1. Yes, I saw that Corzine was “charged” by the CFTC. This is essentially meaningless. First, it is a purely civil action. These oligarch psychopaths LAUGH at the whole “civil action” paradigm. Second, the $100 million fine that the CFTC is going after comes NOT from Corzine, but from whatever is left of the MF Global Holdings estate, IF there is anything left at all. Not one red cent would come from Corzine, who was worth at least $600 million at the time of the collapse in the fall of 2011. Third, even if Corzine gets the dreaded “registration ban” (eyeroll), he will just jump right back into the markets as a silent partner.
The whole farce is a total nothingburger. With cheese.
Meanwhile, let me share a note that I received from an old floor trader buddy, and let me show you what the human toll is not just on the MF Global clients directly, but also on all of the thousands and thousands of decent people who can no longer make a living in the now-destroyed markets:
I have been unable to find gainful employment in the industry I loved and was so very passionate about. As a result I have taken a job as a cook at the *City* Airport Hilton. While humbling, my hands get cut and burned constantly, it is honest work and I work hard.
All the best to you, bless you,
This chap used to help hedge the price risk on the food you eat, thus helping to keep food prices and production stable. Now he is a short-order cook. I, personally, aspire to janitorial work someday.
The smart people still exist. But we aren’t playing any longer. We’re just watching. If you want to be ruled by imbeciles and psychopaths, and you insist upon destroying and running off every genuinely talented, decent, competent person, then so be it. We’ll just be sitting in the back, watching.
2. On the topic of the markets, let me share some insights I have picked up over the last several weeks from various sources and see if this sheds light on this for all of you out there who haven’t spent your life hip-deep in this stuff so you can understand what is going on. Maybe.
First, the people who actually know what is going on view the equities (stocks) and bond markets as utterly worthless trash that is only being marketed to two classes because these are the only classes of investors left who are dumb enough to still not recognize any of this: Pension plans and individual investors. Yes, that’s right. Pension plans are just slightly more “astute” than Joe Schmoe trading his $100k account through Edward Jones.
Understand that the entire stock market is nothing more than a massive facade and bubble, being blown every single day by the Federal Reserve to the tune of $4 billion per day. Yes, the Fed “prints” money out of thin air, and then pumps it directly into the stock market. Why is the Dow at 15000 while the U.S. and global economies are being intentionally strangled to death by the neo-Stalinists in Washington and Europe? Because almost all of the money flowing into it is coming from the Fed, which is conjuring it out of thin air. Again, to the tune of $4 billion PER DAY. If the Fed was removed or stopped, the Dow would collapse to 5000 – maybe lower – very quickly.
And the bond markets are the same. Prices are being propped up (and thus yields suppressed) because of this fake, Fed-bubble money being the only real player in town. Anyone with a lick of sense is long, long since out of the stock and bond markets.
Here’s a little anecdote I have been meaning to publish for a while. The day Obama was inaugurated in January 2009, super-prime farmground in south-central Illinois was selling at an all-time high of $5500 per acre, which everyone in the ag world thought was crazy-insane high. That same ground 4 1/2 years later is now selling for over $20,000 per acre. If you’re wondering where all of the super-rich are going with their wealth, there’s your answer. They are buying up productive farmground, leasing it back to the farmers who stay on as renter-caretakers or glorified sharecroppers, and everyone’s happy. The farmers aren’t leaving, they’re just restructuring their businesses from owning to renting.
So who are these people who are “in-the-know” in the financial markets? As I have said, it is all down to the High Frequency Trading guys. Now here is where it all comes together and gets incestuous. The HFT guys are the same guys who are developing and writing the code and algorithms for massive data (“cloud”) mining and surveillance. They have exhausted the profit potential in the High Frequency Trading itself, because they have run off all of the non-HFT liquidity and thus they were all just trying to poach off of each other, which makes basically no money. So, what they are now doing is developing code that processes ALL news data on the planet, and then the algorithms look for micro-trends, and then attempt to generate volatility and then poach the volatility in sectors or commodities that these micro-trends are indentified in. So yes, all of this “data cloud” and surveillance algorithm stuff that the government is involved in is being developed by the government’s operational arm on Wall Street. Or is the government the operational arm of Wall Street? Discuss.
The term that has been coined for this monstrosity is “Big Data”, and make no mistake, “Big Data” is Wall Street, Facebook, Apple, Amazon, Google and the FEDGOV all together. In terms of the markets, the only way for firms to make money is in developing and selling “Big Data”, poaching derivatives with HFT, and commissions from suckers like you, both personally and through your pension and retirement products.
Now for you wonky trading people. Let’s talk about derivatives. The bid-ask spreads are now totally absent from first, second and even third level derivatives. Even HFT algorithms can’t make a self-sustaining return if the bid-ask spread is a half-cent. In order to find any spread margins and thus make trading viable, these companies have to keep drilling ever lower and creating new levels of derivatives. Every time they drill down and bundle a set of derivatives on, say the seventh level removed from the actual commodity or product (the underlier), to create the new eighth derivative level, inefficient liquidity re-emerges in the new eighth level AND AND AND they evade regulation, because each new derivative level is the “wild west” until such time as an entire regulatory regime is created. The lag on that is massive, so each new derivative level buys time for Big Data.
With each new level of derivatives created, the foundations of the market in total become ever more porous and weak. We are now basically digging an eighth or ninth sub-basement underneath this skyscraper, and using styrofoam packing peanuts as the foundation material.
When the HFT stops, and when the Fed stops pumping billions upon billions of dollars PER DAY into the markets, the structure will instantly collapse because the foundations have been underdug and undermined multiple times, and we are now teetering on foam. In my 2.5 hour YouTube economics lecture (with the epic pink tie) I referred to this as “going no-bid”.
I’ve said it before and I’ll say it again. Anyone who is still in these markets is either stupid or on drugs.