Thursday, 3 April 2014

Stock markets are rigged. How surprising is that?

Of course the answer is - not very.

Michael Lewis was once a bond trader with Salomon Brothers and is now a writer. He wrote Moneyball that spawned the movie starring Brad Pitt and Jonah Hill (he also wrote Blind Side, which I thought was shite, but that was probably Sandra Bullock’s fault). He’s also responsible for other excellent books such as Liar’s Poker and The Big Short.

Michael is a talented writer and has excelled at bringing some of the finance industry’s nasty unknowns into the mainstream arena. That’s not to suggest that his writings are without flaws, but to a person like me who is constantly amazed by society’s acceptance of corruption and scandal, he at least shines a public light on the darkness that is Investment Banking and the politicians that let them do as they please.

Michael recently released another book – Flash Boys; a Wall Street Revolt, and it has caused a bit of noise, even in mainstream circles. The book is about the emergence of ‘high frequency traders’ (HFTs) on stock markets, firms who are in the business of buying and selling stocks thousands of times a day, all at lightning speed and with the aim of skimming small profits from daily trading activity. Michael has been doing the rounds promoting his book and suggesting that the ‘flash boys’ are effectively rigging the markets in their favour. The HFTs have responded by suggesting that what they do is providing more liquidity to the stock markets and that everyone should just chill out because they’re doing everyone a big favour.

My opinion is that we hardly needed more proof of investment markets' brokenness. As I’ve said previously, finance and nutrition have some things in common. One of those things is that whatever is written in the press is usually mindless bullshit. Whether the journalists actually believe what they write, I’m not sure, but I do know that anyone who truly thinks that central banks, particularly the US’ Federal Reserve, can miraculously pull a few strings, buy shitloads of bonds and ‘save’ us all from financial oblivion is deluded or stupid, possibly both. 

If you need any evidence that mainstream economics is total voodoo and about as convincing as naturopathy, then you just have to read a few articles from supposedly intelligent people who think that this is exactly the sort of omnipotent power that Central Banks have - that the solution to debt and poverty is to massively increase your debt. That you should maintain deregulation of a system that is controlled by people who pay themselves insane amounts of money to trade against their clients. That breaking windows and digging and refilling holes will solve unemployment.

Similarly with the HFT thing, if someone truly believes that this sort of activity is all ok and above board, nothing anyone says is going to convince them otherwise. Regardless, will anyone in power do anything about it? I doubt it.

Maybe everything is under control and I'm just not smart enough to understand the 'science' of economics and stock markets. This nice German fella seems to understand it all. Wordy bastard, but his opinions are more believable than most.

I will probably buy Michael’s book and read it out of interest sake, but I'm guessing it'll just make me angry at the outrageous scumbaggery that is allowed to go on. 

If it is one more straw on the zombie camel’s back, then that’s a good thing. But I'm not holding my breath in the hope of the wider community realising it is just one small part of the whole dysfunctional, broken system.