the winning trades simultaneously. Repeat every second.

Of course Goldman Sachs or some other high frequency trader would still say no, so neither plan could be enacted.

Sept. 21, 2011

Better yet, ban high-frequency trading. Best, Don Bauder

Sept. 22, 2011

hibob describes an honest system. High frequency trading, however, is nothing more than an updated version of front running.

When the brokers can trade a milisecond before their market mover clients, so that it's virtually undetectable, they've got a money machine where every investor is screwed just a little bit...

Worse, since many of these high frequency trading algorithms are based on similar strategies, there is a worse risk than ever of a catastrophic feedback loop where cascading trades send the system into a spiral. This has already probably happened at least once, with last year's insta-crash.

A transaction tax, no matter how minuscule, would stop this dishonest and dangerous practice. But since Congress is owned by the owners of the systems, expect nothing to change until it is far too late.

Sept. 24, 2011

Don, you said, "Frankly, nothing would be more desirable for financial stability than the mass extinction of these predators. High-frequency traders, aided by fast-calculating computers, hold a position for minutes, or often seconds. They will make thousands of trades daily, usually ending the day with a zero balance." Since specialists have gone to the wayside, HF traders have created a bulk of the liquidity in addition to their volume. You refer to them as predators, I refer to them as sagacious individuals who are making money. I guess because they make a lot of money they are predators...does that apply to everyone who consistently makes money in all market conditions? I remember when I was a local at the CBOT, people said the same thing about me being a predator because I had first crack at the inside market. That's why people buy seats on exchanges, so they can get first crack at the inside market, and there is noi reason for exchange members to be altruistic. I guess I am a predator because I paid for a seat and consistently make money whether the market goes up, down...it doesn't matter as long as it moves and I'm on the right side. It's still a free country and anyone is allowed to set up their own high frequency trading operation. The HFT guys should be applauded for a job well done, advancing technology, and beating everyone else to the punch.

Sept. 23, 2011

One man's sagacity is another man's depredations. You have a right to your opinion and I have a right to mine. Best, Don Bauder

Sept. 23, 2011

Oh no, we have "Mr. FInancial Expert" back with us-nokomisjeff ....... I bet you're a billionaire by now with your proprietary trading "secrets", right jeff!

Sept. 23, 2011

I didn't see nokomisjeff's name in the Forbes 400 -- all of whom are billionaires. Best, Don Bauder

Sept. 23, 2011

Don, in 1980 there were only 10 billionaires in America- now the entire Forbes 400 are billionaires, what does that tell you!

BTW, Elizabeth Warren is running for the senate in MA, and although I have personally had problems with her-or I should say her LACK of getting involved in a serious legal matter where she was an expert- I do believe in much of what she is preaching.

Her problem is she is talks the talk but does not walk the walk, IMO anyway. Here is a fast link to check out / / /

"I hear all this, you know, 'Well, this is class warfare, this is whatever,'" Warren said. "No. There is nobody in this country who got rich on his own -- nobody.

"You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.

"Now look, you built a factory and it turned into something terrific, or a great idea. God bless -- keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along."1

http://act.credoaction.com/campaign/warren_thanks/index2.html?rc=LA_Warren_09212011_ad1

Sept. 24, 2011

I agree 100% with her-especially the first 45 seconds;

http://www.youtube.com/watch?v=htX2us...!

Sept. 24, 2011

Somebody has to raise the issues she is raising. The frightening gap between the richest 1% and everybody else is economically deleterious, and should make a good campaign issue. Best, Don Bauder

Sept. 24, 2011

"Don, in 1980 there were only 10 billionaires in America- now the entire Forbes 400 are billionaires, what does that tell you!"

It tells me that the U.S. dollar is worth one hell of a lot less now than it was in 1980.

Sept. 24, 2011

Clearly, inflation is one reason for the growth in the number of billionaires. Best, Don Bauder

Sept. 24, 2011

I think those are words of wisdom from Warren. She is right. Best, Don Bauder

Sept. 24, 2011

Perspicacious words those. Best, Don Bauder

Sept. 26, 2011

You will not see people who make money on the markets on any list. Their money is not in the U.S. This is because people that make money in the U.S. are thought of as predators, and will be punished for selling short in a bear market, or perhaps for margining heavily in the bond market anticipating a drop in stocks. People that don't understand trading shouldn't be trading. Don, in all of the years I've read you - and even in understanding your radical shift in economic thought - you know this.

Warning to all people who have 401k's or other such nonsense: You are at the mercy of someone else. I never bought into a 401k. When it was initially offered, I asked what it was all about. The explanation, in a nutshell, was that I would give a percentage of my money to an organization that would invest it in stocks, and I would become more wealthy when I decided to retire. That's what I was told. What I heard was, "I'm going to Las Vegas, give me your money and I'll shoot craps with it and bring you back your profits."

My wife, who didn't listen to my advice, has a completely wrecked 401k. She'll be lucky if she makes 2% on it by the time she's done with the thing. I could have done much better wagering ponies at Del Mar.

That's not the fault of true traders. It's the fault of companies that take your money and pretend that the market is an investment rather than a gamble. Tell me that's not true, Don.

Sept. 24, 2011

There is no question that the stock market is a crapshoot. However, with interest rates so frighteningly low, one way to get yields of 4% or better is to buy common stocks of utilities, pharmaceuticals and oils. In re 401(k)s, I will tell a story. I always used to say in my San Diego speeches that only liars sell at the top. When I was retiring from the U-T in early 2003, I checked my 401(k). I knew that I had moved completely out of stocks, but I was curious to know when I had made the move. I had had only had about 30% in stocks, but at some point I had dropped that to zero. It turns out that I had done that in March of 2000 -- the peak of the market then. I have around 28% of my portfolio in stocks now. Best, Don Bauder

Sept. 24, 2011

Another thing I suspect you know but aren't willing to confess for whatever reason: Keynsian economics is a total failure. Macroeconomic policy has continually brought nations to their knees. They recover, because economic cycles are unavoidable, both positive and negative. But it isn't Keynesian theories in practice that revives anything, stimulus is a fairytale, shifting Fed policy only delays the inevitable. What brings the economy back is good old-fashioned Micro Economics. It's the guy or gal that decides to open up a shop an manufacture something that seems to be in demand. And that will also inevitably fail when politicians come in and demand a percentage, and then more of a percentage. Because, after all, it's the markets that are killing the poor people and business needs to have a heart and give. Or else. Same with traders, those bastards. They're stealing from idiots that give money to people that have no clue (nor care) about how to make money in the market.

Sept. 24, 2011

Keynesian economics doesn't work. Neither does monetarism, rational expectations, supply side, Austrian School -- you name it. The best solution would be to let an economy plunge until prices get so low that venture money will pour in and the recovery will commence. However, that clashes with the political cycle. Ever since the 1930s, people in most major countries expect their governments and their central banks to do something. The president or prime minister who just lets the economy hit its natural bottom will be out of a job, as will legislators. Look at our situation today: the Keynesian government spending is not working, although it may be jacking up statistics temporarily. The monetarist approach of keeping interest rates at zero has helped the stock and bond markets but not the economy. Tax cuts for the rich, engineered by supply siders, is one major factor that got us into this mess. And on and on. If you have an answer, please let us all know. Best, Don Bauder

Sept. 24, 2011

Surfpuppy, Actually my proprietary trading secrets have made money every year since 1978 with only 1982 returning single digit returns. As far as secrets go, they're really not secrets, just a good, disciplined system using multivariate analysis combined with Bayesian statistics and a few other things thrown in for good measure.You could probably do the same thing if you were able to add about 50 points to your IQ. As far as billionaire...no way as my methods are hamstrung by government imposed position limits for speculators in the wheat market, which is my forte. Funny thing about that Forbes list, I was discussing that list with a friend who's on the list. He said that he knew many people who should be near the top of the list who weren't even mentioned. Those people are all big currency traders who exist in the shadows of the financial arena. Most really big independent currency speculators live in places like Monte Carlo, Hong Kong, and the Algarve, and regularly do 40-50 billion dollar trades(even leveraged one must still come up with 3-4 billion to get the trade down.) But then again, just because someone isn't a billionaire doesn't mean that they aren't successful in the markets and don't make their daily bread from the markets. Both Puppy and Don are just taking cheap shots...which is OK by me.

Sept. 26, 2011

LOL @ "Mr. Know It All"....Oppsss...I meant "Mr. I Have Made Double Digit Money Every Year Except 1982!!!!!" I wonder how a brainiac like you beat out all the hedgefunds and money managers in 2008??? Also beat the DJIA, the S&P 500 and the Russell 2000????

Oh, so now it is the "man" (gov) holding you back from becoming a billonaire, not your own lack of creative writing skills! Love this guy!

BTW-I made my first billion at age 14 in the tech boom, so I am OK, and if you had two sticks to rub together you could invent fire!

You're such a clown it aint even funny.

Sept. 26, 2011

Puppy...you are so unoriginal and don't have a clue what a professional exchange member who trades their own account can make. You might be impressed by hedge fund managers returns but we're not. Not only do I beat all those indices, I made money every year. I have to as if I don't make money I don't eat. I don't have the bullshit skills of a lying scumbag lawyer, and I need real talent unlike you. As I said before, you could use about 50 IQ points.

Sept. 26, 2011

OMG, "Mr. Wanna Be Billionaire" is NOW CHANGING his tune, from making "double digit" returns every YEAR!!! to just "making money". Oh brother, you gotta love this clown.

Oh, and I do love this wild, speculative, unsupported comment;

"I don't have the bullshit skills of a lying scumbag lawyer, and I need real talent unlike you."

And it is even MORE hilarious given this earlier comment;

"Fred, since you resort to invective, I suspect that life has passed you by and you're just a bitter also ran."

I can knock you down all day long, keep coming back for more, this is more fund than a "Barrel of nokomisjeffs"......errr...I mean MONKEYS!

Sept. 26, 2011

The invective needle is zooming upward. Best, Don Bauder

Sept. 26, 2011

If you make double-digit returns every year, you should eat very well. In fact, you should be in the Forbes 400 by now. Best, Don Bauder

Sept. 26, 2011

Don, I do eat very well, very well indeed.I also spend money on a world class art collection, travel, and support about 35 people who depend on my monthly stipend. As a supposed business guy, you should know the difference between simple interest and compound interest. Had my returns been compounded every year, I probably would be touching the bottom of the 400 list, but I do need to do things like eat, pay taxes, collect art etc. I would have thought that they would have taught you stuff like this in business school. http://masteroftheuniverse.wordpress.com/about-me/

Sept. 27, 2011

If you became a billionaire at age 14, why do you practice law? Enjoy life. Best, Don Bauder

Sept. 26, 2011

$40 billion to $50 billion trades? By one individual? Who's on the other end of the transaction? Best, Don Bauder

Sept. 26, 2011

Sovereign funds, large banks, insurance companies, currency houses, oil companies, exporters, hedge funds, other big specs and combinations of the above. The currency markets are huge compared to markets like equities and it's not hard for a currency trader with a hundred million in his account to do currency trades worth over a billion. Plus, the cash and forward currency markets are so liquid, you can get down a 100 million trade and not move the market more than one or two pips.

Sept. 26, 2011

Man, that's leverage. No wonder debt is killing us. Best, Don Bauder

Sept. 26, 2011

But leverage and debt are not necessarily the same thing. But you're right, the debt is killing the government. In fact with M2 being around 9 trillion dollars and the national debt approaching 15 trillion, it would be an outlier if we could pay the thing off without significant currency debasement.

Sept. 27, 2011

If you have made double-digit returns every year except 1982 (which is apparently what you are saying), you will make some people suspicious. Some wondered about Madoff's great record. Best, Don Bauder

Sept. 26, 2011

If I ever managed money, my returns might raise some eyebrows, but I only managed money for a guy once, and it turned out very badly. In fact, this is my little personal story about being a good Samaritan and how badly it turned out. http://masteroftheuniverse.wordpress.com/2008/07/24/why-i-dont-take-investors/

Many independent traders on the floor make stratospheric returns. Many floor traders lose money also, but the guys who have been exchange members for 30+ years trading their own accounts are doing something right. To get an idea of what kind of returns are needed, do the math. A floor trader might have 1 million in his account, he might have much more or much less. Simple risk management means that he's not going to have the entire 1 million at risk all the time, but it's better to have some capitalization. The floor trader needs to bring his A game to the table every day, and has to learn to grovel for nickels and dimes because they do add up. The best floor traders usually trade spreads, are never net long or short, because spreading is where the real money with a smaller risk is. A floor trader with a million in his account better make 30%+ a year so he can bring home $200K after taxes. Plus if he leases his seat, he needs to pay that plus exchange dues, commissions, cost of money, slippage, outtrades, etc. It's a tough gig out there but there are a few that quietly go about their business, the rewards not being accolades from business reporters and the media, but the rewards coming from the fact that one can play hardball with the big guys and win. Beating [email protected] at their own game is satisfaction. The public doesn't realize that the market is just one big game.

