Silver bears: a compilation

The Canadian trader/blogger SGS has taught us while amusing us with his original silver bears video series. I remember how anxious I was waiting for the new episodes. His unique sense of humor was the perfect framework to present the conspiracy to the layman, the amateur and the professional. Economists wished to know what is contained in these videos.

Though I want to take the conspiracy with suspicion, I reckon there is much sense in what they say about protecting paper assets through monetary metals suppression. I just say that if Mickey Mouse is left with a mess to clean and he finds a magic wand, he just uses it, doesn't he? "I do it because I can".

Here is a compilation of all eight bears videos:

Dark pools, algorithms and HFT

I found an interesting piece at ZH that I want to maintain in this blog. It is from this just-released book

Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System 

 Enjoy:

In early December 2009, Haim Bodek finally solved the riddle of the stock-trading problem that was killing Trading Machines, the high-frequency firm he’d help launch in 2007. The former Goldman Sachs and UBS trader was attending a party in New York City sponsored by a computer-driven trading venue. He’d been complaining for months to the venue about all the bad trades—the runaway prices, the fees—that were bleeding his firm dry. But he’d gotten little help.
At the bar, he cornered a representative of the firm and pushed for answers. The rep asked Bodek what order types he’d been using to buy and sell stocks. Bodek told him Trading Machines used limit orders.
The rep smirked and took a sip of his drink. “You can’t use those,” he told Bodek.
“Why not?”
“You have to use other orders. Those limit orders are going to get run over.”
“But that’s what everyone uses,” Bodek said, incredulous. “That’s what Schwab uses.”
“I know. You shouldn’t.”
As the rep started to explain undocumented features about how limit orders were treated inside the venue’s matching engine, Bodek started to scribble an order on a napkin, detailing how it worked. “You’re fucked in that case?” he said, shoving the napkin at the guy.
“Yeah.”
He scribbled another. “You’re fucked in that case?” “Yeah.”
“Are you telling me you’re fucked in every case?” “Yeah.”
“Why are you telling me this?”
“We want you to turn us back on again,” the rep replied. “You see, you don’t have a bug.”
Bodek’s jaw dropped. He’d suspected something was going on in- side the market that was killing his trades, that it wasn’t a bug, but it had been only a vague suspicion with little proof.
“I’ll show you how it works.”
The rep told Bodek about the kind of orders he should use— orders that wouldn’t get abused like the plain vanilla limit orders; orders that seemed to Bodek specifically designed to abuse the limit orders by exploiting complex loopholes in the market’s plumbing. The orders Bodek had been using were child’s play, simple declarative sentences sent to exchanges such as “Buy up to $20.” These new order types were compound sentences, with multiple clauses, virtually Faulknerian in their rambling complexity.
The end result, however, was simple: Everyday investors and even sophisticated firms like Trading Machines were buying stocks for a slightly higher price than they should, and selling for a slightly lower price and paying billions in “take” fees along the way.

Debunking Jim Rogers on farming

Jim Rogers has been speaking a lot about farming being the profession of the future. Now, I love his insights and I regard him as one of the best and most honest investors, as I have already said, but reading that a farmer will become as rich as a banker is something ridiculous. Nobody in the history of the world has become rich harvesting. Ever. Per Zerohedge:

His advice, and perhaps Maria should look into it given their ratings recently, is to become a farmer; own farmland; and speculate on agriculture. On the dismal 'ethical' state of our leaders and management, the thoughtful Rogers opines, "You can read world history for decades. There are always people doing things wrong. We have not changed our human nature and we will continue to have scandals and problems" and in a follow-up to CNBC's standard 'money-on-the-sidelines' argument he crushes the money-honey's dreams: "Finance had a great 30 years. That's finished. Now to advance, we have too many people, too many MBAs, too much leverage and too many governments that don't like us". A must-see rebuttal to the 'normal' CNBC hopium with more on China's slowdown, a US recession, Europe and a Greek exit, QE3, and 'tractors'.

Let's analyze this. If the world is to become more rural, then about three in four of the population are expendable. Maybe that is supported by the statement in red. In the absence of banks, credit and monetary base expansion, life as we know it has no meaning anymore. Let's assume that you follow his advice and you survive the holocaust that a reduced banking sector means for the world. Becoming a farmer implies spending your time caring about your farmland. This means that you are open to intruders and armies. What happened at the end of the Roman Empire? People gathered around some strong authority: the count. He, and other nobles and rich men, bankers among them, were large landowners, never farmers themselves. This is what always happens. There will always be legions of poorer people than you that are willing to take a farming job for little money, just go to any farm. If you become a farm owner and get some hold of the laws governing your area, then you will fill the role of count. Otherwise, the one who has a better hold of the sword will take your farm and impose his law.