The story of Navinder Singh Sarao, futures trader who might have caused the flash crash of 2010 (previously), arrested yesterday for wire fraud.
The futures exchange wrote to Sarao on the day of the flash crash, telling him to stop spoofing, and he called them back "and told em to kiss my ass." And then regulators pondered that reply for five years before deciding that they'd prefer to have him arrested in London and extradited to face criminal spoofing charges. One conclusion here might be that rudeness to regulators really works.[more inside]
The betting market in Las Vegas isn’t much different from Wall Street. Fed by rumor, speculation and greed, teams, like investments, can grow hot or cold for no good reason. Moving lines is remarkably similar to market bubbles. Walters insists that “[b]etting on a ball game is identical to betting on Wall Street.” Walters even claims that he has lost a lot of money in the markets and thinks the Wall Street “hustle” is far more dangerous than that in Las Vegas. It should be no surprise then that many Wall Streeters have gambling histories, most prominently Ed Thorp. For more information, read Scott Patterson’s excellent book, The Quants. I even know a few.Gaming The System by Robert P. Seawright [more inside]
The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare. "Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking." [more inside]
"What could he possibly have that's worth $1 million a month other than classified information?" Former NSA head Keith Alexander goes directly into consulting for large financial associations, with a potential Congressional investigation to follow.
Tim Geithner says he doesn't know how he went from a "mediocre student" to leading the response to the "largest destruction of GDP in world history." His resume highlights were from addressing economic crises in developing countries in ways that correlated strongly to increasing poverty and reducing growth. His main response to critics of his "bailout the top" approach is that disaster was the only alternative.
The personal price of exposing financial wrongdoing can be devastating. Report for The Financial Times by William D Cohan, including interviews with whistleblowers formerly employed at Lehman Brothers, Deutsche Bank and JPMorgan Chase.
The two-day Interactive Telecommunications Program (ITP) graduate showcase at NYU was a madhouse, with some 100 projects on view, ranging from groundbreaking innovations to timely trinkets. But the most talked about project by far was Peiqi Su's "Penis Wall" - an array of 81 robotic phalli that rise and fall in response to the stock market. Official Vimeo account for the project - Thesis presentation - in depth How-it-was-made production blog. (Slightly NSFW if your work doesn't like white, plastic, abstract dicks.)
The furious to-do about Obamacare has obscured a basic fact about modern Americans: most of us, certainly the middle class, are sheltered by a complex web of insurance. Some insurance coverage is privately provided, such as life, accident, fire, flood, travel, liability, burial, and consumer product insurance. And some is government-provided or -required: Social Security, Medicare, unemployment, bank deposit, car, health, mortgage, food, crop, disaster insurance, and so on. All of these, without which American middle-class life as we know it would not be recognizable, are relatively recent developments.[more inside]
It used to be that when his trading screens showed 10,000 shares of Intel offered at $22 a share, it meant that he could buy 10,000 shares of Intel for $22 a share. He had only to push a button. By the spring of 2007, however, when he pushed the button to complete a trade, the offers would vanish. In his seven years as a trader, he had always been able to look at the screens on his desk and see the stock market. Now the market as it appeared on his screens was an illusion.In an excerpt/adaption of his new book Flash Boys: A Wall Street Revolt, Michael Lewis follows Brad Katsuyama from uncovering evidence of high-speed electronic front-running to the founding of the IEX exchange intended to discourage it. The Wolf Hunters of Wall Street (SLNYT).
The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet. "Banks are no longer just financing heavy industry. They are actually buying it up and inventing bigger, bolder and scarier scams than ever." This is the latest and last article for Rolling Stone by Matt Taibbi, who is moving on to join First Look Media.
Matt Levine writes in the Wall Street Journal: Morgan Stanley Now Obeying Rules, Reducing Risks, Eating Cupcakes
So while of course it's possible that this is just next-level perception manipulation and I've fallen for it -- that Morgan Stanley has found a novel way to take on immense amounts of complex risk and hide it behind an army of retail brokers and a layer of cream-cheese frosting -- I think that this story is what it appears to be. Morgan Stanley seems to be de-risking by cutting back on risky activities, and responding to new regulations by obeying them.On the New Wall Street, Boring Is Better [more inside]
Looting the Pension Funds: All across America, Wall Street is grabbing money meant for public workers. By Matt Taibbi. [more inside]
How the Robots lost - The Fall of High-Frequency Trading. For the past few years High-Frequency Trading was where the money was but now it looks like the worm is turning. The scale of HFT is stunning - see, for instance, what happens in a half second of trading in Johnson & Johnson.. While profits are evaporating, serious concerns remain about systemic risk.
