Bill Cara’s Blog for May 7, 2010 [See post-close report]

http://bit.ly/aD09IQ

it's a keeper for my unborn children

Add this to the collection for your unborn. :-)

Found this on another blog by a trader name nummy. It is a video of a trader who is giving a "webinar" during the crash. As the video progresses he gets more and more excited. LOL ! ! !

http://www.youtube.com/watch?v=ppEJ8r7bQ2o

Awesome! Instant classic! Spilled my coffee.

List of cancelled trades -

http://media.globenewswire.com/cache/6948/file/821...

CNQ - Upgraded to Buy @ TD Newcrest

at your service!

and aapl

add in TY (ten year note) - or $TNX.X (10 year yield) and EURJPY....

NEW YORK--(BUSINESS WIRE)--Newcastle Investment Corp. (NYSE: NCT) reported that for the quarter ended March 31, 2010, income applicable to common stockholders (“GAAP income”) was $180.2 million, or $3.36 per diluted share, compared to a loss applicable to common stockholders of $242.2 million, or $4.59 per diluted share, for the quarter ended March 31, 2009.

Closed at $2.99 premarket up 23.75%

http://www.businesswire.com/portal/site/home/perma...

no fire works yet.

I am quite surprised no instant snap back rally. or bargain buying. I think mom and pop are spooked!

no mechanical stop in place. no upside target. i dont think volatility is going away.

ATVI - estimates cut at Morgan Stanley through 2012. Have limited visibility for Call of Duty sales. Overweight rating.

still watching currency, London, volume in past leader BIDU, AAPL.

Who is going to hold into the weekend? (rhetorical)

almost a half billion shares are traded in 1.5 hours. Will we see 1 billion c trade today?
Buy order at 3.95 just because I think financials will lead any rally next week.

Picked up a small position of NLS @ $2.86. It got knowcked down hard this week on very little volume. Have been watching this one for a bit and I like the $2.80ish level as support here.

TOF - you still keeping an eye on this one?

S&P 500 hovering around the 200 day SMA and EMA. I don't follow too many technical indicators, but this one I do keep an eye on. Two closes under this level would cause me concern.

thats all i have to say.

a trading anomaly...billions accidentally traded instead of millions... my ass.

how nice the exchanges get to cancel your trades if they took advantage of their own mistake.

the fall we are seeing is as most noted long overdue and might really take everything accept the USD down.

silvers weakness along side the mining stocks today isnt too bad considering what is happening elsewhere. it may mean that when the smoke clears, gold could truly bounce back to forever highs this year. i dont believe we can have gold and the USD moving up aggressively together. passively yes but not both surging to new highs day after day before something gets whacked.

USD is still king...for the moment, even if he has no clothes.

good luck.

(US) US House to hold hearings May 11 on the causes of the market decline yesterday
- subcommittee Chair Kanjorski says its unacceptable that technological error could trigger a market panic.
- seeks SEC investigation of the incident.

Chair Kanjorski... come up with infallible technology, world will remember you forever.

I can't seem to find it on the archives. Can anyone help?

It's green already.....100 point turn around in 5 min on the dow.....
Financils are in the lead.....

"Senate Votes For Wall Street; Megabanks To Remain Behemoths"

Come on, you guys... let's hurry up and vote while nobody's looking.

Harry Reid can now take credit for favoring a breakup knowing full well it would never happen.

That is the one! thanks!

The bars near the NY Fed Bank will prob be "Active" today at 4pm.
http://bit.ly/9CYpQ7

http://bit.ly/buwOsj

We are having nice profitable day today but the warning about extra-strict risk control sounded more than once. Here is a piece from the conversation I want to share:

{Threei} Here is the thing about days like this:
later on you hear al kinds of legends about fortunes made in one day.
99% of them are myth,
but the main thing is:
you will never hear the ones about fortunes lost
and 99% of those are true.
Market is a big cemetery with tombstones saying "He was a brave trader"

Thanks again, Vad - I get an enormous amount from your posts!

...And a really big shout out to Bill for his guidance and always level head - thanks, Bill!

This is from a very hip and tech savvy college student, with money, that I was talking with last night... She was speaking about the I Pad.. said her friends wouldn't be buying, either.. Said her Apple computer, I-Phone and I Pod were all that were necessary for her lifestyle (Very active )... I do not have an opinion either way.. I just trade.. but the comments were interesting...

Not stock price related, but numbers dont lie (well maybe they did yest) but the pace of ipad sales is more brisk than iphone. it took less time to sell 1M units for the ipad vs the iphone. No data plan required, and at a higher price point.

I wouldnt touch apple stock here but you cannot deny the sales numbers. video consumption on the ipad has already exceeded the android platform.

"What is really objectionable about austerity, however, is that it never seems to apply to the bankers who made the bad loans."

http://www.financialpost.com/news-sectors/story.ht...

--------

At least this guy gets it.

Merkel,Sarkozy along with Hu Jintao will be in Moscow on sunday to help celebrate Victory Day. Red Square is abuzz with practice and preperations. For the first time, U.S. and British troops will participate. U.S. combat C company of the 2nd Battalion and the 2nd Co Battalion Welch guards. (love those bear skin covers)

Maybe Merkel and Sarkozy can get Jintao to join in the European bailout? If so, Jintao would probably say 'Hu's your daddy now!'

Should be a good shindig. This is the 65th anniversary. Not many Vets left I'm afraid.

CFTC Warns, GOLD/SILVER Spikes?
http://market-ticker.org/archives/2286-CFTC-Warns,...

WASHINGTON (Dow Jones)--The U.S. Commodity Futures Trading Commission issued a warning to the market on Friday to remind participants that speculative trading limits apply throughout the trading day as well as at the end of trading.

Timestamp, 11:15 Central time

Now let's look at two charts.
. . .

and what junk we own thanks to opaque Fed games. As Johnny Carson used to say, "I did not know that."

http://globaleconomicanalysis.blogspot.com/2010/05...

looks like traffic is moving there again so hoping it was a false alarm.

"Remember that our rebound in industrial production was a precursor to jobs growth."