Sept. 27, 2011

Nokomisjeff, I'm gonna have to go ahead and disagree with you here...

  1. HFT systems CANNOT be set up by just anyone. It requires a lot of capital as well very fast servers with close physical proximity to the exchanges. Very expensive. Not open to all and sundry.

  2. HFT's are NOT "sagacious individuals". They're algorithms.

  3. A lot of people, myself included, believe that HFT is little more than front running. That's illegal for very good reasons.

  4. The risk of a feedback loop creating a "Black Swan" event are pretty clear when you've got algorithms controlling the vast majority of trading volume.

Tell me how I'm wrong, my friend comparing what you've done in the past to what HFT does today. I respect deft traders, as you describe yourself to be. Your hard work and personal assumption of risk is a very different thing from these algorithms created by unaccountable financial entities that are guaranteed to be bailed out at our expense.

Sept. 24, 2011

I agree with Fred: high frequency trading (HFT) is just a highly computerized, more sophisticated form of front running. Front running is the practice of making a trade with the knowledge that somebody (probably a big institution) is just about to make the same trade. It's considered insider trading. Best, Don Bauder

Sept. 24, 2011

Don, not all front running is illegal. You obviously are not acquainted with how a specialist works and the rules they have to go by. Sometimes a specialist has to front run in order to cross a large order, and this is not illegal, nor is it considered insider trading. Same thing happens in the options pits on a daily basis in order to cross complicated straddles, strangles, condors or whatever and none of it is illegal. Front running is also allowed in the currency markets when sometimes the bank is crossing a complicated currency swap. Not all front running is insider trading, and if you actually study how HFT systems work, really drill down instead of touting the populist line, you will find that they are "At Risk" during the duration of the trade.

Sept. 26, 2011

Not to beat a dead horse but insider trading is also allowed for members of congress, and their average returns show it, with Democrats making a statistically significant number of basis points better than their Republican counterparts. Draw whatever conclusions you want. http://insidertrading.procon.org/view.resource.php?resourceID=001513

Sept. 26, 2011

It seems to me that Democrats get more loot from Wall Street than Republicans -- at least on the presidential level. Wall Street loves that liquidity and Democrats are historically more willing to provide it. Best, Don Bauder

Sept. 26, 2011

Yes, some front running is legal. I didn't say it was ethical, though. Best, Don Bauder

Sept. 26, 2011

Without the legal front running, would it be ethical to screw your customer over by not giving him the best price and ignoring your fiduciary duty?

Sept. 27, 2011

Okay, not everyone has access to HFT. But to me, that's a lot like playing blackjack and having the ability to count cards. Some people have that ability and some don't. Following your logic, card counting should therefore be illegal playing blackjack. The reason that it's illegal isn't because some people don't have the ability to count cards, it's because the casinos have a disadvantage, and they control the game.

My point - why I agree with Jeff - is that there is this notion that the markets should be a level playing field, and oh the outrage that it isn't! But the truth is that the markets will NEVER be a level field. There will always be insider trading, there isn't anything you can do to stop it. The only way that insider people get caught is when their lust-greed overrules their intelligence. It's when they make a BIG move based on insider information that they risk getting caught.

If you want to count cards in Las Vegas, you don't sit at the $1,000 minimum single-deck table and toss $5,000 chips out when there's a half-deck full of aces and face cards. You take down $10,000 in one deck and they'll toss you out. You go to a $5 minimum table with a 5-deck rack and a bunch of tourists, and you play to take that rack for no more than $1,000 and then you get up and go grab lunch and play at your next casino.

Sept. 24, 2011

Markets SHOULD be on the level. But I don't know a time in history when they were. Today, the rigging seems to be worse. Best, Don Bauder

Sept. 26, 2011

Don, you should really read your history before you make outlandish claims like that. For a good history lesson, read Henry Clews book here. http://www.archive.org/stream/twentyeightyears00clewrich#page/n5/mode/2up This book discusses the 19th century shenanigans like watering stock, issuing fake stock, buying off congress, bull cliques, bear cliques, corners, etc. If you think the rigging is bad, look at Gould's attempt at cornering the gold market in 1869 when they basically kidnapped president Grant while on vacation so he could not order the treasury to sell spot gold. Today's action is nothing like it was way back then. But rigged? sure, but then again the general public has no business even being in the markets at all. It's only their greed that keeps them coming back.

Sept. 27, 2011

Oh, the hanky-panky in the Robber Baron days was bad. But they didn't have computers then. Best, Don Bauder

Sept. 28, 2011

Fred, if you want a HFT system, you can be up and running within 24 hours. Right now I know of at least 5 people that are leasing space on co-located servers right next to the exchange server, and they're pretty reasonable lease rates at $50K per month. You can find decent HFT programs, plus spoofs and anything else you want, here. http://www.opensourcetrader.com/ You'd need about a million dollars of capital to kick it off, but with leverage that should give you pretty good bang for the buck.

Not all front running is illegal. When I was in the pit, I used to know whether the pit broker was going to buy or sell just by looking at the movement of his eyes, and I could get him to bid up or offer down...Is that front running? Plus, people pay big money to buy seats on exchanges in order to get first crack at the orders coming in...is this wrong?

All the people I know running HFT's are pretty sagacious individuals...the algo is merely a tool used by a sagacious individual to extract money from the market.

Sept. 26, 2011

Great article for those interested in a more philosophical bent regarding markets, HFT, and discussing why the market price is an illusion(something I've known for 35 years incidentally.) Great article. http://seekingalpha.com/article/231921-why-the-market-price-is-an-illusion

Sept. 26, 2011

You know market price is an illusion but still made double-digit returns every year except 1982? Didn't the illusion sometimes frighten you? Best, Don Bauder

Sept. 26, 2011

I primarily trade the wheat market and the returns don't scare me. The mistress of the market has a way of making me very humble, like when I was in the Mexican Peso fiasco in 1982 where I was caught short 50 contracts of pesos the weekend of the devaluation. Had to endure 11 days of limit down moves, and lost $20K per contract...do the math. Another big hit was during the bubble when AMZN was trading at $250 and had a market cap bigger than GE. I shorted a block at $250.75 and watched it gap up to 300 on Monday's open. I bought that stock back in 5 seconds that morning and got killed. Or when I got the wrong way on the CBOT/MGEX Dec 2007 wheat spread where I lost $2.00 per bushel in 3 days on 3 million bushels. I could go on and on about the carnage the mistress of the markets has wreaked upon me, but those hits are all the cost of doing business. All the big market hits in my life, I still sleep like a baby.

Sept. 27, 2011

Correction: Make that I was caught long during the Mexican Peso devaluation and lost my ass:)

Sept. 27, 2011

If you make double-digit returns every year (except one) you should sleep very well. Best, Don Bauder

Sept. 28, 2011

All you need is a million to get started, huh?

Well, I guess I'll just check my pocket for a bit of spare change and sign up for my account, right?

Dude, you're living on a different planet from the rest of us if you think a "normal person" has a million laying around, plus the additional hundreds of millions required to have any chance of competing with the big firms.

I appreciate the information you sent, since it buttresses my points.

So far, you say "it's affordable", and "front running is legal".

What about Black Swan vulnerabilities? Systemic risk from HFT?

What about epistemic arrogance which Nassim Taleb describes so well? Your "sagacious" individuals...well, I say they're pompous gamblers who are playing with things they clearly do not understand, (they pay me and my friends to write it into code), or are so callous they do not care about the consequences.

Legal and good are not the same thing. You may be clever, but you sound highly immoral.

Best,

Fred

Sept. 26, 2011

Fred, since you resort to invective, I suspect that life has passed you by and you're just a bitter also ran. As far as morality, I have never welshed on anything in my life. Have you?

What about Taleb's black swan? Have you ever read his paper that was the genesis of the book? Have you ever sat down with him on Friday afternoon at the Odeon and talked markets, or been to his office? There's much more to glean than you got from reading his book.

And yes, we're gamblers, just like Caesar's Palace gambles. Pompous...probably...when a guy like you is looking up at us, we would seem to be pompous, but I prefer the term cocksure myself. Code writers, hourly guys like you that need someone else to sign their checks just never get what it's like to be an individualist.

Sept. 26, 2011

"Pompous...probably...when a guy like you is looking up at us, we would seem to be pompous, but I prefer the term cocksure myself. "

LOL....DORK is more like it.

Sept. 26, 2011

Surfpuppy, you've lost and don't even know it. Have a nice day chasing ambulances or whatever you do.

Sept. 26, 2011

Ive spanked you so hard my paw is hurting :)

Sept. 26, 2011

Nice they delete my comments and leave SP's invective.

Sept. 26, 2011

Fred, if he has made double-digit returns in every year except 1982, he can carry a million dollars in his wallet. Trouble is: who believes that ANYBODY has made double-digit returns every year except 1982? Best, Don Bauder

Sept. 26, 2011

Don, there's guys on the floor of the CBOT, CME, MGEX, KCBOT that have made money every week since the early 60's. Trouble is that you, like most reporters, do much of your research by reading what other reporters say and don't go looking for yourself. Frankly, I don't care if you believe me or not and refuse to defend my record anymore because since I don't manage money my record is not in the public anyways.

Sept. 27, 2011

I don't know that algorithms and sagacity involve the same skill sets. Best, Don Bauder

Sept. 26, 2011

Elizabeth Warren is a Marxist and her 'distributive justice,' is un-American. The factory owner pays taxes, too, not just 'the rest of us.' Tell us how much of the factory the owner gets to keep (a 'big hunk' is not specific). The veiled threat of mob rule is completely hostile to the foundations of our Republic. Sure we have problems, but re-distribution of assets is not the answer.
Say I own a house. Do I have to pay it forward to someone who is currently renting? Or am I paying it forward to someone not yet born. Are my property taxes and income taxes and capital gains taxes and inheritance taxes not enough? Please support Elizabeth Warren. Someday people will turn off the soma, er, the TV, and realize that all these elitist, Harvard egg-heads do not speak for our center-right Republic.

Sept. 24, 2011

Elizabeth Warren is not a Marxist. She knows that corruption infects Wall Street, and the consumer gets the short end of that stick. She wants to do something about it. Bless her. Best, Don Bauder

Sept. 24, 2011

The problem with Warren is that she is all talk, no walk.

I tired to use her as an expert witness a few years back, on an issue she was an absolute expert, and in a case where she has fought corruption-she wouldn't even return my phone calls, much less a meeting and not even close to getting her on board.

Sept. 24, 2011

She worked for the same Wall Street some years back that she is supposedly railing against now. Regardless of her message, she's a politician, and the motives of politicians are crystal clear. They want to be elected and re-elected. nothing else matters.

Sept. 25, 2011

RFG-I don't thik she ever worked on Wall Street-maybe she did but I don't recall that. As far as I know she has pretty much been a law professor most of her adult life-at HLS most recently.

As far as being a politician, I agree many get used to the power and being re elected is what count smost-I think many have a mission and it is not all tied to being re elected.

Sept. 25, 2011

She worked for the Wall Street office of Cadwalader, Wickersham & Taft while obtaining her Juris Doctor. They lost their ass a few years ago in mortgage-backed securities.

Sept. 26, 2011

Yeah, but do you really think that 2 summers, 35+ yrs ago has any relevance to what she does today? 35 yrs ago, I was a finish carpenter working for a small company making high end custom cabinetry, not even close to what I did for the last 30 or so yrs. I wouldn't say Cadwalader, Wickersham & Taft lost their asses in mortgage-backed securities as much as they lost because of them. They're a financial law firm. They lost a lot of their business and let about 1/3 of their associates go over the course of a couple of years but they still have well over 500 associates. Apparently, they're a tough gig, too. I once read that if a partner doesn't bring in at least $5 million in revenue on a consistent basis, he doesn't remain a partner for very long.

Sept. 26, 2011

Got it-did not know that.

Sept. 26, 2011

She is busy, remember. Best, Don Bauder

Sept. 28, 2011

economics specialnomic!!!

everybody talks and nobody walks their talk...and the ones who try 2 have unbelievable obstacles throw in their way...this country is full of people who think there r quick fixes to everything....we r a sound bite society...so mentally sluggish from being pummeled by all the differing opinions that if we aren't asleep were punch drunk

in certain disciplines differing opinions improve knowledgeability...in our current economic situation they r breeding confusion anger and contempt into the populace

let's get down to brass tax here and call a spade a spade

my niece has just lost her job to outsourcing....the second company she's worked 4 to do that...she wouldn't have taken the job but promises were made that this company wouldn't do it...they even expected her to go to India and train the staff there

as far as i'm concerned these kind of corporate structures r not only greedy but unamerican

values and fairmindedness have become passe among those who have the freedom to wield power in this country

and it's a crying shame

punishing and blaming the middle class for this is a farce

and the word LEADERS...be they be corporate or governmental is a grave misuse of the word....those kind of LEADERS r leading this country to rack and ruin with their non cooperative derisive thinking and behavior!!!

their conscious's r not clear and they have no shame!!!!!!