In 2002, now-disgraced stock analyst Jack Grubman (previously) was the central figure in a preschool-placement scandal in New York's famously Wall Street connected 92nd Street Y.
The Price Of Perfection
The Price Of Perfection
The Lonely Redemption Of Sandy Lewis
“The complicity on Wall Street is sickness!” Mr. Lewis says. He fixes you with his laser stare. “If you think the big firms are being honest” — his tone slides streetwise — “well, sweetheart, go think something else!” The temptation is to dismiss Mr. Lewis, 73, as a crank, except he once ruled as an eccentric genius of arbitrage, with a preternatural feel for the tectonic movements of the markets. He has railed for decades about venalities now on daily display. Rude truth is his currency.[more inside]
“Do you really want to invest in a system where you put up 100 percent of the capital, [you] take 100 percent of the risk, and you get 30 percent of the return?” Frontline correspondent Martin Smith speaks with authors, policy experts, and investment managers about the history and current reality of the 401(k).
"Welcome to Random Roles, wherein we talk to actors about the characters who defined their careers. The catch: They don’t know beforehand what roles we’ll ask them to talk about." McGinley discusses his roles in 42, Platoon, Wall Street, Point Break, Car 54, Where Are You?, Office Space, Seven, Mother and Scrubs.
Wall Street begins playing again with the same matches that burned the economy in 2008 From the New York Times: "The banks that created risky amalgams of mortgages and loans during the boom — the kind that went so wrong during the bust — are busily reviving the same types of investments that many thought were gone for good. Once more, arcane-sounding financial products like collateralized debt obligations are being minted on Wall Street. " (View article on a single page) [more inside]
Elizabeth Warren, in her new role as a member of the Senate banking committee, asks banking regulators: when did you last take a big Wall St bank to trial? (SLYT)
US Justice Department suing Standard and Poor's over a "scheme to defraud investors" before the financial crisis. More details on these recent developments from The Tech online edition here, which notes: "For many years, the ratings agencies have defended themselves successfully in civil litigation by saying their ratings were independent opinions, protected by the First Amendment, which guarantees the right to free speech. Developments in the wake of the financial crisis have raised questions about the agencies’ independence, however." Reuters opts to let S&P break the news for themselves here.
Wall Street's leaders have utterly escaped jail. "There have been no arrests of senior Wall Street executives." Frontline examines why the United States federal government didn't go after the financial titans. (via)
Eunuchs of the Universe: Tom Wolfe on Wall Street Today: [Daily Beast]
"As America teeters on a cliff, Tom Wolfe draws up a sterling indictment of our unscrupulous financial culture. Twenty-five years after Bonfire of the Vanities, the author returns to Wall Street to see what happened to the Masters of the Universe."
Kevin Roose of Nymag.com posted about a brand new North Carolinian hedge fund that seemed less than impressive. The fund then started to use a sarcastic quote from Kevin's post as a kind of ringing endorsement on their website. Uh oh.
What can be done to prevent another financial meltdown? While some cry for armed revolution, others are whispering for incremental changes that could have a substantial impact on how high finance works – or doesn't. John Coates, a former Wall Street derivatives trader and now a neuroscientist at the University of Cambridge, has done novel research on how testosterone skews the thinking – and thus the behavior – of traders, inspiring them to take on more risk than benefits society. His research is now available in a book. Would programs that encourage more women to enter – and/or climb the ranks of – trading groups make finance more responsible? (If this strikes you as biological determinism, there are other lines of inquiry that may be headed in the same direction: how managers exploit subordinates in ways that shape overall behavior and could be modified via both incentives and regulation; how cheating happens and the best ways to prevent it.)
What's also obvious is that this phase of Occupy, with talk of credit unions and occupying the SEC, while eminently worthy, is also kind of boring, especially when compared to the thrill of Occupy's park phase. Some, though, are ready to move on. "It's easy to go back to the park occupation and fetishize it, in a way," says Occupy Chicago's Brian Bean. "I prefer not to run a mini-society – I want to run society." - The Battle For The Soul Of Occupy Wall Street - Rolling Stone - Mark Binelli.
"It is unlikely, I think, that this will generate a lot of media publicity," [Judge] Baer sighed to the jury in his preliminary instructions.