What rebound? What job growth?

If you mean the recent data, I'd suggest you look a little closer. We aren't even providing enough jobs for high school summer jobs much less grads seeking a full time job.

Job availability and quality is pathetic compared to any time since 1945.

As for industrial production most places are working remaining (skeleton crew) employees at more than what was two jobs.

I believe Europe is simply beginning the same strategy as the US has been using for the past two years and has a long way to go (down).

Will we swing wildly today again?

Simon Property Group Withdraws Acquisition and Recapitalization Proposals for General Growth Properties.

http://bit.ly/9sx6qW

Ouch

I thought I had it all figured out and could handle any downturn. 70% of my portfolio was stoped out yesterday. I though great. Now I can buy one of my favorite stocks (long term hold) OKS at under $3.00 per share. I tried to buy 30,0000 shares. I could not enter the order. My account at charles schwab was frozen. Before the order would be acceted I was timed out and had to re log on agian - and again. I have been purchasing a few puts every month for exactly this contingency. I could not sell them. I could not enter an order.

Does any body have a broker that was able to execute at times of high volume. I need to change brokers.

Thanks.

if it were fat fingers, there should have been a rush back to at least pre-mistake levels with additional phantom jobs.

Kept my VXX position on the table. I am going to ponder if then's for next week.

my mindset currently is
+ stay cash on bounce ups
+ watch how prices react at overhead resistance and get short accordingly
+ book gains on bear etf's on the way down

Enjoy your weekends!

TOF, those VIX calls are looking slightly less crazy right now, huh? :)
Perhaps someone did know something.

Well I established a few more of the positions in the Indian and Chinese equities WIT, CISG, SIM, CZZ about a 1/4 to a position. I am still net short a bit and will wait for some positions to fill out and come to me as Bill says. Thank goodness I was net short cause it has allowed me dry powder to get back in when the getting is good

try rig after hours... will see... http://www.usatoday.com/news/nation/2010-05-07-Gul...

I have a theory: anytime the powers wish us to look away they create a quick dramatic diversion. So the bankers won on the Hill. Who's surprised?

http://ronsen.blogspot.com/2010/05/saturday-mornin...

1) Nothing in reserve?
2) Faltering Leadership
3) Weinstein Stage chart
4) Bond market makes a call
5) Damned if you do (short), damned if you don't (moving average analysis)

Cash ain't trash.

"I have a theory: anytime the powers wish us to look away they create a quick dramatic diversion."

Made 'ya look, made 'ya look — just another dirty crook.

Childish, but it still works.

http://bit.ly/a08cO3

Grym,

Your second point is well taken, to which I might add the act of redistricting, whereby incumbents have their congressional districts changed to coincide with their base of support.

As to your first point, I must respectfully disagree with you. Any registered voter can vote for anyone they want by using the write in box. I've done this many times over the years. In addition, alternative party candidates are almost always on the ballot for major seats. I often vote for Libertarian and Constitutional Party candidates. They only have two chances of winning but the major parties do look at the percentage of the vote that alternative candidates receive and think, "Gee, if we had adopted such and such a platform, we might have won that election".

That said, I fear this is all too late. The too few Americans that participate in the political process are mostly concerned with receiving entitlements. Rather than being concerned with what's best for the country, their only thought is "what's in it for me". Hence, they get what they deserve.

Regards,
BH

http://tinyurl.com/2vmmq27

"We can only vote for who is on the ballot"

If you believe this to be true perhaps you should watch Ross Perot in the 1992 US Presidential debate. He was on the ballot. He was a clear alternative, but "we" voted for Bill Clinton.

Yeh it's puzzling to me too, thus I posted it.

To print money (borrow money) to try to inflate the currency by buying govt bonds etc, is an oxy moron no?

Sarah Palin has nothing to do with the Tea Party rallies I've been to. What's more, IMO, after hearing about her debacle where some miniscule number of people showed up for her to make a big bucks speech at a for profit eratz tea party convention in TN, as far as I'm concerned, anything supported by Palin is more likely a republican attempt to take over and misdirect the Tea Party movement.

By contrast, I think Tea Party folk would very likely show up for anything directly supported by Ron Paul. He has been an unofficial voice and an unofficial leader from the beginning, even though he never says so. He doesn't need to. That I know of, he has always advocated liberty and freedom, not powerful big government, as it was originally envisioned by the framers of the Constitution, that the people I met at Tea Party rallies were looking for.

Those in Washington should READ the Declaration of Independence and the Constitution, sometime. Even if just a few of them would read them, maybe we could remember where we came from, and see the error of the direction we are going...

Re: Mixed Results For Tea Party Candidates
Submitted by cheapy (301 comments) on Sat, 05/08/2010 - 12:48 #62472

"Those in Washington should READ the Declaration of Independence and the Constitution, sometime. Even if just a few of them would read them, maybe we could remember where we came from, and see the error of the direction we are going..."

Reply: I think most of them know were they are going...I mean we are going...and could care less; at anytime do you think they, the professional politicians (consider what that means)care for other than number one...THEMSELVES. Willful ignorance is just a facade, two-party bickering is another one. If I am wrong on this and they don't have a from the get go conflict of interest, see Dodd, then I am wrong. But concerned apprehension and anyone with a heartbeat would support my thrust.

ALOHA!!

HUGE PAPER SELLERS!!!
HUGE PAPER SELLERS!!!

So much money is made and paid to just shuffle paper in America. From mortgages to Treasuries to currency to stock to taxes. There is this huge industry that does nothing but generate paper while the "real wealth" industry of manufacturing and production dwindle to nothingness.

President Bush, at the urging of one of the largest paper shuffling CEOs in history, Hank Paulson, spent $700BIL USD in a week to prop up the most unproductive sectors in American business. Tell a farmer in Iowa who toils away in the heat of the Summer producing food for America that his kids will have to pay off massive debt and face severe austerity for the rest of their life so that people who live in Greenwich,CT and Washington DC can live like Kings.