Sept. 24, 2011

Very well said, Nan. American corporations have already betrayed us by shipping their jobs to low- and slave-wage nations. Wall Street has betrayed us by entering into highly speculative deals (greatly derivatives), then demanding that the government and central bank bail them out, then demanding that regulations be relaxed because the financial business runs better without regulation! It's preposterous, but the public has fallen for it. The politicians have fallen for it because the Wall Street lobbyists line their pockets. Best, Don Bauder

Sept. 24, 2011

If Wall Street wasn't connected to Government in any way - I mean a complete separation - then there wouldn't BE any lobbyists, nor any bailing out, ipso facto, less highly speculative (or downright sketchy if you will) trading. It would be caveat emptor. There are other places and ways to invest where the investment is safe. The return isn't so swell.

People are outraged at Wall Street. They should be outraged at government. They should be outraged at the SEC. More regulation isn't going to change a thing, because government is corrupt. Traders will use any advantage they can to make a profit. There is already plenty of regulation in place to try and limit that advantage, and current regulation isn't even being enforced. How is MORE regulation going to help?

You can think that Elizabeth Warren is a lovely human being. She is a democrat running for U.S. Senate. She wants your vote. She wants the votes of 51% of the voting public. She will say whatever it takes to get that 51%. She is running against a Republican, and obviously attempting to divide and conquer in the liberal State of Massachusetts. Caveat emptor.

Sept. 24, 2011

kinda makes u glad u live in Mexico eh Refried ;-D

Sept. 25, 2011

Want more Americans to have jobs? Then ask your representatives to end the H1-B Visa frauds that allow companies to import (immigrate) cheap labor from China and India. Ask American corporations to train their employees again, instead of shopping for foreign labor. Nothing is going to change regarding job creation unless we force corporations to stop outsourcing and insourcing (bring Indian and Chinese labor to the U.S.)

Sept. 27, 2011

and the hell of it is what can we do about it Don....honestly where voting for decent behavior on the part of politicians is concerned i feel like a deer in the headlights

blind by the light of corrupt behavior on the part of each of the entities u've identified

ya know others in the world in this kind of fix have gone protesting thru world Capitals...and many with our blessing

hhhhhhhhhmmmmmmmmm...that's a thought...one can see why people get "up in arms" and have revolutions

i glad ur a voice from the trenches Don

Sept. 24, 2011

People have been demonstrating on Wall Street during the last week, but the media have given it scant coverage. Best, Don Bauder

Sept. 24, 2011

Lissen, y'all, I done awreddy tole y'all the answer.

Don' manipulate and don' be manipulated. For example, don' buy their s#!t!

I noe, doe, ain't nobuddy gonna lissen ta me.

Twstr

"Never underestimate the power of a small group of committed citizens to change the world; indeed, it's the only thing that ever has." --Margaret Mead

Sept. 24, 2011

I listen to you, Twister. Best, Don Bauder

Sept. 25, 2011

i listen to u 2 Twister...i'd rather see a bringing back of the Monroe Doctrine and high tariffs 4 foreign products and a huge campaign to buy American!!!!!

Sept. 25, 2011

Buy American campaign, yes. Tariffs, no. Best, Don Bauder

Sept. 25, 2011

why not tariffs Don???

Sept. 26, 2011

Most economists and historians agree that the tariffs slapped on by the U.S. in the 1920s, and the retaliatory ones slapped on by other nations, were major factors in the Great Depression. Best, Don Bauder

Sept. 26, 2011

But most historians and economists miss the reckless actions of the Fed that were the major factors in the first of the Great Depressions...the one starting in 1930. The later depression of 1937-38 was primarily FDR's and congress fault.

Sept. 27, 2011

thx so much for the tit 4 tat explanation

i din't know :(

Oct. 2, 2011

Buy American campaign, yes. Tariffs, no.

Sorry, until China stops manipulating their currancy, until Japan and Germany stop blocking OUR improts, then I feel tariffs are a legit tool to even the playing field.

Sept. 27, 2011

As I understand the history of it, Bernie Madoff learned the ropes of high finance managing bid & ask matching while working for his father in law, which I surmise gave him advantageous knowledge in creating the electronic order fulfillment software that made the NASDAQ the model for all exchanges thereafter. My point is that bid/ask matching can't be insulated from human beings who are corruptable; no systemization of bid/ask process resolves high frequency trading's shortcomings since malefactors will still require prosecution. Likewise, additional taxation will require additional enforcement, one more venue for financial misdeeds. Better, in my eye, to devote more of already overly limited investigation & prosecution resources to existing statutes.

Sept. 24, 2011

I agree, minimally, this. But if anyone really wants to straighten out Wall Street, simply undock that capsule entirely from the government, and abolish the SEC. After that, dismantle the Fed, it isn't necessary. Once you've unplugged the government from affecting the markets and the economy in general, all of those Economists can concentrate on doing something useful and contributing to society in ways that are both helpful and potentially profitable. Like making donuts or manufacturing fishing rods and reels.

Sept. 24, 2011

Disagree 100%. We tried deregulation. We repealed Glass-Steagall and look what happened. Uncontrolled greed ran rampant and almost ran the world economy into the ditch. That could still happen, because Dodd-Frank is mush. The Wall Street lobbyists, tossing money around Congress, blocked any meaningful reform. It stuns me that the banks can be bailed out to the tune of $13 trillion (both Federal Reserve and US Treasury) and still say with a straight face that government interference is bad for their business. Best, Don Bauder

Sept. 25, 2011

Don, have you noticed that every stock market disruption, panic, etc since 1812 was caused by a government action in one way or another? I love to study the history of market dislocations and I'm surprised how the state usually benefits one way or another after a disruption. Refriedgringo is right in his assessment by the way. Look at the biggest percentage period of US growth from 1866-1908. No Fed, no federal income tax, no SEC, in fact the average citizen never had to deal with the federal government in their lives. Now, people accept these institutions because they are told by the media that they need them.

Sept. 26, 2011

After 1866, the U.S. was recovering from a devastating war. Booms usually follow wars as nations rebuild. Look at the 1920s and post-1946 in the U.S. Best, Don Bauder

Sept. 26, 2011

Yes and look at the difference. Post the bad 1921 depression there was government and Fed interference in the markets whenever they went south, despite the fact that the governments caused the problems in the first place. The booms that go around before and after wars are not true booms as evidenced by Bastiat's broken window fallacy. http://bastiat.org/en/twisatwins.html#broken_window

Sept. 26, 2011

The insatiable greed and laissez faire attitude of the 1920s were partly responsible for the Depression of the 1930s. Best, Don Bauder

Sept. 28, 2011

You're discussing symptoms and I'm looking at the direct causes.

You should study what the Fed did during those times and don't rely on what history books tell you to think? Look at the original minutes of Fed meetings and see for yourself.

Sept. 29, 2011

i think FDR did some of his public support (IE: to farmers because of the dust bowl...5 states went to hell in a handbasket over that one)

FDR's choices were thoughtful at the time...he tried to stabilize the ordinary mans future

i'm saying this because my parents...one from the dust bowl who came out to pick oranges lemons and grapefruit...and one pro-labor very popular at the time...idolized FDR...when he died everybody on our street came out of their houses crying

and i mean everybody!!!

Oct. 2, 2011

HMMOG Don!!!

...i just realized u and i can remember FDR

Oct. 2, 2011

Financial regulars, particularly the Securities and Exchange Commission, do not protect citizens from Wall Street depredations because the politicians don't give them the resources to do so, and even if they did, the regulators wouldn't want to do their jobs. They want fat jobs with the law firms that represent the crooks. Best, Don Bauder

Sept. 25, 2011

Make that financial "regulators," not "regulars." Freudian slip. Best, Don Bauder

Sept. 25, 2011

the financial regulators r financial regulars Don...the regular SOBs that have been taking the public down to a lackluster existence for years!!!

Sept. 25, 2011

That was the Freudian slip. The regulators ARE Wall Street regulars. The agency was created in the 1930 to protect the public from Wall Street predators. Now the SEC protects Wall Street from the public. Best, Don Bauder

Sept. 25, 2011

No matter how Congress and regulators claim to reform the system, it is bound to come under the control of predators. Best, Don Bauder

Sept. 25, 2011

im curious what combination of upbringing, genetics, and life experiences contribute to create people that envy others and seek to punish those they envy.

im completely self made. didnt go to your stupid liberal colleges/babysitting centers, didnt get paid government money for any reason, dont envy my employers for being millionaires, didnt have a trust fund or any inheritance, and bought a new vette at the end of 08 and a new house at the end of 09. not broke. not in debt i didnt carefully plan for. not a republican. not a democrat. not a tea-partier. not affiliated with ANY of your mass-market categories you need so desperately to avoid taking on ideas directly.

what do you think people like ME think of you disgusting fools who love hearing yourselves talk and try to hide your lies behind phrases like "level the playing field" and the ridiculous, evil, terrifying things elizabeth warren is saying.

how much do you think the factory owner pays in taxes compared to his employee? 10 times as much would be on the low end. looks like all those roads, schools, and public safety were paid by the factory owner, not the employee. EMPLOYEES ARE INTERCHANGEABLE. you can kick one out and hire another one right in his place. the employer OWES THEM NOTHING but what they agreed to be paid.

you tighten the noose around your own neck when you give in to the lies people like warren spout. FIGHT. fight that feeling inside you that makes you sneer and piss on the people who really ACT and CREATE in this world.

Sept. 25, 2011

Your attitude is straight out of the Tea Party manual. And you are certainly entitled to your views. Best, Don Bauder

Sept. 25, 2011

Your attitude is straight out of the Tea Party manual.

Don, come on. Give the tea party a break, this is NOT their lines- manual or otherwise, not even close.

Sept. 25, 2011

It sure sounds like Tea Party to me. Best, Don Bauder

Sept. 26, 2011

what do you think people like ME think of you disgusting fools who love hearing yourselves talk and try to hide your lies behind phrases like "level the playing field" and the ridiculous, evil, terrifying things elizabeth warren is saying.

==

LOL...I swear, in my experiences those who claim they made it ALL on their own are usually the ones who had most everything handed to them. I am sure acnnell invented Google or Facebook and did it "all on his own"!!!!!!!!!

Sept. 25, 2011

He stays in the background at Google and Facebook and lets others take the bows. Best, Don Bauder

Sept. 26, 2011

how much do you think the factory owner pays in taxes compared to his employee? 10 times as much would be on the low end.

You are either a fool or a moron, one of the two.

I will tell you how much the factory owned paid in taxes compared to his employees- ZERO! The factory was owned by GE and they paid NO TAXES in 2010.

Put that in your pipe and take a few hits Mr. I Am Self Made By Myself :)

Sept. 25, 2011

And Jeff Immelt, CEO of GE, is one of Obama's trusted outside advisers. Best, Don Bauder

Sept. 26, 2011

acannell, your argument only applies to those whose wealth was created by PRODUCING something of value.

But in the case of HFT, NOTHING is created. It's simply parasitic siphoning of funds though the market-distorting insertion of an automated middleman.

Ayn Rand would be denouncing this practice if she were around today.

In addition, your argument assumes a level playing field, where no one enters the market with a huge advantage and rules are enforced fairly against all players. Anyone who's paying attention knows this is NOT the environment on Wall Street today.

So while your rant is entertaining, and very familiar, it ignores reality in two key points, so doesn't really amount to much but sound and fury, and a real lack of understanding about how the markets actually perform in the real world we live in.

Please, remember, Atlas Shrugged and The Fountainhead (much as I like them both) are just novels, science fiction really. You shouldn't base your world view on science fiction.

Sept. 25, 2011

Actually Fred, you're not completely correct in your assessment of HFT providing nothing. HFT's create liquidity, and with the exiting of most of the specialist firms, they are there to take the other side of your trade if you decide to sell 500 shares that your Grandma left you. In fact, HFT firms provide so much liquidity that they get liquidity rebates from the exchanges for performing this service.

Sept. 26, 2011

Sure, liquidity...that's the "benefit".

Is that worth the costs? You haven't addressed the problems I've listed above, other than saying that front running is both legal and moral in some circumstances.

While that may be true, and while trading algorithms created by "sagacious" traders are also legal and in some perspectives moral, that misses the point.

