The caribou have vanished on Wall Street and the wolves are in a feeding frenzy against each other. Yesterday, the Wall Street Journal reported that Goldman Sachs is considering shuttering its Sigma X dark pool, a business that brought in $7.17 billion from equity trading in 2013, before accounting charges.
There are only three reasons that a Wall Street mega bank shutters a $7 billion business instead of selling it: it’s crazy; its regulators told it to shutter it; there’s more bad news ahead about this business and the firm is trying to get out in front of the fallout. We know Goldman Sachs is only crazy like a fox, so that leaves options two and three.
On March 13, Bloomberg News reported that Goldman Sachs sent refund checks to some of its customers for trades that had occurred in August 2011 where it had failed to execute trades at the National Best Bid and Offer (NBBO), a requirement under U.S. securities laws. Whether that is happening routinely within dark pools is anyone’s guess since…well, they’re dark…and the Securities and Exchange Commission still doesn’t have a consolidated audit mechanism able to keep up with the market it is charged with overseeing.
What triggered this benevolent refund action on the part of Goldman Sachs has yet to be explained. Who discovered the errors is left unanswered as is why we are just learning about something that occurred in 2011 three years later.
Most Americans are traveling with a blindfold on Wall Street’s rigged superhighway. Until bestselling author, Michael Lewis, blanketed the airwaves last week with the news that yet another cartel has formed on Wall Street to front-run the stock trades of ordinary investors with a super-speedy fiber-optic line financed by private investors, the public remained in the dark about the latest weapon in Wall Street’s high-tech arsenal for transferring the little guy’s wealth into the hands of the one percent.
The plan was so insidious that it reminded us of the stealth practices carried out by Wall Street in the tech boom of the late 1990s to line the pockets of the corner offices while separating the small investor from his life savings.
One of those practices is benignly called a “penalty bid” (every trick on Wall Street has some indecipherable name to disguise what’s really going on). And quietly, without news media coverage, the dirty practice is back. It made its comeback on November 27, 2013 in an equally questionable maneuver between the Securities and Exchange Commission, now hobbled with a pack of former Wall Street lawyers running the place, and the Financial Industry Regulatory Authority (FINRA), a self-regulatory body that also runs a private justice system for Wall Street that is devoid of the legal protections afforded in a court of law.
The fallout from the new book, “Flash Boys” by Michael Lewis continues. Yesterday, Jonathon Trugman wrote in the New York Post that “These traders who use the HOV lane to get ahead of investors could not do their trades without the full knowledge and complicity of the New York Stock Exchange and Nasdaq.”
Trubman went on to compare the two best known stock exchanges in the U.S. to houses of ill repute, writing: “What is clearly unfair and unethical — and, frankly, ought to be outlawed — is how the exchanges have essentially taken on the role of running a high-priced, high-frequency brothel…”
While it’s true that the New York Post might possibly overuse sexual analogies (on August 10, 2011 it ran a front page cover comparing the Dow Jones Industrial Average to a “hooker’s drawers”), in this instance Trugman is spot on.
Not only are the New York Stock Exchange and Nasdaq allowing high frequency traders to co-locate their computers next to the main computers of the exchanges to gain a speed advantage over other customers at a monthly cost that only the very rich can afford to pay but they’re now tacking on infrastructure charges that price everyone out of efficient use of the exchanges except the very top tier of trading firms.
Money manager Axel Merk thinks new Fed Chief Janet Yellen can’t do much to improve the labor market even though she claims she’s most interested in helping Main Street and not Wall Street. Merk says, “Yellen is from Berkley, our neighborhood, and it’s all about warm and fuzzy feelings. Ultimately, of course, there is only so much the Fed can do for Main Street. My view is the Fed is the major contributor of the growing wealth gap we have in the U.S. You have free money, easy money, hedge funds can do great with it, but when lured into credit, you can fall down into the cracks.
Yes, she wants to help Main Street, which conversely means she may be far more interested in regulatory policy to force banks to do certain things. . . . She is more interested in regulation than worrying about interest rates.”
How would you feel if you went to the store to buy something, and someone rushed ahead of you and purchased it first and then sold it to you at a higher price? Well, in the financial world this happens millions upon millions of times. In fact, this practice has become so popular that it has spawned an entire industry known as “high frequency trading”. At this point, high frequency trading makes up about half of all trading volume on Wall Street, and it is costing the rest of us billions of dollars a year. And the funny thing is that this is all perfectly legal. High frequency trading firms are exploiting a glitch in the system, and by allowing this to go on, the authorities have essentially given them a license to steal from the rest of us. Sadly, this is just another example that shows that the odds are never in our favor. The “little guy” never seems to be able to win, and those at the top of the food chain like it that way.
Making money in the stock market is supposed to be about making wise investment decisions. It isn’t supposed to be about finding a glitch in a video game and exploiting it. But that is essentially what these high frequency traders have done. They have spent an extraordinary amount of time and energy figuring out ways to make pennies (or sometimes just fractions of a penny) on the trades that the rest of us make.