The most unproductive people in America make the most income. Whether it is Jamie Dimon, the CEO of JPM, or Ben Bernanke or Pres Obama or Tiger Woods or Koby Bryant or Ben Stiller. Someone tell me what it is that Goldman Sachs produces that I can use in my daily life? Can you eat a CDS?

As far as movie stars, rock stars, sports stars and the likes none of the services they perform are needed to stay alive. As far as Ben Bernanke and the US FED go they are totally expendable. Then in terms of politicians ... why so many? They don't represent WE THE PEOPLE anyway! We could get by with just 4 member of Congress. One for the North, one for South, one for the East and one for the West! Executive Branch ... nah ... just the Pres, everyone else can go home. Cabinet? No ... All we need is a GOGGLE poll for the people to make decisions in nano seconds.

Clearly if this is the best the "experts" of American politics, banking and business can do then they are obviously not "experts". In fact it appears their only "expertise" is marketing themselves. Marketing their way into the boardrooms and the money spigot at the US TREASURY.

In the end all this paper will be utterly worthless and its only utilitarian value will have been to transfer the "real wealth" of the farmers and doctors and factory workers to the pockets of those who produce "false wealth".

"Attention SafeWay shoppers ... We have a special on CDS in the produce department today, only 2 cents per metric ton!"

"We can only vote for who is on the ballot"

"If you believe this to be true perhaps you should watch Ross Perot in the 1992 US Presidential debate. He was on the ballot. He was a clear alternative, but "we" voted for Bill Clinton."

I wasn't one of the "we" and voted for Perot in two elections. Before that I voted for John B. Anderson in 1980. He proposed a $0.50/gal. as tax to go to develop alternative energy.

The only other presidential candidate I ever voted FOR (all others were votes against the other guy) was Barry Goldwater who was billed as a "war monger". The saying was vote for Goldwater and the US will have 500,000 troops in Viet Nam. The later reply was, "I voted for Goldwater and sure enough... the US had 500,000 troops in Viet Nam.

I figured Goldwater's more genuine WW2 experience gave him a better reason to avoid involving us in a land war while Johnson's pretense at WW2 service made him likely to get us in too deeply.

Grym (Don Quixote reincarnate)

Kaimu,
I have to agree with you:

"All we need is a GOGGLE poll for the people to make decisions in nano seconds."

The business of government has become too big to save. Civil disobedience from your iPad...how fitting!

http://bit.ly/9ac2T7

Someone please take away his microphone.

Does he even know anything about finance/trading/regulations/conflicts of interest/anyone's agenda other than his/anyone's agenda other than his masters?

is the headline at WSJ.com

Here is more detail
http://bit.ly/9LF4Iv
"Officials discovered that gas hydrates, ice-like crystals lighter than water, had built up inside the 100-ton metal container. The hydrates tried to make the dome buoyant, and they also plugged up the top of the dome, preventing it from being effective."

Um, so am i reading this correct? Because the top of the dome is now closed off and prevents oil co's from extracting the oil from this new well, it is deemed useless?

Their job should be to stop the leak. even if it bankrupts them and prevents them from ever touching the oil.

BH,

I believe the Tea Party you are referring to was the one that had the convention in Nashville where they were supposed to pay Palin $100k to speak, and were selling tickets for $580 ea (I think), and only a few (like 2,000 people, must have been Palin or republican fanatics) showed up. I do believe that group was explicitly created to steal the Tea Party thunder into the republican camp, but what they don't seem to understand is that the reason we hate the republicans almost as much as the democrats is that the republicans have abandoned the ideals of freedom, liberty, and the other ideas on which the nation was founded, no different than the democrats in that regard. Hell, with Bush, they PROVED it!

By comparison, if that had been Ron Paul speaking for free, it would have drawn 50,000 or 100,000 people, I'd bet. A few weeks ago I read that Ron Paul was neck and neck with Obama in a 2012 election poll.

I seriously doubt Palin would get 20% vs Obama. I wonder if there has been such a poll recently...

Anyway, yes, I find it saddening to see the loss of the potential for the Tea Party as any kind of force, and think the best bet for Americans is leave if possible, because nothing else seems to ever do any good. As one of those with a red target marked "Rich" on my back, I'm certainly looking for a better place to live.

NYUGrad,

Actually some of my buyers have been waiting for the hoopla of the Tax Credit to taper off before making offers. There are plenty of buyers biding their time for the dip. Areas around Military bases and hometown heroes will continue the pace for another year due to extended military Tax Credit benefit for overseas service until June 2011.

http://bit.ly/cQiIPT

Not bad.

http://www.frontlinethoughts.com/pdf/mwo050710.pdf

the joke started making the rounds of the trading room last week when news release by the Spanish finance minister declared that there was absolutely no question of Spain selling its debt or requiring EU/IMF assistance (or words to that effect). It's a running joke because when they say "everything is fine" we know it's not the case - think of Seinfeld's Costanza effect.

A quick tidbit from Mauldin's weekly letter is that more than 45% of Spanish debt is owned by foreigners. Spain is rolling over and issuing new debt to the sum of 225 Billion Euros this year, so foreign bond investors are if all goes to plan due to stump up 100 Billion in foreign purchases. This is not chump change.

Given Greece's predicament and the rapidity with which such conditions can deteriorate, is it likely that Spain will sail smoothly through such debt issuance this year? Adding to the agony is the probability that Europe is economically flat on its back, and cannot boast the (real?) GDP figures that the US is releasing and if not already in a double dip, is well on its way.

It provides a clue to the ongoing $/Euro trade until the unwanted spotlight is placed squarely on the US.

This grim economic scenario makes me think of The Matrix, although perhaps the following parody might be more appropriate. Voter's are not yet ready to take that pill (or perhaps the option continues to be denied to us?):

http://www.youtube.com/watch?v=DyTBHdsEPjc

NYUGrad,

I don't need to see his birth certificate, don't care about his color — he was in Chicago long enough to be a pure Chicago politician.

He also took a bow for the "good" job number. This is a detailed accounting from Mish

"This morning the BLS reported an increase of 290,000 jobs. Headline unemployment rose to 9.9%. Hidden beneath the surface the BLS Black Box - Birth Death Model added 188,000 jobs. However, as I have pointed out many times before, the Birth/Death numbers cannot be subtracted straight up to get a raw number. It contributed to this months employment total for sure, but the BLS will not disclose by how much.