The system itself is put at risk by the HFT systems. Fraud is made nearly undetectable. Only the wealthy and well connected get these advantages, and everyone else pays extra.

A transaction fee, no matter how miniscule, might be a reasonable way to remedy these systemic faults. Still, since I know the system is rigged in the first place, and the rule makers have become handmaidens, nothing will change.

We both know, if you're honest, how this will end...very badly.

Sept. 26, 2011

Fred, what your real argument is about is price that you've couched in systemic risk. You'd rather appear to be socially conscious instead of what you really are, cheap. You think think transactions are too expensive and you want a better deal. However, 20 years ago stocks were quoted in 1/8ths and 1/4. Now they're decimal. It used to be that the cost of the transaction would be that a customer would have to pay an eight or a quarter on the bid asked which would equate to $6.25-$12.50 on a 100 share transaction plus commission and exchange fees. Now since the specialists are largely irrelevant, and we're quoting on decimals, the bid asked in most stocks that HFT trade is a penny and the average takeout of an HFT trade is 6 mills, or 6 cents per 100 share transaction. Since one can get $0.75 commissions on 1000-10,000 shares plus the bid/ask and fees and that 6 mil vig, it's much cheaper to get down a trade and pay a buck than 30 years ago when Merrill Lynch would charge you $85 to get down a 100 share trade.

And I will agree with you that the system is rigged. If it's rigged, and you know it's rigged, then why do you want to play in a rigged game?

What you should really be railing about is market slippage, not HFT, as slippage is the real systemic problem.

Sept. 26, 2011

"And I will agree with you that the system is rigged. If it's rigged, and you know it's rigged, then why do you want to play in a rigged game?"

Baby Einstein, why don't you ANSWER the questions Fred posed to you???????

Here, let me post it again, and this time do not run off;

" (1) The system itself is put at risk by the HFT systems. (2) Fraud is made nearly undetectable. (3) Only the wealthy and well connected get these advantages, and everyone else pays extra."

"(4) A transaction fee, no matter how miniscule, might be a reasonable way to remedy these systemic faults."

OK "Mr. Billionaire In Your Mind", answer all 4 questions.

I won't hold my breath, you're a bag of gas who cuts and runs.

Sept. 26, 2011

I'll answer that.

  1. HFT actually benefits the market. The liquidity offers market stability, the SEC investigated this just last year when HFT was blamed for a sell-off. Later it was discovered that the fault was really when a firm took a multi-billion dollar position in order to hedge another position they took. The real fall took place when most oft the HFT systems decided to go on hold and stop trading because of the large position, which halted liquidity and sent things tumbling.

  2. You'll have to be specific as to how that is happening. All trades are reported, and as Jeff points out, investors using HFT even receive small payments in exchange for the liquidity. Where is the undetectable fraud?

  3. Anyone who has capital to invest in the market can either purchase the software, or trade through firms that offer the service. The wealthy also drive expensive cars, SP, should everyone then be able to drive expensive cars because otherwise it simply isn't fair?

  4. The only people that want a transaction fee are governments (for the ability to spend that much more money on people that would elect them to office) and people that don't understand how HFT actually works. In effect, it would kill off liquidity in the market and promote the type of market instability that led to market crashes far beyond the ups and downs we are currently noticing.

And SP, we're having a discussion here, you tend to get a little wound up about it. You bite, and people are prone to bite back. I don't mind seeing people disagree, but really, you and Jeff don't need the name-calling. We're all adults here.

Sept. 26, 2011

The wealthy also drive expensive cars, SP, should everyone then be able to drive expensive cars because otherwise it simply isn't fair?

These were Fred's questions, not mine.

But to answer this one specifically, YES, everyone should be driving a similar car if they are in a race.

If you're in the Indy 500, then everyone should have an Indy 500 car, because a Go-Kart in an Indy 500 is not a fair race. The same can be said ofthe markets.

"I don't mind seeing people disagree, but really, you and Jeff don't need the name-calling. We're all adults here."

EXHIBIT #1;

I rest my case.

Sept. 26, 2011

A transaction tax, if truly international, would be great, but as I said, it isn't going to happen. Best, Don Bauder

Sept. 28, 2011

SP, when you were a real little kid and your mother took you to the doctor, did you ever hear the words hydrocephaly or crack baby mentioned in hushed tones?

By nokomisjeff 3:48 p.m., Sep 26, 2011 > Reply > Report it

==

Oh Brother.

That was so HILARIOUS!

"Mr. Wanna Be Billionaire" also does stand-up!

I suspect your "double digit" trading claims are about as credible as your stand-up routine is.

Sept. 26, 2011

SP shows no signs of having been a crack baby. Best, Don Bauder

Sept. 30, 2011

Those are good questions, SP. Best, Don Bauder

Sept. 26, 2011

Don, why does SP get a pass at calling me names, but if I respond in kind, I get deleted. I realize that SP has a lot of his life tied up in this forum, but c'mon, give me a break. He started the whole thing in the first place, made it personal, and now the censors delete my comments and allow his invective to stand. To quote Shakespeare, "There's something rotten in the state of Denmark."

Sept. 26, 2011

BTW...your comments are not the only ones getting yanked, half of mine are gone also.

Sept. 26, 2011

Hey SP, I'm going to let you have the win on this debate. I suspect that you are in real need of a victory in life, no matter how small, and my munificence was never in doubt....so this victory's for you....enjoy.

Sept. 26, 2011

Thanks NJ, I don't know if I could have gone on without you letting me "have the win"...... that made my day/week/month and year. Life is whole and in balance for the pup once again.

Sept. 27, 2011

Happiness is a balanced Pup. Best, Don Bauder

Sept. 28, 2011

For someone who knows the system is rigged, you certainly take the time to defend that system. Best, Don Bauder

Sept. 26, 2011

Yes, but the sharp drop in transaction prices came before HFT showed up. Best, Don Bauder

Sept. 26, 2011

And the transaction prices are still going down in spite of HFT, because HFT is replacing the specialist system which is rigged because the specialist has a peek at both sides of the order book. Anyways, here's a pretty good paper from some people at my alma mater, regarding the impact on HFT on the equities markets. http://www.futuresindustry.org/ptg/downloads/HFT_Trading.pdf Since it's done by the futures industry(No friend of HFT I might add) I find it to be mostly accurate. A couple of figures don't jibe with my figures, but the math and most of the conclusions are pretty much spot on.

Sept. 26, 2011

Both you and Don are presuming that HFT and Flash Trading are one in the same. HFT does not present an opportunity to front other investors. Flash trading does. Currently, there are very few firms that offer flash trading. The benefit to liquidity in the market is stability in the market. Traders that utilize HFT technologies make so many trades in a single day - and I mean buying, selling, re-buying, re-selling that could all happen within seconds - that many analysts believe the liquidity actually controls the risk of volatility. And if you think about that on a broad, dynamic scale, where trades are being made at volumes where the slightest movement triggers a counter-movement, it makes perfect sense.

Sept. 26, 2011

Dave, I know the difference between HFT and Flash and suspect that you were addressing this to the other guys. Despite the fact that flash has the ability to front the other investors, when it goes through the best price routing it might get picked up at an exchange and an extra fee added because of the make or take concept and in this case they might be taking liquidity away and have to pay a fee. Not all things are as good of a deal or a slam dunk as the pundits would like you to believe.

Sept. 26, 2011

Yeah, I agree. And the point is, that using a firm (or investing in the software yourself) to utilize flash trading is not a limitation to only certain investors, anyone can go to a firm that offers it. The point is that most don't, and that isn't because they have some social conscience about inadvertently fronting someone (or even purposefully doing that), it's because, as you point out, there's no guarantee of a profit and it could wind up as a loss. Depends on the investor's strategy as to whether it's worth it. In other words, if flash trading was a slam dunk, almost everyone would be doing it, and certainly most firms that offer HFT would also offer flash trading and that simply isn't the case.

Sept. 26, 2011

That trading on multiple exchanges is problematic, particularly when one of the exchanges is essentially unregulated. Remember the Enron loophole in energy trading. It was supposed to be legislated out of existence but there is more volatility in the energy pits than ever. Best, Don Bauder

Sept. 26, 2011

While volatility in some energy is relatively high, this is not the highest ear by a long shot and other periods of time had much higher volatility like 1973, 1979, 1987, 1991-92, 2008-09. And not all energy is volatile.... nat gas isn't too volatile, gasoline futures and heating oil aren't too volatile either. Just Brent and WTI show decent VIX these days. As a sidebar, note the movement on the crack spread this week which offers much predictive value.

Sept. 26, 2011

Bart Chilton of CFTC recently stated that energy speculation is the highest on record. Best, Don Bauder

Sept. 26, 2011

And that's why Chilton is a bureaucrat for the CFTC and doesn't trade his own account.

Sept. 27, 2011

How do you know he doesn't trade his own account? Do you have access to bank records in the Caribbean? Best, Don Bauder

Sept. 28, 2011

If he does, his disclosure statements that are a matter of public record make no mention of it. And why would one use Caribbean banks? Those went out of style in the 90's. Lichtenstein, Russia, China, the Channel Islands, and Dubai are the places to go for that type of business.

Sept. 28, 2011

Liechtenstein was a haven before the Caribbean really got big in the game. How about the Cook Islands? Best, Don Bauder

Sept. 28, 2011

Caymans are the world's fifth largest money center. Caribbeanpasse? No. Best, Don Bauder

Sept. 28, 2011

Cook Islands banking was a scam back in the 80's perpetrated by the IRS to catch money launderers. The Caymans and Nassau have matured and no longer accept large amounts of cash like in the 1980's.

Sept. 29, 2011

Volatility and liquidity are inversely correlated and volume shouldn't be mistaken for liquidity.

Sept. 27, 2011

On Wall Street, nothing makes perfect sense. Best, Don Bauder

Sept. 26, 2011

Remember that day when the market plunged 1,000 Dow points in a flash? You can thank HFT. Do you still think it brings stability? Best, Don Bauder

Sept. 26, 2011

Actually the flash crash was caused when Waddell&Reed put an order to sell 75,000 mini S&P contracts AT THE MARKET through the electronic system. Since the market depth at at the nearby price was 500-600 contracts for the nearest 20 ticks, after the first 10,000 were sold, the buying stopped and it was offered down. This single market order overloaded the entire system, and the HFT just reacted. Note the other futures markets reacted very heavily. Incidentally, Soros the Palindrome lost 600 million that day as he puked his positions at the bottom. Note...none of this would have happened if the order for the ES had gone through open outcry. Incidentally, in the big S&P pit at the CME it was just like old times and here's an audio of the crash itself. Very fascinating audio. http://www.youtube.com/watch?v=5gmpbsZ9H_w This audio reminds me of the pit action in 1987 and the pit action after the markets reopened the week after 9/11.

Sept. 26, 2011

And that was over 4 billion in one trade. The SEC cleared the cause on HFT trading, but never suspected an enormous move like that out of Waddell & Reed as suspicious at all. Go figure. Bet they have good lobbyists.

Sept. 26, 2011

Here's a pretty good link to a screen shot of the prices over a very few seconds of HFT trades. http://www.nanex.net/StrangeDays/08022011/ELNK_08022011_1.jpg Luckily they don't show the bid/asked, the spoof quotes, and a few other things that would make this chart look like spaghetti.

Sept. 29, 2011

Yes, oceans of liquidity creating false euphoria ALWAYS end badly. Best, Don Bauder

Sept. 26, 2011

Front running in any form is amoral and should be illegal. Best, Don Bauder

Sept. 26, 2011

And what does all the liquidity create? Artificial asset price increases that are mistaken for economic growth. Bubbles. Best, Don Bauder

Sept. 26, 2011

And what does illiquidity create?

Sept. 26, 2011

Much Wall Street activity -- LBOs, stock buybacks, HFT, M&A, ad nauseam -- not only contributes nothing to the economy, but actually helps to shrink it. Best, Don Bauder

Sept. 26, 2011

You're entitled to your opinion, but then again I suspect that you would think that WWII got us out of the depression of 1937-38.

Sept. 26, 2011

Don doesn't, he knows better than that. We've had the discussion maybe a year or two ago.

Sept. 26, 2011

Alan Greenspan was a disciple of Ayn Rand. I have not heard Greenspan's opinion of HFT. Best, Don Bauder

Sept. 26, 2011

If you're willing to sell your soul to the devil, you WILL manipulate rather than cooperate.

Madoff was just a convenient sacrificial goat.

Sept. 25, 2011

Show me a Wall Streeter who has not made a pact with the devil and I will show you a money loser. Best, Don Bauder

Sept. 25, 2011

Have you quantified this, or is this just some more jingoism?

Sept. 26, 2011

"2.Better yet, ban high-frequency trading." Ain't gonna happen, Don. The customer has spoken, and they want it NOW. SOX compliance, perhaps? A joke, then and now.

