I thought GS owns a huge amount of the underlying CDSes themselves, through AIG...so how can someone own an asset and then also bet the spread on that? That's where I'm getting confused on this, plus what is the % of existing CDSes that GS already owns?
Everyone, and I do mean everyone who tries to make a market in any instrument initially tries to make money off the spread. I've done it many times just on certain equity index futures and bonds. Trying to make money off the spread isn't the problem. The problem is if Goldman is front-running, that's the big no-no.
of the public citizens. The mirror looks both ways and people that spread BS on those applications added to the problems. Shame on the mortgage industry for making it too easy to lie but does it mean we have an untruthful segment in society?
With Mary Shapiro back again at SEC, and with Holder far too busy at Justice, filing briefs to defend the crimes and misdeeds on behalf of the Bush Administration - and to continue such misdeeds, I'm pretty certain we can count on nothing taking place from that direction.
"Imagine if Wall Street was Las Vegas in the 50's, these cats would have ended up either dead in shallow graves or beaten bloody and dumped out into the desert, i.e. get out of town."
At least one copy of this code was uploaded to a London server - and a former CFO from ABN Amro (Netherlands) is found dead from shotgun wounds to the head in southern England (police find nothing suspicious, of course), and a broker with Deutsche Bank AG, in London, is asked to take part in an IT-related investigation which may concern him as well, and falls to his death from a rooftop restaurant (police find nothing suspicious, of course).
Anyone remember all those bankster deaths surrounding BCCI way back when? Yup, nothing casino-like about Wall Street.
will be as productive as the Pecora Hearings. Both political parties have dirty hands in this crisis. Particularly, several key advisors and cabinet member of the Obama Administration - Geithner and Summers.
Summers was instrumental in Clinton's signing of Gramm-Leach-Bliley and Commodities Futures Modernization Act. As for Geithner, besides being a protege of Rubin/Summers, his finger prints are all over the AIG bailout.
I think Summers/Geithner are more dangerous than a Greenspan or some ideologue worshiping free markets. Summer/Geithner are the types that believe in the power of the financial conglomerate strictly as a profit maximizing venture. They believe that is the cure all to our problems - strong financial conglomerates. Or should I say - financial oligarchy.
But I wonder if it will have any real fiscal impact - raise revenue. I am trying to find any study that examines whether rich people have more opportunities to shelter/shield/hide income than less wealthy people.
If so, then marginal tax rates don't mean anything because rich people's effective tax rate may be much lower. This is what makes the tax system regressive. Warren Buffet use to use the example that it is not fair that he pays less in taxes as a percentage of income then his secretary. That is not fair but this is the tax code/system we operate under.
We need to change the focus from a policy perspective from marginal tax rates to the effective tax rate. Maybe, if we simplified the tax code and eliminate various tax schemes our tax code would be more progressive.
That also seems quite "not in the spirit of the game" and is preying on inferior "sync" and timing of multiple markets.
When I said "black box" what that means in engineering is no one knows what is inside.
So one can say "algorithm" but without seeing the code, one must really reverse engineer to find out what it's doing and that's by behavior, which is another area of engineering...to obfuscate any possibility of reserve engineering, i.e. cover your tracks.
So, since this is money really and since one has no idea what's going on inside the "black box" well, it's possible that market manipulation and even illegal activity is the algorithm itself.
Since GS runs the country, I mean who the hell is watching GS? We have this constant revolving door...people work in government almost as their standard sabbatical per corporate requirements.
LTCM was derivatives and that was more in the real of mathematical formulas vs. "code" and timing...but to me goes to these absurd CDOs based on Copulas.
I also wrote up quite a bit on how those mathematical models (which in turn can be implemented in software) were obviously not valid mathematically, so how it is if someone writes bullshit in math that is not a crime yet if they just take the money period that is? Just because it's in math doesn't make it less of a crime if it's in English?
At least regulated, someone somewhere needs to be reviewing these models and inspecting them, approving them before being allowed as "new innovative financial products". There are plenty of geeks out of a job, many of them could do just this sort of work.
But I mean this stuff is not investing, it's getting around the game with technology.
Imagine if Wall Street was Las Vegas in the 50's, these cats would have ended up either dead in shallow graves or beaten bloody and dumped out into the desert, i.e. get out of town.
The one thing that has raised my eyebrows has been the alligation of front-running. This is illegal, and if they are doing that using their code, then the SEC and the Justice Department should slam the book on them. You see, its one thing to have a set of code that goes for arbitrage moments. But it is a totally different thing to implement arb-seeking algos in the same software you use to fulfill your market-making obligations.