This month there were 66,000 temporary census workers added to the payrolls. That number can directly be subtracted. Interestingly, the details show only 59,000 government jobs in total were added. That means, states have cut back 73,000 jobs. Expect this trend to continue."

Ross,

We seem to have parallel experiences which I'm sure many others share. I find myself homesick for a time which perhaps never really was. I do remember, however, there was a time when people could believe in the goals expressed in our Declaration of Independence and the Preamble to the U.S. Constitution.

Individuals, whether shareholders or citizens, have almost no power or rights left. partially it is the abdication of individual responsibility which has allowed this to be taken from us. To rebel in the same fashion as the Colonists would lead us to fighting another civil war less like our War Between the States and more similar to the Russian Revolution of 1918 — probably with a result to match.

In1963 I was in Alabama and saw real racial hate first hand for the first time. I had hoped the Civil Rights Act of 1964 would bring equal rights, but it was perverted into a quota system which, IMO, has only reversed the problem and caused continued division. "Diversity" has added even more special interest groups and diluted individual rights further.

Sure we need to improve health care, but the insurance lobby has at least as much power as the oil bunch and the cost scares me. My taxes will be a far bigger problem for my nest egg than my meds.

Inflation/deflation is not the major issue — currencies have been and will be will be our undoing in a global attempt to juggle economies.

Anyone with an awareness of life in the US must know that we have been in continuous decline for decades. The info is available and anecdotal evidence is obvious in the number of family members which now must work, not just to buy additional "wants" but to maintain a decent life style or to avoid being added to the homeless stats.

I am not sure it is possible for any system to govern large populations at the speed of light and do it well. The best we may be able to do is try to prevent government doing massive harm. For this Constitutional limits on power seem to me to be most important.

It's time for We the People to make the rules again.

for all the time and information put into making Bill's blog, in my humble opinion, the best on the web... Thank you, Bill, for all the very, very hard work, and investment, you have so graciously given... And remember your Mom's, everybody... treasure what you have as time is so precious.

http://ronsen.blogspot.com/2010/05/sunday-morning-...

Happy Mother's Day!

1) The culture of entitlement
2) Does the math 'work'? (I doubt it)
3) Possible outcomes from the PIIGS crisis (from my son the credit derivatives guy)
4) Point and figure charts, nowhere to run, nowhere to hide?
5) Epilogue: a Mother's Day Message

best to all...

Ron

http://www.youtube.com/watch?v=HmzN1p5q2sY

I slept last night in a good hotel
I went shopping today for jewels
The wind rushed around in the dirty town
And the children let out from the schools
I was standing on a noisy corner
I was waiting for the walking green
Across the street he stood
And he played real good
On his clarinet, for free.

I first heard this song after buying 'Miles of Aisles' in the mid-seventies, and wore it out. Joni- what a writer, what a musician.

Everytime I listen, my mind drifts off into imagining how different life would be had I taken another path.

When I was eighteen, I spent a few weeks washing dishes at a small restaurant in Othello, WA. The middle of Nowhere, with a capital 'N.' I slept in a ramshackle house with two cooks. The older one, Jimmy, decided to drive down to Reno for a vacation, and I jumped at the chance to go with him. Probably my most memorable road trip. Seeing the Columbia River Gorge for the first time. Small pastoral farms along the highway in Oregon. Sliding towards the shoulder a few times as snow began to fall outside Susanville in California.

So hey- What if I had settled down in Othello for the rest of my life, content with returning home each evening to a book, a turntable, and a basement apartment? What if I had stopped at one of those small farms, asked for a job, and ended up falling in love with the place? Jimmy was fifty and divorced, with a daughter he talked about occasionally- what was he doing frying up steaks for ranchers and farmers during the day, and chain-smoking/reading dime novels at night?

Life is a 'many-splendored thing.' Which is also the title of a great novel that can get you pondering the many paths we take in life:

http://en.wikipedia.org/wiki/A_Many-Splendoured_Thing

What's eternity for? Among other things, we might have the chance to explore each of the infinite 'paths' in life, ending up with the kind of understanding of self and universe that cannot possibly be had in one lifetime.

Happy Mother's Day to all the Moms.

I had no doubt that HFT, algo trading and LPs will be blamed for the crash (and for everything else that is wrong on the planet for that matter), and of course expected nothing less from that site. But didn't this community deserve better?

Those who seriously believe HFT is to blame will have to explain eery similarities between this crash, that of 1929 and, for a good measure, 1987. Similarities going way beyond the word "crash" - economy and market circumstances surrounding the particular date, charts and personal accounts of witnesses who describe it in the words: "there were no bids, bids were simply withdrawn down to unthinkable levels... so limit sell orders wouldn't find the takers and market orders would hit prices not seen ever, adding to panic, scaring every observer and causing more sell orders." Sounds familiar? Isn't it how those ACN prints at 1 cent and others of this kind appeared?

Now... how many HFT algo liquidity providers did we have in 1929?

Think of how the panic works. Think of what people are likely to do (and yes, program their computers to do) in a situation of big selling wave hitting. Isn't it "pull the bids, liquidate long positions"? You don't seriously expect sane person, fund or bank try to support the market going against that wave, buying as high as possible? Put yourself in the shoes of anyone who is responsible for a serious amount of money, someone's or your own - will you pull your bids and close your longs, or will you say "hey, I need to prevent market from crashing, I will bid it up"? Why on Earth do you need any other explanation for the crash?

You want to know how they, bubbles and crashes, form? History is your answer. Read on The Tulip and Bulb Craze, South Sea Bubble, The Florida Real Estate Craze, The Crash of 1929, The Crash of 1987, The Asian Crisis, The Dotcom Crash, Housing Bubble and Credit Crisis... how many more do we need to see the pattern and stop blaming it on some evil-doer? Isn't finding that goshdarn criminal, punishing him, and in doing so thinking that we prevented the next crash, while not doing anything to fix the system, is the reason for the next bubble and crash?