Fortunately, this practice was exposed in front of the entire world by 60 Minutes the other night. Steve Kroft interviewed a former trader named Michael Lewis that just released a new book entitled “Flash Boys” that is all about the evils of high frequency trading. The following is an excerpt from that interview: Continue reading →
“All the Presidents’ Bankers: The Hidden Alliances that Drive American Power” by former Wall Street veteran, Nomi Prins, is a seminal addition to the history of continuity government between the White House and Wall Street from the days of Teddy Roosevelt and the Panic of 1907 right up through the Panic of 2008 and the Presidency of Barack Obama. (Don’t be intimidated by the 69 pages of footnotes; while meticulously researched, this is a captivating read for anyone seeking clarity on why Wall Street can collapse, get bailed out by the taxpayer, cause a Great Recession and still call the shots in Washington.)
The hefty hardcover deserves instant classic status for two reasons: like no other tome before, it explains through original archival material why the mega Wall Street banks are coddled by Washington and have been allowed to survive a century of public looting – because they are considered an essential financial component of the U.S. war arsenal.
The book also brings into crisp perspective the history of mega banks like JPMorgan Chase and Citigroup, their variously esteemed and despised titans of yesteryear, and why the country is reliving the mistakes of 1929 today.
Prins makes us all insiders as we read the private notes from Presidents scribbled to the historic Wall Street figures of their day. There is enlightening detail provided of the lead up to the 1929 stock market crash and the Great Depression. The foundation was laid, brick by brick, stone by stone, in a manner so identical to the lead up to the 2008 Wall Street crash that it gives one pause as to whether we have yet seen the worst of the aftermath.
Things have been getting a little…strange lately. What with all these banker suicides and warnings from banks that the stock market is about to decline by 10% or more.
To add to that, let’s recall an article that appeared in The Washington Times back on October 29, 2012 entitled, “MEANS: U.S. economy on schedule to crash March 4, 2014″:
Those wild and crazy Mayans put down their marker that the end of the world would occur on Dec. 21, 2012 — about two months from now. There is, of course, some small chance that they might be right. On the other hand, there is a very large probability that the real end of the world will occur around March 4, 2014.
The doomsday clock will ring then because the U.S. economy may fully crash around that date, which will, in turn, bring down all world economies and all hope of any recovery for the foreseeable future — certainly over the course of most of our lifetimes.
Interest rates will skyrocket, businesses will fail, unemployment will go to record levels, material and food shortages will be rampant, and there could be major social unrest.
Any wishful thinking that America is in a “recovery” and that “things are getting better” is an illusion.
While we’ve gone about our daily lives, billions of hidden agents have established an empire across Europe.
Over the last 80 years, they have set up millions of outposts from northern Italy through southern France and all the way to the Atlantic coast of Spain.
They have brutally usurped and butchered their native European rivals in a zero-sum game for territory and resources.
The expertise and authority required to carve out, coordinate, and control an empire that could cover the distance from San Diego beyond the northeast tip of Maine makes this exploit seem impossible.
It should take a legendary figure like Alexander the Great or a conspiracy of powerful people to accomplish such a feat.
But there is no such emperor or conspiracy. In fact, no one is in charge at all.
Deceptively Simple Rules
The empire that has come to dominate such a wide swath of land is a supercolony of Argentine ants.
It is made up of millions of independent colonies that have brutally destroyed their rivals. Yet you can take Argentine ants from Portugal and drop them in an Italian colony, and they all get along just fine.
These ants will not hesitate to slaughter their kin in South America, so what changed when they crossed the Atlantic?
On the evening of Sunday, December 15 of last year, six weeks before the onset of the latest rash of tragic deaths of young men in their 30s employed at JPMorgan, the Pearland, Texas police received a call of a person in distress outside a Walgreens pharmacy at 6122 Broadway in Pearland. The individual in distress was Jason Alan Salais, a 34-year old Information Technology specialist who had worked at JPMorgan Chase since May 2008.
A family member confirmed to Wall Street On Parade that Salais died of a heart attack on the same evening the report of distress went in to the police. The incidence of heart attack or myocardial infarction among men aged 20 to 39 is one half of one percent of the population, according to the National Center for Health Statistics and National Heart, Lung, and Blood Institute, based on 2007 to 2010 data, marking this as another unusual death at JPMorgan.
A person identifying himself as Dave Steiner wrote the following about Salais in the online condolence book provided by the funeral home: “My condolences to your entire family at the sudden passing of Jason. When I had the pleasure of interviewing Jason to be a part of the team at J.P. Morgan back in 2008, it was clear to me within just a few short minutes that he was a man of character, intelligence, work ethic, kindness and integrity. In the years that followed, and until the sad news of this week, I was witness to his hard work, the friendships he built, stories of his beloved family and of course baseball…”