Sept. 25, 2011

I'll bet most don't even know what HFT is, and would be shocked to learn that the HFT computers get information before it goes on the wires. Yes, SOX compliance probably won't make it -- not with this Congress and this Supreme Court. Best, Don Bauder

Sept. 25, 2011

Don, why don't you tell the whole story instead of just a half truth?

Sept. 26, 2011

I assume you are talking about HFT. The original column above quotes an economist who thinks HFT adds liquidity. Best, Don Bauder

Sept. 26, 2011

nokomisjeff, why don'y you stop spinning those whoppers of yours!

Sept. 26, 2011

The opinion of nokomisjeff on HFTs is a legitimate one. Plenty of informed people share his views on the topic. Best, Don Bauder

Sept. 26, 2011

Surfpuppy, My answer can only be expressed in this video. http://www.youtube.com/watch?v=pofupY... Have a nice day and work on that anger. You might be a big time ambulance chaser and I accept that and wouldn't attempt to question your knowledge of the law.

Sept. 26, 2011

Ah, as I suspected "Mr. Wannbe Billioniare In His Creative Writing World" has the brain power of a circus chimp-thanks for posting that video up and proving yoruself the fool.

Sept. 26, 2011

SP, just keep dancing to my tune. I just can't believe how worked up you get. I will say this, you do give me a chuckle. Thanks:)

Sept. 26, 2011

Err...right, my paw is still hurting!

Sept. 26, 2011

That invective temperature is getting higher. Best, Don Bauder

Sept. 27, 2011

i'll kiss ur paw and make it better pupster ;-D

Oct. 2, 2011

TY nan! Your kiss will make it all better.

Oct. 3, 2011

I want SP to stay angry. He makes plenty of good posts on this forum. Best, Don Bauder

Sept. 27, 2011

And plenty of nasty, demeaning, partisan, ill informed yet passionate, invective filled posts.

Sept. 27, 2011

Can you and SP kiss and make up? Best, Don Bauder

Sept. 28, 2011

He started it and I am willing to not play anymore if he will just stop making it so personal. Disagreement about ideas is one thing but the invective is another. However, I am just as guilty because he gets so wound up and I just keep egging him on because it's so fun. That's a big character flaw that I have, although it's good strategy to keep your opponent off balance. Hope he's not like this in a court room.

Sept. 28, 2011

"He started it "

LOL.......I swear Jeff, for a guy who must be at least 60 y/o, you're a bigger baby than I am, and that is saying something!

So do you live in Florida still, or are you in San Diego? I am only aksing because I was wondering how you stumbled upon the Reader, and Don, if you do live on the East Coast.

Sept. 28, 2011

SP, I am a resident of Florida, and spend 1/3 of my time in NYC. I've known about the Reader for many, many years. I spent every summer of my childhood living in PB and have family there and in La Jolla. And I'm not 60, only 54:)

Sept. 28, 2011

The calumnies add to the colloquy. Best, Don Bauder

Sept. 30, 2011

Elizabeth Warren makes a lot of sense with her talk, and I will still support her, but I don't know what she was smokin' when she made the pitch on her website, but I must say I expected more of her. She needs better advice, especially on website design. http://elizabethwarren.com/splash

Sept. 25, 2011

I suspect she will be able to afford the tech support she needs. Best, Don Bauder

Sept. 26, 2011

That's what troubles me; one can't buy friends.

Sept. 26, 2011

now Twister!

i KNOW ur not that naive!!

Sept. 26, 2011

Just today (Sept. 26), Berkshire Hathaway agreed to buy back a slug of stock. Its stock zoomed. Warren Buffett bought some friends. Best, Don Bauder

Sept. 26, 2011

Both A and B shares????

Sept. 26, 2011

Yes, an indefinite amount of both A and B shares. Best, Don Bauder

Sept. 26, 2011

There is a limit to how much they will buy back: "Berkshire plans to use cash on hand to fund repurchases, and repurchases will not be made if they would reduce Berkshire’s consolidated cash equivalent holdings below $20 billion." http://finance.boston.com/boston/news/read?GUID=19550849

Sept. 26, 2011

Yes, Buffett wants at least $20 billion in cash. Best, Don Bauder

Sept. 26, 2011

"Its stock zoomed." Yeah, "A" shares went up about 8%. But remember, before today those same "A" shares were down almost 20% over the last year or so.

Sept. 26, 2011

Stand on the corner and start handing out $100 to people. You will be amazed how friendly they are. Best, Don Bauder

Sept. 26, 2011

Wall Street can buy friends. So can you. Best, Don Bauder

Sept. 26, 2011

"That's what troubles me; one can't buy friends." That may be true. However, I have heard that if you have the money, you can rent them, by the hour, though I wouldn't have personal knowledge of such things myself.

Sept. 26, 2011

Why don't you volunteer to help her, Twister? Best, Don Bauder

Sept. 26, 2011

Borderline personalities abound.

Re:By dbauder 1:41 p.m., Sep 26, 2011

Sept. 26, 2011

"You'd rather appear to be socially conscious instead of what you really are, cheap."

"I suspect that life has passed you by and you're just a bitter also ran."

WOW. I disagree with a guy about the utility and morality of HFT, offer what I think are cogent arguments, reply to his assertions...and suddenly I'm both cheap and bitter, having seen my life pass me by.

I'll tell my wife and son this...I guess they should know that daddy is such a loser.

Nokomisjeff...You've consistently avoided the straightforward questions I ask, instead just asserting that I'm ignorant, jealous, cheap, bitter, and so on.

I know that I don't understand how everything in the markets works...and frankly, Mr. Jeff, neither do you.

But I think I do understand the basics of High Frequency Trading, from a legal, economic, and technological point of view. What I assert is that this will not end well because:

  1. Feedback loops creating Black Swan events not previously possible, but with HFT almost inevitable

  2. Front trading rips off customers. It may be legal in some circumstances, and a lot of firms do this every day, but it's still immoral and indefensible as public policy

  3. Traders don't actually understand the algorithms...most are too arrogant to admit it (So the captain of the ship keeps telling the hapless passengers that big white thing off the starboard bow is just an illusion, full speed ahead.)

  4. Despite laughable protests to the contrary, these HFT systems are NOT available to the "common" investor. They're enormously expensive to set-up and maintain, and their primary purpose is to shave a little off each transaction -- ripping off the common investor. The highly touted liquidity HFT offers is likely to lead to price bubbles and crashes, while offering only the illusion of advantage to customers who are ripped off for far more than they're saving on transaction fees.

The game is rigged. I'm not playing. That doesn't stop me from watching in grim fascination, and occasionally asking why those who claim to know so much are acting so stupidly. When the best reply I get is that I'm somehow "cheap" and "bitter"...it just makes me more certain that this will all end in tears.

Best,

Fred

Sept. 26, 2011

Ohh-oh. Mr Billionaire Wannabe will never recover!

Sept. 26, 2011

You make excellent points, Fred. Best, Don Bauder

Sept. 26, 2011

And Don, I guess the points I make, the scholarly papers and articles I cite, are just chopped liver:)

Sept. 27, 2011

The articles you cite are profound. Best, Don Bauder

Sept. 27, 2011

But you miss the profundity of the points.

Sept. 27, 2011

Fred, You just don't have a clue. Seriously. And keep saying that I just don't understand the algo. And again, you don't understand HFT and resort to the populist rants. And, I agree with you that it will end in tears....your tears.

Sept. 27, 2011

Yes. I agree. I'm quite ignorant. I'm very certain that I don't understand everything...in fact, I understand very little.

That's why I'm always reading, questioning, re-examining evidence, asking if I'm allowing cognitive biases to shade my assessments. I'm certain I'm ignorant, and grow more so every day.

Yet...when I assert something in a public forum, I'm usually able to back it up with independent well-respected sources.

I'd hardly call myself a "populist", since I oppose bread and circus public expenditures...I've been so vocal in my opposition to such boondoggles as publicly subsidized sports stadiums that I've received death threats. (More than a few. Most of them unimaginative.)

In fact, Jeff, I'd say that we probably agree on far more than we disagree. I'd also label myself as a sort of anarcho-capitalist-libertarian Ayn Rand kind of guy.

But only if you add to this a big helping of recent cognitive science research, extensive IT experience, world-wide travel and work (yes, foreign languages too), plus the ceaseless devouring of books of all kinds.

The more I know, the more ignorant I get. What I have learned about HFT, (something I've been interested in for a few years now), makes me quite concerned about its unintended consequences. If that scepticism makes me ignorant in your eyes, I'm quite pleased. I am quite happy to be thought of as stupid...it's when everyone agrees with me that I get worried about my position.

Best,

Fred

Sept. 28, 2011

In fact, Jeff, I'd say that we probably agree on far more than we disagree. I'd also label myself as a sort of anarcho-capitalist-libertarian Ayn Rand kind of guy.

== I found this on Jeff's web page, so you two, and even me, are not that far apart on certain things (HFT is not one of them);

“[W]hen you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you. . . you may know that your society is doomed.” Ayn Rand

Sept. 28, 2011

What Jeff seems to not have a clue or understand is the GOAL of Wall Street was never ultra fast "trading", or skimming a few cents here and there on millions of trades. The goal was to finance American industry-business.

Today it does very little of that.

Sept. 26, 2011

SP, no offense, but you're a lawyer. What are YOU producing? I get that you disagree with Jeff, but man, you two aren't exactly building bridges and skyscrapers here. HF traders, insomuch as you might not see some sparkling new city library built in their wake, provide a ton of liquidity in the market at breakneck speed. If you can put that in micro economic terms, it's a lot like some super-high-speed Walmart, except the store both sells and buys goods from consumers at breakneck speed. Think of that in terms of creating friction, and that friction keeps the market from slipping wildly.

Sept. 26, 2011

Excellent point, SP. Wall Street has become a gambling casino. One of the worst things that has happened to the U.S. economy is that manufacturing has declined from more than 20% of the economy to below 10% while finance has doubled from around 10% to above 20%. Wall Street has lost its purpose and its way, with help from the Federal Reserve, the Treasury Department, Congress and the White House. One day we will be very sorry for this. Best, Don Bauder

Sept. 26, 2011

But Don, while manufacturing has declined from 20-10%, we're still producing more and more. The manufacturing output in the US has doubled since 1975, while the population hasn't. It's just that other segments of the economy are growing faster.

Sept. 27, 2011

The manufacturing output in the US has doubled since 1975

Not in realitve terms, only absolute terms. So you're wrong again.

Also, even though manufacturing has increased in absolute terms it has LOST employees in both relative AND absolute terms.

We have 50% LESS manufacturing jobs today (relative) than we did 30 years ago, and have 31% less employees. Those are the true facts, and are pretty big numbers.

Nations that propser-all of them-are manufacturing producers.

Sept. 27, 2011

Pup, most of the jobs loss can be attributed to gains in productivity, not outsourcing. Those former factory employees need to find other jobs, just like the people in the horseshoeing industry in 1900 needed to find other employment. The Fed has an interesting chart here. http://www.federalreserve.gov/releases/g17/current/ipg1.gif

You said "Nations that prosper-all of them- are manufacturing producers." Really....Saudi Arabia, Singapore, Oman, Dubai, the Emirates, Monaco...all big manufacturers?

I hope you are more accurate in your legal briefs than in your feeble attempts to pick me apart.

Sept. 27, 2011

Really....Saudi Arabia, Singapore, Oman, Dubai, the Emirates, Monaco...all big manufacturers?"

Singapore, Dubai, UAE and Monoco are countries the size of POSTAGE stamps. Monaco is less than 1 square mile. San Ysidro is bigger than Monaco. All but Singapore derive their wealth from one major natural resource-OIL.

Oman is also a very small country per its population, less than 1/10 the size of CA and les than 1/100'th the size of America. And once again it derives it wealth from one major source-oil. When you have small countries-in both population and area, it is much EASIER to change your status in relation to wealth-especially if you're lucky enough to be sitting on a resource such as oil. If you had a HS with 20 students you could easily transform their intelligence and testing level at a pace 20 times faster than that of a HS that has 5K students. Simple explanation.

So once again, you compare apples to oranges to try to fool the folks here, only to get shot down, full of holes, by me. I suspect this comment is about as accurate as the rest you post here.

Sept. 27, 2011

Singapore earns most of it’s GNP from services like finance and shipping. It is one of the largest shipping ports in the world.
Singapore ranks 84th in the world for oil production yet ranks 20th for oil consumption = net importer of oil. It also has no natural gas reserves, so it must import gas – some 8 billion cubic meters a year. It’s 84th ranking places it in the company of the Czech Republic, Chile, Belgium, andf the Philippines for oil production.