Not even speaking of the logic used to blame those darn HFTs and LPs... only people having zeroknowledge about how they work can seriously believe that nonsense. But the irresistible siren song of another juicy conspiracy theory is, umm, irresistible

Grym- There are many people we run into each day living by themselves in that basement apartment, with 'secret' inner stories we'll never know.

I recommended a film several months ago, which I'll recommend again:

http://movies.yahoo.com/movie/1809257705/info

The director does a beautiful job of setting up viewers for over an hour, before taking them on an intense emotional ride for the final twenty minutes.

With a computerized trading program, trades happen much faster, and when the trading programs interact, markets move faster creating an overall trading system that under stress acts in a way that is difficult to predict. Things go sideways very quickly. Bugs in the implementations will appear when new and surprising situations occur, and the programs end up interacting with each other in unexpected (and unpleasant) ways. Debugging such a system is difficult, especially when the various participants really don't want to work together.

Another point. As you say, all crashes happen because traders withdraw their bids. However, in the past there are always some people who do not get the word, and so the crash happens more slowly because of that. When more and more liquidity moves to those who get the word instantly, this speeds up the process of the crash. Panic can happen almost instantly, and is transmitted at light speed to all participants. Does it make panic more likely? It does make it happen faster. And faster means scarier, for the humans watching.

Somehow, slow motion train wrecks are all right. It implies you can get out of the way, you have time to react, etc. When things happen at millisecond speeds, humans do not have time to get out of the way, and that most likely undermines confidence in the system. Its like being a part of the herd that, instead of the stampede off the cliff taking 10 minutes, it happens instantaneously. That sort of thing can be - unsettling to the individual cows.

We might consider that the capital markets primarily exist so that companies can be funded. A secondary market is important, but the primary importance is to facilitate deployment of capital to business. That is its proper place in the "real economy." Maintaining an orderly capital market to avoid scaring the investors is really quite important to maintaining capital coming in to provide that primary function.

I would guess if automation of trading tends to cause the market to have more of these rapid decline events, confidence in the market will decline, and that will reduce fundamental participation. And that would seem to be bad for the proper deployment of capital, which will harm the real economy.

I think sometimes it is important for us traders to remember that we are the tail, and the "real economy" is the dog.

Dave, there are so many variables in it, it's hard to even know where to start discussing them. Maybe slowly developing panic is more harmful because it dulls down the feel of danger, much like in famous boiling frog fable? Maybe quick one day panic is less harmful to those who "didn't get the word" as they come home and see market already back to it's normal levels, much as it happened on Thursday? Whether it's all the case or not, you can see how involved these things are, and how pathetically shallow those single-track "blame HFT" explanations are.

Secondary market vs primary purpose is whole other can of worms. I have no doubt that PTB would have happily shut down secondary market if only they could come up with remotely workable idea of how to make primary one work without secondary. The reality is, one won't exist without the other... "Go together like a horse and carriage," you know :) IMO, this is something that will take care of itself - when automation rises beyond certain optimal level, it will make itself meaningless and unprofitable and proportions will return to more reasonable ones.

WASHINGTON—The International Monetary Fund Sunday approved a three-year, €30 billion ($38 billion) loan to help pull Greece out of an economic quagmire.

The IMF loan, the largest financial commitment the institution has ever made to a single country, is part of a €110 billion package that includes conditions requiring Athens to tighten their fiscal belt and raise taxes.

Europe's finance ministers late last week cleared the way for disbursement of their portion of the loan, with the package clearing its highest hurdle Friday: approval by the German parliament.

Under the terms of the deal, Greece will cut its budget deficit from a record 13.6% of gross domestic product last year to 8.1% this year, and below an EU ceiling of 3% by the end of 2014, translating into €30 billion in combined spending cuts and higher taxes.

IMF officials have said they are confident the measures are enough to bring the Mediterranean country back from the brink.

But markets are skeptical that Greece will have the discipline to see the required reforms through and that the country's economy will be able to grow enough to repay their loans on time.

Last week, traders sought to alleviate risk as Greeks rioted in Athens after the parliament approved major austerity measures. Investors migrated out of the euro currency and into the dollar, gold hit $1,200 an ounce and the Dow Jones Industrial Average in the U.S. plummeted. Many fear contagion in euro-zone countries, such as Portugal and Spain, especially given that a large portion of Greek bondholders are in France and Germany. The cost of borrowing for European banks and many governments is rising as the market factors in a higher risk of default.

Halting the contagion is the primary reason why financial leaders said they're developing a special "stability mechanism" that would be in place before markets open Monday. In particular, the ministers are considering a significantly expanded credit facility from the current €50 billion line available now. Economists say another heavy-hitting option on the table includes a foreign exchange swap to stabilize the euro.

Those measures were the subject of discussion among European financial leaders late Friday and are expected to be one of the talking points of a special conference call Sunday between the financial ministers of the Group of 20 largest economies.

Also, President Barack Obama Sunday spoke with German Chancellor Angela Merkel about the continuing financial crisis in Europe, stressing "resolute steps to build confidence in the markets," a spokesman said.  

As a programmer and trader/investor/gambler, I have to agree that market participants saw some stocks going off a cliff, and prudently liquidated or pulled their bids in order to avoid the falling knife. Nobody has time in that situation to go investigate WHY the stock was dropping or WHY others were selling, or WHAT the company was REALLY WORTH in a liquidation scenario. They just sell and wait for the chart to tell them where the bottom is. What if you had bought and were to have found out later that there was actually a business reason WHY those stocks were being pummeled? I always figure I'll be the last one to hear about it, so I wait for the news, anymore, LOL.

So if it had been my money, I'd have done the same and pulled my bids, too, but I was ALREADY OUT, and with the market up pretty high, and not knowing if the panic would spread to other stocks, or what effect it would have on Mom and Pop mutual fund holders with jobs Friday and the weekend coming (like in 1987), I certainly wasn't risking MY capital unless I at least knew what was happening, and more likely waiting for a much larger overall capitulation down move.

