| The events of May 6th 2010 in the US stock market, the so-called Flash Crash, have been getting a lot of attention lately and the main reason is because of yesterday's missive: BLAME! The US government has accused Navinder Sarao...ONE MAN in bunny slippers in England...of nearly destroying the US stock market. Because the feckless clowns who run the CFTC & DOJ believe that they have someone to blame, and of course you should NEVER question authority, the matter is solved. Case closed. Done & done! Not so fast... The US stock market is the largest and most liquid in the world and therefore impossible to be taken down by one single guy in his basement...from England. Mr. Sarao is said to be an HFT trader, which requires mega-SPEED per trade, and is the reason why I mentioned his country of origin several times. Unless he was part of a huge bank desk or large hedge fund, his so-called "HFT" trades would suffer so much latency from London to Chicago to render them USELESS. Mr. Sarao did break the law and should be punished, there is no doubt of that; however, he did not bring the global market to its knees by himself and therefore should not be a scapegoat. Before this week there were several "absolute" reasons of the Flash Crash... 1) "It's a capitulation with no bid side...you have a void in stocks with points down..." Trader that is regularly on CNBC (remember NO BID SIDE) 2) A "fat finger" trade was also blamed as usual ($16M to $16B). 3) Later, the small firm of Waddell & Reed was blamed because it executed "sell programs." Those who accused W&R, however, never figured its selling RATIO into the overall massive volume of the day, which clearly exonerates W&R of any/all blame. 4) Now, of course, there is Navinder Sarao, who does not work for: Citadel, or GETCO, or Tower Trading, or Jump Trading, or KCG, or Optiver, or Virtu...etc. 5) The odd thing is (not so odd for the jaded) that the large firms that do the same thing as #Sarao every single day are never questioned... Poor kid – he needed to grease the slimy politicians of the CFTC/regional Senator. Oops! Not gonna happen and that's another reason why I stressed "England" earlier: the US gets to believe that the market is made of local puppy dogs and if any foreign non-politically connected basement-trading guy gets "uppity" --- well, they'll take'em down. Of course, this is just my opinion and you are free to disagree, as well as believe in the tooth fairy – but seriously, it's your life. Go for it. By the way, I was on the floor this day and I have to say that – yes – it was wild. The financial media reported it one way...but the following audio clip happened right next to me... https://www.youtube.com/watch?v=E1xqSZy9_4I Can ONE guy trading in his basement with bunny slippers make more of a difference than the Greek scare, the MEGA leverage, the HFT firms shutting OFF their programs, etc? Sure his activity is now illegal but responsible for the preceding audio clip? Come on – now way! Trade well and follow the trend, not the perma-bull OR perma-bear "experts." Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia. | 
No comments:
Post a Comment
Keep a civil tongue.