In most markets, black boxes at times make up over half the volume. Goldman wasn't the only one to employ algos and such. Their mistake was to outsource the job, and look at what happened? In a way, its justice, because now everyone knows the colonel's recipe or soon will be. Something else regarding black boxes, at the end of the day they merely reflect what the firm's biases and such. The quants who come with it in each firm are different from the others. The only thing they have in common is to look for arbitrage moments, for example many stocks trade off more than one exchange and at times you could have discrepancies that only last a millisecond. McDonalds could be trading for 40/40.01 on the NYSE and 39.99/40 at the Chicago Stock Exchange (yes there is one) or some otc. The algo simply buys at the latter and sells at the former for that one penny, but in millions of shares.
The largest users of black boxes in recent years have actually been companies behind the Exchange Traded Funds (ETF). One of the largest group are the SPDRs, and each fund has to insure that the shares of the ETF correspond with the stocks in the S&P 500. Index funds also do this. Indeed, you may be surprised to find that your 401k money going into one of these things is utilizing a black box.
But these things aren't perfect either. Anyone remember Long-Term Capital Management? Part of their collapse had to do with their black box operations. There are others as well. Like I said, in cases where they believe their is a discrepancy in the price, is actually a reflection of their biases. Two years ago (I believe it was two), grain traders who normally took advantage of a known arbitrage moment when there was the closing of the old crop/new crop spread got killed when at the last moment news of a grain failure in Canadian Red Wheat (I think)aborted any chance of that arb moment.
I agree that stimulus is being pissed away by directing it into non-productive sectors, especially the Financial Sector. Why should this sector be 15 Percent of the economy, up from 7 percent a few decades ago? Let the institutions that raped the economy through "innovation" experience a little of Greenspan's "creative destruction." Even Bakunin could be right once in a while and Ayn Rand could be wrong.
What about mortgages "under water" but not yet distressed. Systemic abuses by originators and real estate industry, as well as rosy comments by Bernanke created a market where home buyers were forces to compete with speculators, and are now trapped in overpriced houses. Worse, they are stranded if asked to relocate, and must make choices that are unfair. Since government policies contributed to the mess, let the Fed buy mortgages based on fair appraisal, at rates a percentage point above the 10 year treasury. This would introduce competition into the mortgage market and banks would have to choose whether they really want to be in the lending business.
Wow great analysis....We cant now expect anything to come out of America its gone...its really high time that, some other nation take a lead in guiding the worlds destiny.
Capitalism and democracy are both failures and America has unfortunately got both tangled in its neck. Only a revolution can save Americas not wall st or capitol hill.
Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.
*snip*
My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.
The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.
Roopinder Singh, who runs file storage website xp-dev.com, told Reuters in London on Friday that computer files show whether or not the valuable code -- which U.S. prosecutors have charged former Goldman employee Sergey Aleynikov with stealing -- was viewed by others, but he declined to say what they show due to the scale of the case.
According to Singh, accounts at xp-dev.com initially have a privacy setting that only lets the user see them. However, users can change that setting to allow other people to view files.
So, this blackbox code - which may be able to manipulate the markets could be open source now.
I've got four articles on the subject on my blog Outside the Autistic Asylum. I would suggest not doing it here.
-------------------------------------
Maximum jobs, not maximum profits.
I thought GS owns a huge amount of the underlying CDSes themselves, through AIG...so how can someone own an asset and then also bet the spread on that? That's where I'm getting confused on this, plus what is the % of existing CDSes that GS already owns?
Everyone, and I do mean everyone who tries to make a market in any instrument initially tries to make money off the spread. I've done it many times just on certain equity index futures and bonds. Trying to make money off the spread isn't the problem. The problem is if Goldman is front-running, that's the big no-no.
--------------------------------------------
www.venomopolis.com
of the public citizens. The mirror looks both ways and people that spread BS on those applications added to the problems. Shame on the mortgage industry for making it too easy to lie but does it mean we have an untruthful segment in society?
bid-ask spreads on CDSes will generate record profit for GS.
Anyone want to comment further on this one?
I'm just reading this thinking, WTF? You can make trades off of just the spread....when GS has an inside track to CDSes as it is?
I don't understand this well enough to analyze, so it's just raised by eyebrows but that's as far as I understand this article.
With Mary Shapiro back again at SEC, and with Holder far too busy at Justice, filing briefs to defend the crimes and misdeeds on behalf of the Bush Administration - and to continue such misdeeds, I'm pretty certain we can count on nothing taking place from that direction.
"Imagine if Wall Street was Las Vegas in the 50's, these cats would have ended up either dead in shallow graves or beaten bloody and dumped out into the desert, i.e. get out of town."
At least one copy of this code was uploaded to a London server - and a former CFO from ABN Amro (Netherlands) is found dead from shotgun wounds to the head in southern England (police find nothing suspicious, of course), and a broker with Deutsche Bank AG, in London, is asked to take part in an IT-related investigation which may concern him as well, and falls to his death from a rooftop restaurant (police find nothing suspicious, of course).
Anyone remember all those bankster deaths surrounding BCCI way back when? Yup, nothing casino-like about Wall Street.
will be as productive as the Pecora Hearings. Both political parties have dirty hands in this crisis. Particularly, several key advisors and cabinet member of the Obama Administration - Geithner and Summers.