Realistically, we are out here gambling because we don't have and can't get honest jobs that will allow us to live decently, so we'd better gamble well.

As for LEVERAGE... Borrowed money is scared money, and by necessity scared money is always going to run at the first sign of trouble, IMO.

Cheapie,

exactly right. You hear a rumbling noise of unknown origin and see a crowd running toward you yelling "run for your life" - you turn and run, you don't stop and wonder about origins of the sound, crowd's being possibly wrong etc. It's when everyone is on the high grounds, noise subsides and there is time to turn around, look and see that there seems to be no immediate danger, that market bounce starts. In this case it happened at -995 or so.

Whatever served as a trigger, reaction pretty much showed how fragile the market was at the moment. Is there any wonder that after 13 months rally and with all the troubles brewing in Europe (not that the rest of the world in in tip-top shape, mind you), sell orders overwhelmed the market in matter of seconds?

Bloomberg

645b, yes "B"

Add additionally 100 BEUR from the IMF and the total would be 600 BEUR. That is what they are aiming for.

Sunday, May 09, 2010 3:40:24 PM
The Goldman Sachs Group Inc Negotiating a deal with SEC regarding investor CDO charges - Telegraph
- Would consider pleading to lesser charge of negligence and pay fines if SEC charges of fraud are dropped.

There are a few issues in there, let me break them down by points so it would be easier to read.

1. "If whatever caused those flukes is still in place and has not been fixed, then such flukes will continue to appear."

It's in place, it will never be fixed and they will continue to appear in extraordinary circumstances - because what caused this fluke is the very human nature, the way we react under extraordinary conditions. That's why I started this string with reference to 1929 crash and accounts of witnesses describing the same thing.

2. "...HFT isn't such a blessing for the overall market..."

It's hard for me to discuss these things in terms of good and bad, blessing or damnation. This is not a kindergarten - none of these phenomena, be it HFT or LP or dark pools, is black or white. They are beneficial to some participants in some situations and harmful to others in other situations - as any complex entity or action is a very complex system. My major irritant with these explanation is oversimplification which, in turn, misses the point. Let's quote from the article, by the guy who leads the crusade against HFT for a while:

"Today, the human specialist model has been replaced by an automated market maker model.... Once the market sensed stress, the bids were cancelled and market sell orders chased prices down to the lowest possible point.”

Again - will he care to explain how exactly this same thing happened in 1929 when there were nothing but specialists at the NYSE floor?

3. "The NYSE has sold investors down the river in order to allow fee-paying, co-locating, black-box traders to profit unfairly at the expense of every other investor."

Well, I'd like someone to explain me how they profit from every other investor. I asked many times - no explanation came forth.

4. "sudden liquidity departure was courtesy of “your friendly” high-frequency traders"

Fine. Let's take them out and have no liquidity in a first place. In what universe does it make sense?

5. "participants whose only concern is to squeeze out every last picosecond and fractional cent"

Well, it irritates me that this is considered a bad thing by itself. Point to me any single market participant who, while placing his orders, thinks "oh, how do I do my trading in a way that benefits someone else? How do I make this guy I am selling to profitable?" Anyone here ever caught themselves thinking that? Or expected anyone else to think like that? What the deuce, really...

6. "when the going got rough, the high-frequency crowd stampeded for the exits and their vaunted pools of liquidity vanished with them.”

Now we are back to the question I already asked today: what would human traders do in this situation, step up and supported the market, sacrificed themselves in order to protect "long-term investors"?

Finally: if anyone in power thinks they can mandate human traders to support the market in such situation (in other words, demand them to put their own money on the line of fire, no less), why can't they then simply demand to program their black boxes accordingly? What's with this focus on algos, as if it was not humans who programmed them?

Oh, and by the way, what's with all the crusaders demanding that someone supported the market during freefall? Didn't they, and us for that matter, express anger about 400 Fed traders allegedly influencing the market? Artificially supporting it? Preventing from crash? How come we now damn those who refused to provide artificial support and stepped away?

Hope I managed to crystallize my views on this... sorry if not, it's a multi-sided matter, not always possible to keep compact

I think the only problem I saw was that one market decided to pull their bids and stop trading without them all stopping at the same time. It seems to me that halts should be coordinated in the rare instances they are needed or used, not partial in nature.

I guess one could argue for an automatic temporary halt once a stock moves a certain percentage during the day, but I think if that were to be done, it should be much higher than 10%, starting maybe at every 20%, and lasting 15 minutes or so each time, long enough for any news to come out, etc.

While I still prefer the slower days of old, I do remember in 1987 there were people who couldn't get through by phone to their broker. Similar frustration and fears. I lucked out when all my stops (not limit orders) triggered very close to my set prices.

As I recall I closed up around 15% on the year, but bought back into the same big blue chips companies about a week too soon.

Not as venturesome now with now other regular form of income as when working.

I'm sitting out while the dust settles and some direction is decided.

"WASHINGTON—The International Monetary Fund Sunday approved a three-year, €30 billion ($38 billion) loan to help pull Greece out of an economic quagmire.

The IMF loan, the largest financial commitment the institution has ever made to a single country, is part of a €110 billion package that includes conditions requiring Athens to tighten their fiscal belt and raise taxes."

If the NYT graph is for real this seems hardly worth mentioning.

Nice history lesson, like you said its more complex than I thought. After reading all that, I think things have improved with decimalization - I know certain folks in the marketplace fought that tooth and nail, but I think the investing public is so much better off now than they were with fractions.

Yet I still wonder, did we have fills at 0.01 during the 87 crash? And if not - why not? Heck, did we have that in 2008 during the whole slow motion train wreck? If not - what changed between then and now? Maybe that's the thing that bothers me the most. Why did ALL the bids on those stocks just suddenly vanish? I understand the technical reasons, you've explained them quite clearly. I'm wondering about the "market forces" reason for having no bids at all. Is that really a normal thing?

Maybe nobody put in any stink bids there because the market has been going up too steadily. Maybe they all got hit on the way down. Maybe - it's an opportunity? Toss in stink bids at, what, a 40% drop in stocks that are "unlikely to drop 40%"?

