Perry Glasser

Archive for August 16th, 2011|Daily archive page

FLASH MOBS, BLACK BOXES, AND VANDALS

In Business, Economics, Economy, Finance, Politics, Wall Street on August 16, 2011 at 7:24 am

Welcome to Philadelphia

The United Kingdom, Chicago, Philadelphia, and Cleveland are suffering from the same illness that has shaped the stock markets for a decade: a mob mentality that spreads at the speed of light with no purpose other than to make vandals rich.

Remember when there was such a thing as “investors?”  Show Dollar$ a hedge fund manager interested in investing for the long term, and I will show you a money manager going broke. Those wealthy clients want high returns, 20 percent or more, and no one survives with a buy-and-hold mentality. The mentality is epidemic, and Citizens with memories extending back further than breakfast will recall notions of “rational markets.”

Rationality has nothing to do with a flash mob. They dance, they sing, they clap, they cheer, but when they get surly they burn and loot.

And in the stock market, they do it for the same reason: profit.

My algorithm can beat up your algorithm

INSIDE THE BLACK BOX

“A special class of algorithmic trading is “high-frequency trading” (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe. …. As of 2009, HFT firms account for 73% of all US equity trading volume.” Algorithmic trading is  also called black-box trading.

Kids on the street who text the time and place of an imminent raid on their favorite retail outlet know that law enforcement is helpless in front of a spontaneous mob. They strip shelves of what they want, and then run like hell.

Algorithms signal each other of a raid on markets, strip pennies from value that on leveraged derivatives become millions, buy and sell in an instant, know that regulatory agencies are helpless, and then run like hell.

Dollar$ dares to suggest that any Wizards and Weasels who believe market stability is a healthy climate for investment, innovation, and general macroeconomic non-monetary policy that might create jobs to get those unruly youth off the street, may want to stop the flow of bullshit about how such markets are open and fair.

Dollar$, never shy of suggesting policy, simply asks that all stock and derivative orders in excess of $5 million be limited to any single entity to no more than two per hour.

Let’s level the playing field by tilting it toward traders with blood in their veins.

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