Sept. 27, 2011

Singapore has found ways to compensate for its relatively weak natural resources base. Best, Don Bauder

Sept. 27, 2011

No Skippy, You said that manufacturing was necessary for a country to be rich and I disproved your contention. You didn't add any modifiers until I proved you wrong. You blew it.

Sept. 27, 2011

No Skippy, You said that manufacturing was necessary for a country to be rich and I disproved your contention. "

OK, you "got me"!

In the future I will have to qualify my comments for Mr Expert to exclude "outlier" nations that are far out side the standard deviation, and for the most part are sitting on a natural resource such as oil which is like sitting on top of a gold mine.

Singapore is the one exception, as I noted in my original post- but once again it is the exception because of it's size.

Sept. 27, 2011

Would you even know how to calculate a standard deviation?

Sept. 27, 2011

SP has to answer that one. Best, Don Bauder

Sept. 27, 2011

"Would you even know how to calculate a standard deviation?"

Jeff, I have multiple graduate level courses in statistics, and have produced graduate level original research using said statistics, I GUARANTEE you that I know 10 times more about statistical analysis than you do.

Sept. 28, 2011

Sure you do SP, sure you know more than I do. Keep pulling out that ruler to compare your penis size. Maybe someday you'll win. Out of curiosity, what is your CV other than you being a lawyer with really bad manners? Where did you go to school, degrees etc? How many actuarial exams have you passed? I guarantee that I've passed more SOA exams than you and I took them for the same reason Hilary climbed Everest, because they were there. Furthermore, with as much scrutiny that you've given my posts, when I mentioned using Bayesian Statistics as part of the tools in my chest, had you really known squat about statistics, you should have been attacking me all over. You give yourself away. Inquiring minds want to know.

Sept. 28, 2011

Another thing,SP, if you are so knowledgeable about statistics and probability, here's a little problem for you to show us you can solve.

Two identical boxes. One of them contains 10 balls numbered 1-10. The other one contains 100 balls numbered 1-100. You don't know if the box on the left contains 10 or 100. You use a coin flip to choose one of the boxes and ask a friend to pick a ball at random from it. The ball he picks has the number 9 written on it. What is the probability that the box you chose contained 10 balls?

Sept. 28, 2011

LOL...yes Jeff, Im going to do your little question to prove to you I knwo stats, hang tight and keep checking back here for the answer :)

Sept. 28, 2011

SP, I am the master puppeteer and you dance on command. Make it easy on yourself and use Wolfram

Sept. 28, 2011

This is the smallest box ever here.....

Sept. 28, 2011

What's the dif? He got a ball that could have been in either box. Best, Don Bauder

Sept. 28, 2011

Really? This is supposed to prove one's intellectual bonafides?

How about this one instead:

Q: There are ten crows on the fence. A cat takes one of them. How many crows are left?

A: None of them...the crows are too smart to stay put.

Moral: Don't depend on math to assess intellignece, since it often masks real-world ignorance...what Hayek called the "Pretense of Knowledge" and what Taleb calls Procrustean thinking.

Sept. 28, 2011

Love that crows analogy. Best, Don Bauder

Sept. 30, 2011

You're up, SP. Defend thyself. Best, Don Bauder

Sept. 28, 2011

How will we ever know who knows the most about statistics, SP or Jeff? Best, Don Bauder

Sept. 28, 2011

@Don, if I have a question about some stats, I have a quant that works for me who has a PhD from MIT. He can answer anything statistically related. But then again I'm no slouch in the math dept, and took lots of math and statistics courses in order to analyze data for my dissertation. Bottom line is now I don't have to know the answer, but I can always hire someone to find it out for me, quickly.

Sept. 28, 2011

If you have a MIT quant on the payroll to take care of statistics, do you also have a Harvard English PhD to assist you in the invective department? Best, Don Bauder

Sept. 30, 2011

No, and now you seem to be making the progression from snarky to dishing out a little invective yourself.

Sept. 30, 2011

Maybe you need to check these guys out?

1 http://www.thickskin.com/ .

Sept. 30, 2011

Jeff's playing with these guys. Trust me on this. By the way, I WARNED! the wonderful yet very busy website caretaker about how this the comments would get in this format. mine might not even show up.

Sept. 30, 2011

OK, lets see how messed up we can make this box/posting reply.

Oh man, what happened,. this box was SUPPOSED to be a reply below RFG's post above mine, and it was supposed to be skinnier than his!!!!

Oh well........

Sept. 30, 2011

SO: So did you ever figure out the little word problem? The box was so small nobody can even read what it says.

Oct. 1, 2011

Sometimes your quick generalizations get you in trouble, SP. That happens to me, too. Best, Don Bauder

Sept. 27, 2011

You did make a good point on the Middle East oil countries. Best, Don Bauder

Sept. 27, 2011

"Singapore, Dubai, UAE and Monoco are countries the size of POSTAGE stamps. Monaco is less than 1 square mile. San Ysidro is bigger than Monaco. All but Singapore derive their wealth from one major natural resource-OIL."

Really?? Monaco derives it's wealth from oil? Monaco has ZERO natural resources. Their main industry is tourism and another substantial portion of the government’s revenues comes from taxes Additional revenue comes from franchises on radio, television, and the casino, from state-operated monopolies on tobacco and postage stamps, and from sales taxes. They have no manufacturing. And ya need some help with your geography, apparently. True, Monaco is less than a square mile. But the UAE is about 32k square miles, about the size of Maine and Dubai is an emirate WITHIN the UAE and is about 1500sq. miles itself. Singapore is about 700Sq miles and Oman is not 1/10th the size of Ca. Ca. is about 160k sq miles and man is about 120K sq miles or about the size of Kansas. I'm not takin sides, but if your going to contest the accuracy of someone else's comments, you might want to be a little more accurate with yours

Sept. 27, 2011

Oman is not 1/10th the size of Ca. Ca. is about 160k sq miles and man is about 120K sq miles or about the size of Kansas.

If you re-read my comment, I stated Oman's POPULATION is 1/10 of CA, not it geographic size;

"Oman is also a very small country per its population, less than 1/10 the size of CA and less than 1/100'th the size of America.

Sept. 28, 2011

Had you said Oman is also a very small country per its population,which is ..., I would have taken it that way. However since all of your other references in the post were of a geographic nature, it was reasonable to conclude your reference to Oman was as well. My mistake, no big deal. Still, that doesn't negate the fact that some of your other references were inaccurate in terms of both geography and economics.

Sept. 28, 2011

That is wht I put in the population on Oman, the country itself was not small geographically, but 3 million people, that is very tiny.

I think San Diego county is 2.6 million, and that is just one county out of 58 in the state, in just one of the 50 states!

Sept. 28, 2011

If you got invited to David Copley's yacht parties in Monaco, you would know all these things. Best, Don Bauder

Sept. 28, 2011

But Jeff has a point, SP. The emirates aren't manufacturers; they are lucky enough to have oil in the ground. Best, Don Bauder

Sept. 27, 2011

Yes, people in horseshoeing had to get new jobs in the early 1900s. Today, people in horsesh**ting find jobs plentiful on Wall Street, and get bailed out when their gambles backfire. Best, Don Bauder

Sept. 27, 2011

Don, you said there are plentiful jobs on Wall Street? I keep my ear to the ground and don't know too many firms hiring other than the odd position to fill, but plenty are laying off. Who's hiring in meaningful numbers?

Sept. 28, 2011

Is your manufacturing figure adjusted for inflation? Best, Don Bauder

Sept. 27, 2011

Don, Wall Street has always been a casino. Think of the crash in 1929. I'm not certain that it's reasonable to expect the market to be something it isn't. On the other hand, in general, if someone invests in very sound stocks - or even better the index itself - for the long term of perhaps thirty years or more, then obviously the result would be quite satisfactory.

Sept. 27, 2011

What we have today, and what we had in the 1920s, is gambling for the sake of gambling on Wall Street. Not gambling for the sake of financing economic growth. Best, Don Bauder

Sept. 27, 2011

But economic growth does not have to - and I would argue SHOULD not be - based on taking companies public in order to encourage such growth. It isn't a handful of publicly-held companies that move that indicator, but a flurry of small, privately-held businesses that provide true growth and and fertilization for a robust climate for such growth to continue. Markets are for gamblers, private business is for true investors.

Sept. 27, 2011

The IPO market, which is usually rigged, is one of the biggest crapshoots around. Think of the 1990s. Thank goodness, it's quiet now. Best, Don Bauder

Sept. 27, 2011

Wall Street has always been a casino. Think of the crash in 1929. I'm not certain that it's reasonable to expect the market to be something it isn't.

RFG-it is reasonable to view Wall Street as a financial center for financing American economic growth. If you view it as a casino then they should be in Las Vegas, not on Wall Street.

I think Wall Street has turned into a casino, where the insiders/connected few reap huge windfall profits while socializing their losses on the poor.

I disagree that it has always been a casino.

Sept. 27, 2011

But it is, SP. Right now, let's say we have $100,000 and decide to buy stocks. It's a gamble, because the person willing to sell them to us at whatever price, is betting that the stocks will be worth less tomorrow than they are today. Otherwise, they wouldn't be selling. Every transaction is a gamble, for both sides.

Sept. 27, 2011

"It's a gamble, because the person willing to sell them to us at whatever price, is betting that the stocks will be worth less tomorrow than they are today."

"Otherwise, they wouldn't be selling."

Not true. There are many reasons a stock is sold.

Companies raise money to expand and grow by selling stock, and they hope the price goes up, not down.

Parties that sell stocks do so for a variety of reasons, not just because they think the stock will go down in value-some are cashing out-some are on margins and must cash out-some are cashing out because of a better value in some other investment.

Parties selling are not doing so soley because they think the price will go down.

Sept. 27, 2011

True: a seller does not have to be a bear. There can be any number of reasons, include those related to an estate, to sell. Best, Don Bauder

Sept. 27, 2011

SP given your track record with your minimal knowledge of the markets, I would revisit that statement about not believing that Wall Street has always been a casino. Read Henry Clews book, and you'll change your mind. Nothing is different in 2002 than in 1792 as far as markets go.

Sept. 27, 2011

Stop being a pretender- pretending that you are the one and only all seeing expert on all financial markets-you're not.

You are only the "expert" in your wild dreams and fantasies.

Sept. 27, 2011

I think we have to face facts here. Nokomisjeff has lots of knowledge about the markets. He has made only one major mistake in this colloquy: trying to say that in 35 years in the market, he has only had one year (1982) in which he didn't have double-digit returns. That kind of statement can get one investigated. Maybe you meant something else, Jeff. Maybe those double-digit returns in some years were actually double-digit MINUS returns. Best, Don Bauder

Sept. 27, 2011

Tell me more about Henry Clews' s book. Best, Don Bauder

Sept. 27, 2011

You should read Clews book and draw your own conclusions.

Don, you should be careful about your concern with double digit returns. Did it ever occur to you that the average yearly return of the DJIA from 1899-2010 is 9.4% because of the pronounced upward drift...not saying it was up every year but you get the gist? Did you know that from the 1930-2000 the NYSE specialist firms made an average of 0.7% trading their own book PER DAY, with most never having losing years? Did you know that [email protected] makes an average of 22% per year off it's grain futures trading and hasn't had a losing year in the grains since 1958? My friends in the HFT business tell me that their average yearly returns on capital run around 18%. Congressmen beat the benchmarks by an average of 55 basis points per month or 6% per year. http://www.bepress.com/bap/vol13/iss1/art4/ The average FX desk on a large bank returns 13-18% per year. But your concern about large returns tells me that you should get a copy of Dimson's out of print book, "Triumph of the Optimists."

You are also assuming that to generate large returns that I am doing the exact same thing that you're doing and that's the farthest thing from the truth. Generally speaking, if the public is buying, I am selling and vice versa. On a big move down when the public is selling, I am buying and when there's a big move up I am probably selling into it. The public is wrong on average, a statistically large part of the time. For the system to exist, it is essential that the public buy at the top and sell at the bottom on average....there is no other way.

Then you talk about large returns...it's one thing to try and earn 15% off a 50 billion dollar portfolio and another thing to earn 15% off of a 15 million dollar account. Scalability is a real issue here. The average successful exchange member trading his own account vs the general public their own account is like Secretariat running against a broken down mule. Where the exchange member wins out is lower costs of transaction, quicker trades, more information, lower slippage, lower or no margin(this is a huge advantage)and the biggest advantage...getting first crack at the inside market(buying at the bid and selling at the ask). If all transactions are buying at the bid and selling at the ask, one will get those outsize returns of 0.7% average per day. Exchange seats don't cost 6-7 figures for no reason. As far as investigations go, the public managers undergo plenty of scrutiny. I'm not public and I've had my dealings with the CFTC, NFA, a couple of exchanges I belong to, the IRS. I am way too familiar with the mechanics of an audit. The only thing I've ever been nailed for was exceeding position limits a few times, a few tax disputes with the IRS, and trading wheat for a friend(ex-friend) without a brokerage license/Series 3.

