Michael Lewis on the farce of this week’s “spoofing” arrest

This week’s “spoofing” arrest of a home-based trader in England accused of causing the May 2010 flash crash, insults the intelligence of anyone who pays even a passing attention to the rampant deceit and rigging so dominate in our much abused capital markets today. Michael Lewis offers his own incredulity here, see: Crash Boys:

“Traders who seek to manipulate the U.S. stock market are meant to encounter resistance from the market itself. During the flash crash, Navinder Sarao apparently used Jon Corzine’s now defunct MF Global to place orders and clear trades. Why didn’t MF Global see what he was up to, or at least call him to ask him about it? There’s now a big business on Wall Street of firms renting out their HFT infrastructure to prop shops. Does that business depend on the brokers paying no attention to what their customers are doing? Do the big Wall Street firms that rent out their technology bear any responsibility for what their customers do with the weapons they’ve been given? For that matter, why don’t U.S. securities exchanges assume any responsibility for what happens on them?

Sarao’s manipulative orders were placed on the Chicago Mercantile Exchange. Why didn’t the CME notice what was going on? Or did they notice, and simply not care, as the behavior was standard practice for their high-frequency trading clients?

Then there is the biggest question of all: How can a guy working from his parents’ house in suburban England whose only actionable orders were to BUY stock market futures cause such a sensational collapse in U.S. stocks? On the day of the flash crash, Sarao never actually sold stocks. He was trying to trick the market into falling so that he could buy in more cheaply. But whom did he fool with his trick?”

Jon Corzine’s MF Global was aiding and abetting improper trading activities before the firm collapsed in 2011? Shocking! Of course none of that has hurt Mr. Corzine. Off scot-free from his last endeavor, Corzine is reportedly looking to launch his next hedge fund. It’s very profitable to be above the law…

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The Economist: world’s most over-valued housing in Canada

Economist global housing prices“The Economist tracks the health of housing in 26 markets around the world, encompassing a population of over 3 billion…The Economist’s housing index compares the path of house prices against two measures: rents and income. If house prices rapidly outpace either one, a bubble may be forming. According to our measure, property is more than 25% overvalued in seven of the markets we track, notably in Australia, Britain and Canada…

It is in Australia and Canada, however, where prices seem most out of kilter. They are 61% overvalued relative to rents in the former, and 89% in the latter.”

That makes Canadian housing the most over-valued in the world relative to rents and third behind Australian and Belgium relative to income.  (see table on left)

See, Global housing markets:  property puzzles and also Over-valued home prices put new owners at risk.

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April manufacturing data disappoints all around the world

We can thank modern globalization for synchronous downturns.  But then again, who needs a real economy or growth anywhere when financial riggers have HFT, free money and government support and underwriting at their beck and call.

See: We just got disappointing manufacturing data from all around the world.

Manufacturing Purchasing Managers Indexes disappointed everywhere today.

Japan, China, France, Germany and the U.S. all had PMI reports out today that missed expectations. Japan, China and France had readings below 50, signifying contraction.

April manufacturing data

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The farce of yesterday’s ‘spoofing’ arrest

The arrest yesterday of one lone HFT guy in Britain underlines just how farcical the rigged casino, formerly known as public markets has become. Perfect for show of crack down, without any industry bite, Mr. Sarao is a safe target for the finance controlled regulators and prosecutors since he was not working for any of the big HFT firms who are making off with billions in this area every week.

The spectacle reminds of Sergey Aleynikov, the ‘rogue’ trader who was prosecuted in 2010 not for improper trading via HFT, but rather because he allegedly stole code for doing so from his employer Goldman Sachs. For this latter outrage he spent 97 months in prison before his conviction was overturned and entered as an acquittal by the United States Court of Appeals for the Second Circuit on February 2012.

This whole theater is a farcical show to bait and switch the public eye away from the fact that HFT manipulation has become the dominant force driving public markets today. Lest we forget how corrupt and self-serving actors have become, just last week, none other than former Fed head, Ben Bernanke himself accepted a sweet consulting gig for Citadel-one of the world’s largest and most profitable HFT firms–with nary so much as a blush or embarrassed look. Or that Bart Chilton, the Commodity Futures Trading Commission head that was supposed to be watching for illegal activity in futures markets from 2007 to 2014, took a plum spot himself last April as “Advisor” with DLA Piper, one of the largest HFT lobby firms in the world.

The reality is that there are thousands of traders working for large firms and TBTF banks every single day, who are doing all manner of spoof type false/skimming/frontrunning orders that are deleted before they can be completed. There is no defense or legitimate function for allowing these forces to rape public markets as their own personal profit playground. Their activities put all legitimate participants and functions for capital markets in support of the economy and savings, at extreme risk in the process.

Several people who are not on the take, have been providing daily evidence of all these abuses to regulators for years with no response. Nanex founder Eric Scott Hunsader has been just one of the leading horn blowers in all of this, you can follow his daily twitter on these topics here. The evidence is massive and incontrovertible, and yet also intentionally ignored by captured law makers and prosecutors to date.

Just how dumb do they think the public are? Very dumb indeed; and so far they have been right. The public are perfect patsies.

Themis Trading Partner Joe Saluzzi discussed many of these facts on Bloomberg in the following two segments yesterday. Here is a direct video link.

Navinder Singh Sarao, 36, appeared in London court the day after his arrest by British police after being charged in Chicago with 22 criminal counts including fraud and market manipulation. Themis Trading Partner Joe Saluzzi explains why the selection of only Sarao for prosecution in this is an outrage. Here is a direct video link.

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El Erian on why he is avoiding publicly traded stocks and bonds

Mohamed El Erian first ‘shocked’ the mainstream when he admitted in a print interview in early April (I wrote about it here) that he had most of his estimated 2.2 billion personal savings in cash and non-publicly traded investments today (ie., private equity, private loans etc) out of concern for over-inflated public markets (stocks and bonds) thanks to years of central bank-led distortions.

For a billionaire who made his fortune selling people on the merits of public investment markets at PIMCO, to say openly that he has moved out of them to avoid dangerous valuations, you know the risk-reward dynamics have gone full nut job. I couldn’t agree with him more.

Mohamed El-Erian explains where he’s putting his money in cash and illiquid non-public investments in order to avoid the most expensive Fed-inflated assets in public markets. Here is a direct video link.

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Danielle on The Financial Survival Network

Danielle was a guest today on The Financial Survival Network with Kerry Lutz, talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

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