Vad -

"It's not about CFTC or SEC, it's not about GS - it's about real reasons for the whole debacle vs. pointing fingers at scapegoats."

Yes, I certainly agree we all should take a broad view beyond the media focus on scapegoats. Kaimu's right when he says we just keep re-electing the same two-party monopoly. That's our fault. But parties come and go in American history and these two are getting long in the tooth. The U.S. Constitution has taken a beating and I want to believe its in the early rounds using Ali's rope-a-dope to exhaust its greedy foe, the money monopolizer.

The mother of all bubbles for us will be hyperinflating the almighty USD and consequently extinguishing its global reserve status. Trade imbalances will then normalize and productive capacities eventually renew with re-energized competition. These things take a long time to develop and then, as you know all too well, it hits the fan. When the dollar bubble pops, I don't expect another bubble to burst in my lifetime because all that fiat currency sloshing around today will be worthless and not available along with the insanity of derivatives to pile on to a sector with wild speculation. The bubble era will cease to exist with a global trade currency backed by hard assets. Even the WSJ had an op-ed commentary entitled "The Gold Standard: The Case for Another Look" on Friday, May 7. I see that coming.

We the People are heavily armed here in America, like it or not. It ain't gonna be pretty when the politicians try to renegotiate the 'social contracts' with the public unions in Illinois, California and the 48 other remaining gov'ts not to mention the mid-term election in November. It's all part of what the floor traders called 'the great unwind' and we're in the middle of it.

As for algos, HFT, and all that, everyone thought the Titanic was unsinkable at the height of the Industrial Revolution before engineers understood much about fatigue and metallurgy.

Cheers.

$USD and gold both down about -0.7%.

Still a daytrader's market right now.

dave, certainly fractions times were more volatile. 1/8 was a common spread, and 1/4 or 3/8 were not unseen. Momentum stocks were pure day trader's heaven, to the degree today's day traders can't even imagine unless they traded back then. Grab 1000 shares of a fast moving creature at the beginning of momentum, and watch your money grow by $250 - $375 with EACH TICK! Well, worked the other way around too of course :)

As for "did we have fills at 0.01 during the 87 crash? And if not - why not?" - well, simply because in absence of developed electronic market with widespread access, there ceased to be a market! Read what Grym said, people simply could not get their orders in by any means. Phone were not answered for hours, if at all. Bids vanished back then just they did last week or in 1929. But here is a list of differences:
- in 1929 we had a relatively transparent non-compartmentalized market for a very few participants some of whom described this "no bids" situation;
- last week we had a highly compartmentalized but very transparent market for a lot of participants most of whom could reach the market and could see albeit briefly this "no bids" situation;
- and in 1987 we had mildly compartmentalized market with little transparency, something inbetween those two.
As a result, "no bids" situation in 1987 was simply masked by lack of visibility, lack of access, inability to see actual marketplace and reach it with order.

this headline just crossed the wire:

19:50 (EU) G20 finance ministers are holding a teleconference on bailout of Greece, led by South Korea and Canada

Reminds me a joke from early post-Soviet times: Ukraine and Argentina signed an agreement about mutual non-invasion between Belarus and Mongolia

Overnight SP futures in asia are +22; euro +1.34 to 1.2887. Looks like a gap up monday. Amazing what 600 billion will do for you, isn't it?

When I did my usual "What are they talking about?" search for a definition of a term I wasn't familiar with, I found two links that satisfied me before I moved on:

http://www.wikinvest.com/wiki/High-Frequency_Tradi...

http://market-ticker.denninger.net/archives/1259-H...

A quote from the first:

As an example, let's assume that a buyer wants to buy 100,000 shares of INTC. The market price of an INTC share is $26.10, but the buyer's limit price is $26.40. In other words, the buyer is willing to pay up to $26.40 for each share of INTC or $0.30 more than its current price.

Via flash orders from NASDAQ, high-frequency trading firms get a peek at these orders for 30 milliseconds before they are shown to everyone else. Having detected a demand for INTC shares, the computers at these firms then start issuing small immediate or cancel (IOC) orders at specific levels above the current price of INTC shares. If the first sell order at $26.15 is accepted by the buyer, another sell order at $26.20 is issued, and so on.

This continues until a sell order at $26.45 is issued. Because the buyer's limit price is $26.40, the sell order at $26.45 is rejected. At this stage, the firms' computers flood the buyer with sell orders at $26.39, causing most of the company's order of 100,000 INTC shares to be filled at $0.29 cents above market price.

Under normal circumstances, a buyer would see the sell order at $26.15 and might subsequently drop the limit price on his/her order. However, high-frequency trading computers are so fast that unless the buyer owned comparable machines, he/she would have no chance to do this.

The thirty millisecond advantage is described here: http://www.nytimes.com/imagepages/2009/07/24/busin...

A lot of fancy words for "The can is being successfully kicked down the road":

Sunday, May 09, 2010 8:11:06 PM
(EU) Finance Ministers agree on 3-year €500B mechanism to contain Greek fiscal crisis; Plan to contain mix of loans and debt guarantees - EU officials
- Agreement guaranteed on pro-rata basis by EU states
- Confirms EU plan to contain €440B in loans from member state govts, €60B from EU budget
- IMF to take part in financing
- Point of contention was whether aid would contain guarantees

- German official De Maiziere: EU contribution would be direct aid
- Affected states agree to increase consolidation
- Regulation of financial markets to increase

- Spain's Fin Min Salgado: First loan payment to come before May 19th; EU officials committed to fiscal sustainability
- Consolidation plans will be hastened
- Multinational agreement would contain Greek crisis
- IMF could contribute €220B to fund, to dictate conditions

- EU Commissioner Rehn: EU nations are committed to quicker deficit cuts; To protect EUR at all costs.
- Supports ECB steps in defending the Euro

- Luxembourg Fin Min: ECB to make announcement on market intervention measures.

I lent the EU 1 Trillion I didn't have to stop the crisis.