Sept. 28, 2011

The average yearly return of the stock market has been around 8 to 9% (depending on how it's calculated), but it doesn't go up every year. You say you got double-digit returns every year over 35 years except in 1982. Sorry, Jeff, I respect your knowledge of markets, but that is not a credible statement. Best, Don Bauder

Sept. 28, 2011

Well, Don frankly I don't care what you think. I just mentioned something in passing and you made a big deal out of it. Furthermore, you are comparing me to stock traders and not commodity traders which I find you very deficient in your knowledge. Anyways, if credibility is to be tossed around, our last go around a few months ago, you put plenty of words in my mouth and showed that you have issues regarding credibility yourself.

Sept. 28, 2011

Just a question. Since I have repeatedly made it known that I am primarily a wheat trader, what kind of returns do wheat traders make per year in your estimation? Do you even have a clue?

Sept. 28, 2011

Since I have repeatedly made it known that I am primarily a wheat trader, what kind of returns do wheat traders make per year in your estimation?

Jeff that is impossible for you or anyone else to know (and BTW you had never made that fact "known" here).

There is NO WAY you, or anyone else, has access to that info- to every single "wheat trader"'s income, or rate of "return" (I am assuming you mean by return their profit, and by profit then their income).

Heck there is no possible way to even know how many wheat traders are out there. It would be like asking how much return an commercial industrial real estate broker makes. Imposible to know. You may know what a few make, or even what many make,but you do not know what they all make.

Sept. 28, 2011

Without the pricing information, you have absolute no credibility in saying that I don't earn double digit returns. And since the grain trade in general is pretty insular, I can make a pretty good guesstimate of most players. And yeah....I did mention the fact that I trade wheat.

Sept. 28, 2011

nokomisjeff, I have been posting on the Reader for at least 10 years. Don Bauder is a gentleman, and I respect his blog. I am not always a gentleman on here, but sir, I can say for 55 you are certainly an immature, arrogant and misguided individual. nokomisjeff, are you drunk or high when you are posting? Because the only credible reason for your haughtiness is an inferiority complex. A man so important as you seem to proclaim would not have time to spar with simpletons on the Reader. So what are you really? In need of attention? You need therapy, nokomisjeff.

Sept. 28, 2011

I can make a pretty good guesstimate of most players.

No you can't, you just claim you can, and even in your speculative claim you yourself admit in your own words it is just a "guesstimate".

Sept. 28, 2011

Yes, you said you trade wheat, or mainly trade wheat. But year in and year out, commodities are the biggest crapshoot of all -- and the most manipulated. My father got a Master's in ag economics in 1922 with the idea of going on the Board of Trade, until he saw it was a rigged game. Best, Don Bauder

Sept. 28, 2011

Then your father missed it because the CBOT is rigged....in favor of the members. Your father didn't do you a favor that's for sure.

Sept. 29, 2011

Yeah, but Jeff has a MIT quant to figure it out. Best, Don Bauder

Sept. 30, 2011

Well Don, if you are in business, don't you hire the best and brightest???

Wait a minute, the fifth estate doesn't follow that model.

Sept. 30, 2011

There are no Mozarts in journalism, I admit. Best, Don Bauder

Sept. 30, 2011

You were the one who started talking about average returns of the stock market. Go back and check. Best, Don Bauder

Sept. 28, 2011

Jeff, you wrote:

"On a big move down when the public is selling, I am buying and when there's a big move up I am probably selling into it. The public is wrong on average, a statistically large part of the time. For the system to exist, it is essential that the public buy at the top and sell at the bottom on average....there is no other way."

EXACTLY. That's how markets REALLY work today. The professionals MUST depend on the ignorance of the masses and their willingness to fall for the same narratives again and again, with predictable results. The latest example seems to be the gold market...as soon as "everyone knows" to buy gold, the insiders are selling at what they know to be the peak of the bubble.

Thanks, Jeff, for your openness and honesty. At least you're not dressing up your behavior in faux-philanthropy saying you're somehow helping the people. You're trading to beat others, in a very gamelike fashion with nothing personal...and that's about the only way to make real money in the markets today.

Personally, I don't have the stomach for that. I'd feel guilty for getting paid for what I consider to be parasitic behavior. But I know quite a few people who make money in ways I find distasteful, and still get along with them well enough.

So, seriously, everyone reading this should re-read what Jeff wrote. If you're "dabbling" in markets, you'll get taken to the cleaners by the pros who do this day after day and have so many advantages that pretending the market is "fair" is dangerous self-delusion.

Sept. 28, 2011

This is particularly true in the commodities pits. Those who actually want delivery of the commodity (say, General Mills) and the scarpers gang up on the outside speculator. It's been proven over and over that the outsider loses in commodities. Best, Don Bauder

Sept. 28, 2011

Sounds like you are a contrarian. That makes those annual double-digit returns even more questionable. Best, Don Bauder

Sept. 28, 2011

Don, Your claims to be a business reporter are dubious at best. I'm not a contrarian at all and for you to make that speculation tells a lot....I guess that you never heard of reversion to the mean. If i were you I'd put whatever money I had under the mattress.

Sept. 29, 2011

It is deplorable that Wall Street is a casino and unspeakably deplorable that the government and Federal Reserve bailed the gamblers out to the tune of $13 trillion or more, and may have to do so again. Best, Don Bauder

Sept. 27, 2011

SP, the goal of Wall Street is and always has been to make money for the exchange members and market participants. Put away that 8th grade history book and get real.

Sept. 27, 2011

Make money, no. Accumulate money, yes. Best, Don Bauder

Sept. 27, 2011

Don, to accumulate money you have to make it first.

Sept. 27, 2011

LOL...Thank you Captain Obvious!

Sept. 27, 2011

"Make" means to "earn." So few on Wall Street ever make money that they would then accumulate. Best, Don Bauder

Sept. 27, 2011

Don, you need to get out more.

Sept. 27, 2011

What do you mean get out more? Get out of jail more often? I'll take your advice. Best, Don Bauder

Sept. 27, 2011

Don, I have a pretty good collection of 30+ market related books over on my blog. You can download them all and read them right off the site. Pretty interesting stuff. http://masteroftheuniverse.wordpress.com/books-to-download/ I also have another collection of classical books to download for all of those books you never got to get around to in college. Pretty decent selection there also\Jeff

Sept. 28, 2011

Here is a good quote off Jeff's website, so on the money;

“[W]hen you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you. . . you may know that your society is doomed.” Ayn Rand

Sept. 28, 2011

Yes, good quote. Best, Don Bauder

Sept. 28, 2011

You say I should get out more. You mean that I should read books on websites. The last thing I need at my age is to spend more time on the computer. Best, Don Bauder

Sept. 28, 2011

"Make" means to "earn." Don, you "earn" money for performing a service. You earn money as a result of your efforts. What you're talkin about is deserving what they make, which is a whole other conversation that has been hashed out in the Reader many times before and probably will be many times in the future. Maybe you should sign Dylan Ratigan's petition to add this amendment to the US Constitution: "No person, corporatio­n or business entity of any type, domestic or foreign, shall be allowed to contribute money, directly or indirectly­, to any candidate for Federal office or to contribute money on behalf of or opposed to any type of campaign for Federal office. Notwithsta­nding any other provision of law, campaign contributi­ons to candidates for Federal office shall not constitute speech of any kind as guaranteed by the U.S. Constituti­on or any amendment to the U. S. Constituti­on. Congress shall set forth a federal holiday for the purposes of voting for candidates for Federal office."

With "no money" in politics, it might be a little harder to buy the politicians necessary to facilitate the debaucher that occurs on Wall Street. But then again, someone would find a way around it. They always do.

Sept. 27, 2011

I agree with Ratigan. Citizens United has to be buried once and for all. Best, Don Bauder

Sept. 27, 2011

Citizens United and Kelo v New London are horrible decisions from the SCOTUS-how those two were decided like they were shows how upside down things have gotten.

Sept. 28, 2011

Agreed: two horrible decisions -- Citizens United goes down with the worst in history. Best, Don Bauder

Sept. 28, 2011

Dylan Ratigan Judge Napolitano are the only two TV personalities I watch. Agree with BOTH of them.

I saw Ratigan get so upset of the scamming that is going on in America that he went on a heartfelt rant like nothing you have ever seen before-all from the heart. I agree with him on nearly every topic.

Sept. 28, 2011

Television, any TV rots your mind.

Sept. 28, 2011

I used to see Ratigan occasionally on CNBC but have never seen his current show. I have quoted from it, however, using other sources. Best, Don Bauder

Sept. 28, 2011

I haven't quantified this yet, but I suspect that the amount of time watching CNBC is probably inversely proportional with higher returns on your money. CNBC really rots your mind.

Sept. 29, 2011

Actually, I watch Bloomberg more than CNBC. And I don't watch either very much -- say, just early in the morning, at lunch, and at the market closing. Best, Don Bauder

Sept. 30, 2011

You ought to turn off all of the TV and get a Bloomberg Machine. They might have a free trial, but I don't know. Bloomberg is all the up to the minute quotes(the ultimate truth) and unfiltered news reports. All of those TV business channels are even worse than the print business reporters....and they are pretty bad. Just look at Alan Abelson, who has been bearish since the DJIA was at 700. Can you imagine how broke you'd be if you listened to him?

Oct. 1, 2011

It's really kind of unfortunate that such personal exchanges get deleted; they provide invaluable information concerning the characters involved.

The best way to handle baiting is not to bite. By sticking to the substance and avoiding the personal (except for the relevant stuff), Mr. Williams brings information, wisdom, and dignity to the proceedings.

If anyone saved the deleted stuff, I'd appreciate receiving it for my collection.

Sept. 26, 2011

Fred Williams does provide a lot of pithy, provocative material. We appreciate his blog entries. Best, Don Bauder

Sept. 27, 2011

I'm bringing wisdom and dignity?

Oh no!

I'll do my best to stop that. From now on I'm only writing fart jokes...

:-)

Sept. 29, 2011

Please, more pith. Not farth. Best, Don Bauder

Sept. 29, 2011

I don't know of anything that has been deleted in this colloquy. Incidentally, thanks greatly to nokomisjeff, tomjohnston, Twister, SP, refriedgringo, Ponzi and others, this has been a very enlightening discussion -- one of our best. That goes to show that the feistiest forums are often the most informative. Best, Don Bauder

Sept. 27, 2011

Very good:)

Sept. 28, 2011

I don't know of anything that has been deleted in this colloquy.

Several of Jeff's comments were deleted, as were several of mine. Jeff was trying to claim he was being singled out-not true.

Sept. 28, 2011

I am not aware of those deletions. Best, Don Bauder

Sept. 28, 2011

ditto!!!

especially the ones that expose our dignity ;-D

Oct. 1, 2011

Questions are at the heart of enquiry, right? Answers are best considered to be provisional.

Sept. 28, 2011

Let me make a little pause here in the commenting to welcome Jeff...(aka nokomisjeff) to the discussion.

I don't agree with everything Jeff has to say, but he is very well informed, articulate, and brings a fresh perspective.

So, even if we disagree (hey, maybe BECAUSE we disagree) I'm really glad to have a new sparing partner here.

Best,

Fred

Sept. 28, 2011

Agreed. We welcome Jeff and hope he comes back on all kinds of topics. Best, Don Bauder

Sept. 28, 2011

Look out guys--yer dignity is showing . . .

Sept. 29, 2011

We'll have to conceal our dignity. Then we will be indignant. Best, Don Bauder

Sept. 29, 2011

This is in response to Refried's assurance that Florida Jeff is just playing: I trust your judgment, Dave. My comment had more to do with the knee-jerk reaction I experience whenever I see or hear the word " snarky" being used. Advantage Nokomis.

Oct. 1, 2011

" snarky" is a very weird word, for some reason everytime I see it in print or hear it, I instantly think of Hanna barbera kids show from the late 1960's named "The Banana Splits", where they had 4 animals (played by humans) and one of them was named Snorky. I know, weird stuff from my surpressed childhood;

Oct. 1, 2011

Proving yet again the importance of proper paper training? ;>)

Oct. 1, 2011

In my college days in the '50s, the verb "snark" meant to sneak a look at the sorority house next door (or women could snark on fraternities.) There was no word "snarky." Best, Don Bauder

Oct. 1, 2011

I feel stoopid to admit this-I had no idea jeff's name was related to where he lived.

I have never heard of Nokomis FL before. It looks like a nice area, not too far from where a friend of mine lives in Brandenton, FL.