The Scam Wall Street Learned from the Mafia is Matt Taibbi's take on the recent convictions in the municipal bond bid-rigging case of United States v. Dominick P. Carollo, Steven E. Goldberg, and Peter S. Grimm. These three fraudsters are among the fifteen convicted so far with regard to the federal government's investigation into nationwide municipal bond bid-rigging schemes. [more inside]
The JOBS Act or "Jumpstart Our Business Startups Act" is not really about creating jobs but about loosening regulations on companies planning to IPO. SOX compliance and other financial regulations have made going public an expensive and time consuming process for young companies, and many are now staying private or getting acquired rather than going public. Fewer regulations encourages more IPOs, but what are the unintended consequences of "exempting [companies] from independent accounting requirements for up to five years after they first begin selling shares in the stock market"?
Too Smart to Fail : "A résumé filled with grievous errors in the period 1996–2006 is not only a non-problem for further advances in the world of consensus; it is something of a prerequisite. Our intellectual powers that be not only forgive the mistakes; they require them. You must have been wrong back then in order to have a chance to be taken seriously today; only by having gotten things wrong can you demonstrate that you are trustworthy, a member of the team. (Those who got things right all along, on the other hand, might be dubbed “premature market skeptics”—people who doubted the consensus before the consensus acknowledged it was all right to doubt.)" —Thomas Frank, The Baffler
Why I Am Leaving Goldman Sachs. New York Time Op-Ed. March 14th 2012:
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.[more inside]
The Rolling Stone's Matt Taibbi uses a paper bag to illustrate exactly how the sub-prime mortgage scam worked, and how we're still on the hook for the next catastrophe. [more inside]
Fancy derivatives are mostly gone. Prop trading is gone. There’s less leverage everywhere. Mortgages are back to old-fashioned conservative mortgages—which is a good thing.”
The End of Wall Street As They Knew It After surprisingly successful financial reform, public vilification, and politics that have turned against them, the Masters of the Universe are masters no longer.
Andrew Lo reviews 21 books on the financial crisis. In a 41-page paper, Andrew Lo, from the MIT Sloan School of Management, does a comparative review of 21 books about the financial crisis - some from academics and some from journalists and Secretary Paulson, looking for common threads. Tyler Cowen comments.
Alan Moore and David Lloyd designed it 30 years ago. The V for Vendetta mask appropriated by Occupy protesters the world over. The Guardian recently asked Alan what he thought about the masks. Now Channel 4 news takes him into Occupy territory to face that face. But who is the true anarchist?
I'm writing this in hopes that the OWS movement can have a better understanding of the hedge fund industry and the financial markets.
I work in Wall Street and work in hedge fund analysis. I'm the only person in my office who supports OWS.
Critics of the Occupy Wall Street movement have complained that the protestors have no clear goals, so WE DON'T MAKE DEMANDS composed a list of 12 concrete, specific suggestions focusing on economic reform, stronger regulation, and closing loopholes.
"It may be possible to keep your entire cake while explaining to any nearby hungry people just how reasonable you are."
Thirteen Observations made by Lemony Snicket while watching Occupy Wall Street from a Discreet Distance (scroll down)
Occupy Wall Street is an event comprised of anti-corporate non-violent protests that are being promoted by a range of groups including the AdbustersMedia Foundation and a New York City group called General Assembly. Months ago a plea was put out to diverse political and activist groups urging them to descend on Wall Street on September 17th and take part in long-term occupation of the area in the spirit of the Arab Spring rebellions. [more inside]
Is the SEC Covering Up Wall Street Crimes? "A whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals."
On July 23, 1920, Charles Ponzi hired former Boston Post journalist William H. McMasters as his publicist, who quickly realized that his new client was defrauding the public. Just ten days later, McMasters wrote an exposé published in the Post that led to Ponzi's ultimate downfall. The newspaper won a Pulitzer. McMasters was The Man Who Time (Almost) Forgot (Via) [more inside]
In an investment manager's view on the top 1% - referring to the richest Americans by wealth and income - we learn that one needs $1.2 million in net worth to barely slip in the door of the top 1%. But that's just a start: the real power and influence in the U.S., the author argues, resides in the top 0.1%. You can guess who you'll find there: bankers and large-cap CEOs. Relevant quotes include... [more inside]
Reuters reports that Goldman Sachs is storing aluminum in several warehouses outside Detroit. Apparently not much aluminum is actually leaving the warehouses. This may help explain the recent spike in the price of - any guesses? - aluminum. [more inside]
A Dirty Business. New Yorker article on the prosecution of Raj Rajaratnam, head of the Galleon hedge fund. Previously: Matt Taibbi on Wall Street regulation and prosecutions.