:)

http://bit.ly/bBPnWl

And the show goes on as it must:

20:51 (EU) EU Commissioner Rehn: ECB to buy govt bonds in secondary market

20:55 EUR/USD Falls sharply below 1.2850 after comments on ECB participating in secondary govt bond markets

Holy crap the ECB really is going to buy bonds in the secondary market. The short squeeze tomorrow in Greek bonds should rival what happened to the financials back in the fall of 2008. I'm glad I'm not the one playing in the deep water over there.

Thanks Val for your help. I see where they noted back on March 12th "The combined company will trade on the NYSE under the symbol “SWK”. As I mentioned before depending on where you look you can only find SWK. But other places have both SWK & BDK, strange.

9:16:51 PM
ECB: To intervene in public and private debt markets; Scope of operations to be determined by governing council; Operations intended to re-absorb liquidity
- To conduct 3-month liquidity operations with full allotment in May and June
- To reactivate dollar swap lines with US Fed
- BOE, BOC, FED announce re-establish dollar liquidity facility

I'm not picking a fight, I'm asking questions. I'm also no longer able to conduct the proposed experiment as I've moved away from IB.

However, if this is a non-issue, why did Mary Schapiro state the following when proposing the ban:

"Flash orders may create a two-tiered market by allowing only selected participants to access information about the best available prices for listed securities," said SEC Chairman Mary Schapiro. "These flash orders provide a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes."

Was she wrong, being misleading, etc.? I thought she had a good reputation here. Is there really no way to profit from early access to the data flow?

I see that NASDAQ says they voluntarily ended the practice ( http://ir.nasdaq.com/releasedetail.cfm?releaseid=4... ) but then also see that Direct Edge has now gained exchange status and still offers the service. ( http://www.nasdaq.com/aspx/stock-market-news-story... )

I've always been in favor of education. I'll limit order 1000 shares of INTC .40 above the ask @ 10:00am, right after I close the warning screen saying I'm bidding above the ask. I'll report back tomorrow.

used for national debt in my lifetime. I saw 1M and 1B become nothing in my lifetime. why not also lay wast to 1 trillion.

After Trillion:
quadrillion
quintillion
sextillion
septillion
octillion
nonillion
decillion
undecillion
duodecillion

downtrend in Euro ... http://www.marketwatch.com/story/euro-jumps-on-eu-...

No sweat Vad, I'll be careful. I now it will be hit at the best bid. Since I'm all cash right now at least it will give me something to do besides watch :)

Now, that reference to Schapiro is about flash orders, not about HFT per se. You do know it's not the same, right? So, as we discussed HFT here and mechanism by which they are supposedly rob someone, let's state that everything I said so far was about HFT, NOT about flash orders.

This is presumably the problem. It was my understanding that HFT is a particular type of algorithmic trading typified by flash trading, thereby making HFT and flash trading practically synonymous.

Vad- Don't feel bad at all, I get L2 quotes and will pick my spot. Hell, that's the only way I made any money for 6 months until I woke up.

baz... sorry... after hours? We are talking normal trading time here, not when there is no market.

http://www.reuters.com/article/idUSTRE6430AR201005...

I still believe this is going to be a really big issue for the southeastern US economy and possibly for the US economy. This oil leak is estimated to have released 4 Million gallons of oil into the gulf, but there are estimates even inside BP that the actual amount of oil leaking is 10 times the amount estimated. If this is the case, then that means there could be 40 Million gallons in the gulf already (by comparison the largest spills ever were around 3 million gallons).

BP's latest attempt to stop the leak was with this huge dome to be placed over the leak. That didn't work out. As a result, the leak continues.

mcgro2 > I know you have faith in the rebound of BP's shares, but I have to be honest, I think this could ultimately take down BP to the 30's or even at some point put them under. I think this will end up causing several hundred billion dollars worth of damages and its impact on the overall US economy could be devastating. This could force people to rethink deep see drilling, drastically shortening the time until peak oil becomes a real issue, and increasing the price of oil at a time when our economy is just starting to recover. I'm trying not to exaggerate the impacts, but I don't think people have factored this into their opinion of the markets and the US economy.

TOF you could be right about the impact of this, peak oil-wise. All the oil stocks have been hammered, which is the opposite of what you might expect. I'm not a buyer of BP at this point, but it might be an opportunity to pick up some oil services companies at a discount. And I'm guessing it won't be a positive for the US economy as you say. PBR might be a good candidate too.

ALOHA!!

Let me just say this about any "union". This applies to a marriage, to a trade union, to a monetary union.

A union is only as strong as its weakest link.

I learned this from many, many years embroiled in the drama of IBEW. Unions force the most productive people(in this case Germany)to "compensate" for the least productive. Otherwise if there is no compensation then the entire union is in jeopardy. This has been the flaw of any economic union yet these Keynesian Phds insist on making the same mistakes that have been made for hundreds of years. ONE SIZE DOES NOT FIT ALL when it comes to economies and people, which is essentially what economics is. At least the Austrians will admit it ...

Now consider this ... On Mothers Day, 9:15PM no less, the sneaky US FED announced the currency swaps from 2008 are back ON!! The US FED practically released this news the same time the EU released its "crafty $928BIL"! Hummmm ... its a show of something but I would call it "force" ...

The following is cut right off their website. No fanfare here but this will pressure the USD and maybe Obama will make his double the exports by 2011 promise!

Release Date: May 9, 2010
For release at 9:15 p.m. EDT

In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

Look at that ... "In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe ..." These guys see trouble down the road. Once again I will ask "Who will bailout the US Treasury?" The US taxpayers are on life support since the majority of those who work pay no taxes or account for minuscule revenues. The majority of revenues are being skimmed from the top 15% producers.

Something has to give and from what I see Obama is taking the same politically expedient route that Bush took ... DEBT! Our political leaders are like water ... they seek the path of least resistance. They prefer to stack the DEBT for future generations that have not yet reached voting age. Not a lot of "astute" voters are standing in the way of that strategy. Not sure if it is just plain stupidity, selfishness or "hubris" ... Its all a fine line!

"Let me just say this about any "union". This applies to a marriage, to a trade union, to a monetary union.

A union is only as strong as its weakest link."

"Beware of entangling alliances."

George Washington