Oct. 1, 2011

Florida is suffering a big deflation of the value of residential assets, but Jeff of Nokomis may be escaping it. Best, Don Bauder

Oct. 2, 2011

My house has lost 50% of the perceived value in the past 4 years, yet my taxes are up every single year. Go figure.

Oct. 2, 2011

He is. The guy is very smart when it comes to the markets, and obviously his ideology is quite libertarian and his economic tendencies are Hayekian (as are my own). He knows that Don was once an Austrian School guru. He's also smart enough to know that he isn't going to talk anyone out of their positions here. He's just having some fun. He baits SP, for example. SP should know better than to take that bait ;)

And snarky is a quite popular word with literary types. Like SP, I wasn't fond of the word at first either, in fact I thought it was invented recently by some literary hipsters (the types that only seem to read books that no one has ever heard of), but it turns out that it dates back to the turn of the last century. I seem to never run out of stuff to learn about.

Oct. 1, 2011

I'm ashamed to say that people had used the word "snarky" many times before I figured out what it meant. Best, Don Bauder

Oct. 2, 2011

u can look up all unfamiliar slang words in the Urban Dictionary Don

http://www.urbandictionary.com/define.php?term=snarky

that's what i have 2 do...lol ;-D)

Oct. 2, 2011

I'm a little verklempt by the group-hug going on, but Don, the book "Snark" by David Denby is one I think you would really enjoy, especially because of your on-line presence as a journalist and the reader's ability to comment on your stories. Check it out - it's a short read, really exposes snark for what it is and I had a lot of fun reading it. You will, too.

Oct. 1, 2011

i think i'll check that one out 2 Grantie

Oct. 1, 2011

I'll check it out -- of the library. Best, Don Bauder

Oct. 2, 2011

hey reader...lots of the replies here have move off to the right so far they have become unreadable...this is such a good discussion i hope can u fix that web administrator

i can't afford a larger screen

thx ;-D

Oct. 2, 2011

I don't know what happens when the boxes get so narrow. Worrying about that is not my responsibility. Best, Don Bauder

Oct. 2, 2011

i asked web admin to fix it Don...it's such a good discussion i hate to miss any of it

Oct. 2, 2011

This was a problem some time ago, but then it went away, only to return here. Best, Don Bauder

Oct. 3, 2011

The only way I've found to beat the margin retreat is to avoid the "Reply" at the end of the message; instead, post via "Post a comment" and paste in the relevant name/date from the "signature" line, thus:

By dbauder 7:11 a.m., Oct 3, 2011

This will avoid the Great Shrinking Space problem. It has a second great benefit: You can edit your remarks.

But greatest of all, people don't have to check the hundreds of posts to see if anything new has been added.

Oct. 3, 2011

i agree

but u can add content and correct replies 2...i still think Web Administration should find a way to fix it

Oct. 3, 2011

I don't know what script was used or I would offer some assistance. One solution is to run "if/then" script once the reply reaches whatever point is unreadable, then back it up and up and up until it's around 1/2 way to the left margin and then run it back again. In other words:

reply reply of reply reply of reply of reply reply of reply of reply of reply reply of reply of reply of reply of reply reply of reply of reply of reply reply of reply of reply reply of reply reply of reply of reply of reply reply of reply of reply of reply of reply reply of reply of reply of reply reply of reply of reply reply of reply reply of reply of reply reply of reply of reply of reply...

... and so on. That way you don't lose the thread of a certain reply, it retains its integrity without confusing anyone as to where it originated.

Oct. 3, 2011

dizzy now I'm dizzier dizzier by the moment dizzier than dizzy should be dizzier than a mosquito at a nudist camp whoa there, a little less dizzy now? dizzy can be cut by sheer will? markedly less dizzy now call it dizzy lite undizzy uhoh......

Oct. 3, 2011

u r such a funny funk Duhbya....

and thx Refried...for the dizzy analogy

;-O

Oct. 3, 2011

I know, seems wonky, but in action it's sort of easy to follow. And it's artistic in a way.

Oct. 3, 2011

Sublimely artistic, that's what caught my eye. Upon re-reading my response, however, I have decided to schedule a long overdue vacation, commencing immediately. ;> )

Oct. 4, 2011

yawn...can i go with??

Oct. 4, 2011

Absolutely, but bring your best fall foliage camera, 'cause that's the itinerary. October's always been my favorite month, and that was before we moved to Maine 6 years ago.Miss your former avatar, btw, but really like your new one, too! (speaking of foliage)

Oct. 4, 2011

i will only have this avatar thru the fall then back to the the money shot...the guns!!!

Oct. 5, 2011

There IS a god!

Oct. 5, 2011

it is artistic!

Oct. 3, 2011

I recommend staying out of the stock market and stocks, bonds, currencies, derivatives, and the like, except maybe in an IRA or 401K that guarantees it will never go down, which I have in my IRA. That way you will never loose money in that area.

As for just investing in stocks, bonds, currencies, derivatives, and the like don't do it. Instead, invest in yourself in your own business. If you make double digit incomes from investing in the markets, that's not enough for me. I invest in my own business and make 100s and 1,000s of percent on my investments. Yes I can prove it, and I do it all the time. I am not talking about big investments here, but small ones, which can be the down side depending on how you look at it. If you are living in a $1 million + home then you need more money than I make, but if you live within your means and don't need more rooms in a home than you can ever use then invest in yourself and your own business, built it and stay out of the markets.

Oct. 12, 2011

Rich is 100% right that the public should stay out of the markets. I will add another caveat....people who are fascinated by the market, think they know a little about the markets....they should really stay away as they know just enough to be dangerous. I would go one step further and even stay out of those investments for the IRA or 401K that are guaranteed for the principal to never go down....the numbers might show them never going down, but if they are dollar denominated, the values will go down significantly, and there's 99 years of data showing the dollar losing most of its value.

Oct. 12, 2011

I agree, entirely. The exception being that an investor wishing for long-term growth taking a strategic position with a certain stock, irrespective of normal market fluctuations. That's the difference between betting a horse in a race and buying a stallion for stud duties. Both are a gamble, but one is safer than the other. In either case, one should do one's homework first.

Oct. 12, 2011

Doing homework sometimes doesn't help. Lawyers have ways to hide smelly news in legal Latin. Best, Don Bauder

Oct. 12, 2011

True. The dollar has lost most of its value over the century. That hurts if you are traveling overseas, among other things. Best, Don Bauder

Oct. 12, 2011

As long as the Fed keeps shoveling in liquidity (and it will do so as long as the economy remains gravely ill), you might be surprised how well the stock market does. On the other hand, if the situation collapses, then you will be happy to have stayed out of the market. Best, Don Bauder

Oct. 12, 2011

ditto refried!!

Oct. 12, 2011

The Fed might keep shoveling in liquidity, it might not. That is for the bond mavens to decide, not the Fed. They might keep the printing presses going in overtime, but that is not necessarily considered liquidity with nothing behind it. I assign a high probability to a debasement like during the 1923 Weimar Republic as described in Fergusson's book, "When Money Dies." http://www.goldonomic.com/When%20Money%20Dies.pdf the full download here. The saving grace for the dollar might be if the euro disappears, and there is a better than 50% chance of that happening within the next 8 years.

Stuff like linking to Fergusson's book is sharing....not answering stupid questions like the price of wheat in 120BC...which I answered even though I should not have dignified the leading questions with a response.

Oct. 12, 2011

High probability of Weimar inflation. Wow. Best, Don Bauder

Oct. 12, 2011

Jeff, I concur.

The Euro in its current form, from my perspective, is toast.

Whether that means the dollar retains value (not from choice but necessity as a safe haven) instead of being debased...difficult to say.

Is there an alternative replacement currency (not gold) where those in need of monetary transactions (not just investors) could turn which is large enough and fluid enough to suit the needs of economic life?

We all know fiat money is based on trust...and it seems to me today that the real trust is in online transactions. Having to deal with so many debasement prone currencies makes life unnecessarily complicated for those who make and own such systems.

The question arises as to whether solely online nominal representations of value based on trust aren't more sustainable without governmental interference...

Hmmmm.....

Oct. 16, 2011

I never thought fiat money was based on trust, I thought it was based on decree. Because it's a product of governmental regulation, trust is pretty low on the totem pole as far as fiat currencies are concerned. Since "all" currencies are losing value over the long term, I think the only trust is that the market trusts that they will lose value.

Personally, the fact that the government has a monopoly on specie is the biggest rip off of the public there is. Ideally, there would be private specie, competing, and let the market assign values. But I'm not going to go off on this because I could go on for hours and hours.

Oct. 16, 2011

Be practical. You're not going to have private currencies in our lifetimes, if ever. Government-sponsored specie may be a ripoff, but it's not going away. Best, Don Bauder

Oct. 16, 2011

Oh I agree 100%, but the public should be educated as to how much they are getting ripped off by having governments having the monopoly on money.

Oct. 16, 2011

The online transactions are done through financial institutions that have the governments in their pockets. So you are not going to cut governments out of the equation. What I worry about is the trust that supports fiat currencies. That trust is evaporating before our very eyes, hardly surprisingly. Would a basket of currencies replace the dollar? The euro would have to be a big part of that basket: 'nuf said. Best, Don Bauder

Oct. 16, 2011

Re: Snark

Don, this is an outstanding example of "snark"...read the captions as you click through the photos.

http://www.theglobeandmail.com/news/arts/celebrity-photos/celebrity-photos-of-the-week-oct-12/article2197635/

Oct. 16, 2011

I will get to it. Best, Don Bauder

Oct. 16, 2011

Don and Jeff...here is Kahneman explaining the "illusion of validity" and how it leads intelligent people to think their good luck is actually due to skill.

http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-hazards-of-confidence.html?hpw

Market traders have been richly rewarded, and can tell all kinds of tales of how hard they worked to earn the money. But the facts are stark...they got lucky, and just can't admit it.

Best,

Fred

Oct. 22, 2011

The race is neither to the swift nor the victory to the strong. Best, Don Bauder

Oct. 29, 2011

@Fred, I saw that flawed article and read it with detached amusement. If you want to think I'm lucky, then so be it. I have noticed that the harder I work, the luckier I seem to get, and these 90 hour work weeks seem to correlate with my increase in luck. I assume that you would contend that a successful poker player or horse player is just a matter of luck? It's easy to ascribe luck to people who succeed in the markets when you're sitting in the peanut gallery bitching about why your 401-K lost money.

Oct. 25, 2011

Some successful gamblers are lucky. Then again, some are liars. Best, Don Bauder

Oct. 29, 2011

Golly, you're right. That dummy Kahneman...what was the Nobel Prize committee thinking when they gave him a prize, huh?

From now on, whenever we need to know anything about any subject, we'll turn to Jeff the omniscient and ignore all those stupid cognitive scientists who actually do that wasteful experimentation and research.

Thanks for setting us all straight. With your ninety hour days, and forty day weeks, working so hard at your trade, we're lucky to get these fragrant little wisdom droppings from you and should be far more grateful.

And don't worry...it's enough just for you to say you disagree. As usual, we won't expect any actual evidence or reasons for your opinion. Since you're a fancy day-trader, picking up the little slivers here and there when you can fool other fancy day-traders, we all know that your knowledge is as near-perfect as can be imagined and won't dare to question you.

Oct. 30, 2011

Fred, I love hearing the cries from you guys in the peanut gallery.

Nov. 16, 2011

All "currency" is "fiat" currency, and it is based on promises, promises, promises. This will not work in an atmosphere of lies, lies, all lies.

There is no credibility left, really. The only reason "the economy" keeps going is because of momentum, and the simple fact that people have no alternative. The reality is, my dear Watson, that it is all full of sound and fury, signifying nothinger and nothinger, and nothinger.

It is not the end of the world as we know it, it is the beginning of the world as we had hoped we would never come to know it. People will find a way around the circumlocutions of the "markets" eventually, and all those "investments" will be deflated. Those who misinterpret the spasmodic fluctuations of recent stock markets may sputter all they want, and certainly they will point to others for the blame, but like all blame, it rings hollow--always has, always will. It is simply IRRELEVANT. As the Great Pogo said, "we" is the enemy, not they. And we, the Great Suckers, having been sucked dry, will have to help each other, and just let the Biggest Suckers steal from each other . . . until it's all gone . . . gone, g o n e.

In re: By dbauder 9:31 a.m., Oct 16, 2011

Oct. 25, 2011

It's always enjoyable to see a Jim Fisk steal from a Jay Gould, or vice versa. Both deserve their fates. Best, Don Bauder

Oct. 29, 2011

Or Wat sons "intellectually," from Epstein and Rand?

Oct. 30, 2011

Yeah, Fred, stop picking on poor Watson.

In re to: By nokomisjeff 5:28 a.m., Nov 16, 2011

Nov. 16, 2011

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