Summers was instrumental in Clinton's signing of Gramm-Leach-Bliley and Commodities Futures Modernization Act. As for Geithner, besides being a protege of Rubin/Summers, his finger prints are all over the AIG bailout.
I think Summers/Geithner are more dangerous than a Greenspan or some ideologue worshiping free markets. Summer/Geithner are the types that believe in the power of the financial conglomerate strictly as a profit maximizing venture. They believe that is the cure all to our problems - strong financial conglomerates. Or should I say - financial oligarchy.
But I wonder if it will have any real fiscal impact - raise revenue. I am trying to find any study that examines whether rich people have more opportunities to shelter/shield/hide income than less wealthy people.
If so, then marginal tax rates don't mean anything because rich people's effective tax rate may be much lower. This is what makes the tax system regressive. Warren Buffet use to use the example that it is not fair that he pays less in taxes as a percentage of income then his secretary. That is not fair but this is the tax code/system we operate under.
We need to change the focus from a policy perspective from marginal tax rates to the effective tax rate. Maybe, if we simplified the tax code and eliminate various tax schemes our tax code would be more progressive.
DKos Diary Reverberates Throughout Wall St. (w/update)
I guess if "everybody" is doing it ... so much for the free market
That also seems quite "not in the spirit of the game" and is preying on inferior "sync" and timing of multiple markets.
When I said "black box" what that means in engineering is no one knows what is inside.
So one can say "algorithm" but without seeing the code, one must really reverse engineer to find out what it's doing and that's by behavior, which is another area of engineering...to obfuscate any possibility of reserve engineering, i.e. cover your tracks.
So, since this is money really and since one has no idea what's going on inside the "black box" well, it's possible that market manipulation and even illegal activity is the algorithm itself.
Since GS runs the country, I mean who the hell is watching GS? We have this constant revolving door...people work in government almost as their standard sabbatical per corporate requirements.
LTCM was derivatives and that was more in the real of mathematical formulas vs. "code" and timing...but to me goes to these absurd CDOs based on Copulas.
I also wrote up quite a bit on how those mathematical models (which in turn can be implemented in software) were obviously not valid mathematically, so how it is if someone writes bullshit in math that is not a crime yet if they just take the money period that is? Just because it's in math doesn't make it less of a crime if it's in English?
At least regulated, someone somewhere needs to be reviewing these models and inspecting them, approving them before being allowed as "new innovative financial products". There are plenty of geeks out of a job, many of them could do just this sort of work.
But I mean this stuff is not investing, it's getting around the game with technology.
Imagine if Wall Street was Las Vegas in the 50's, these cats would have ended up either dead in shallow graves or beaten bloody and dumped out into the desert, i.e. get out of town.
The one thing that has raised my eyebrows has been the alligation of front-running. This is illegal, and if they are doing that using their code, then the SEC and the Justice Department should slam the book on them. You see, its one thing to have a set of code that goes for arbitrage moments. But it is a totally different thing to implement arb-seeking algos in the same software you use to fulfill your market-making obligations.
--------------------------------------------
www.venomopolis.com
In most markets, black boxes at times make up over half the volume. Goldman wasn't the only one to employ algos and such. Their mistake was to outsource the job, and look at what happened? In a way, its justice, because now everyone knows the colonel's recipe or soon will be. Something else regarding black boxes, at the end of the day they merely reflect what the firm's biases and such. The quants who come with it in each firm are different from the others. The only thing they have in common is to look for arbitrage moments, for example many stocks trade off more than one exchange and at times you could have discrepancies that only last a millisecond. McDonalds could be trading for 40/40.01 on the NYSE and 39.99/40 at the Chicago Stock Exchange (yes there is one) or some otc. The algo simply buys at the latter and sells at the former for that one penny, but in millions of shares.
The largest users of black boxes in recent years have actually been companies behind the Exchange Traded Funds (ETF). One of the largest group are the SPDRs, and each fund has to insure that the shares of the ETF correspond with the stocks in the S&P 500. Index funds also do this. Indeed, you may be surprised to find that your 401k money going into one of these things is utilizing a black box.
But these things aren't perfect either. Anyone remember Long-Term Capital Management? Part of their collapse had to do with their black box operations. There are others as well. Like I said, in cases where they believe their is a discrepancy in the price, is actually a reflection of their biases. Two years ago (I believe it was two), grain traders who normally took advantage of a known arbitrage moment when there was the closing of the old crop/new crop spread got killed when at the last moment news of a grain failure in Canadian Red Wheat (I think)aborted any chance of that arb moment.
--------------------------------------------
www.venomopolis.com
I agree that stimulus is being pissed away by directing it into non-productive sectors, especially the Financial Sector. Why should this sector be 15 Percent of the economy, up from 7 percent a few decades ago? Let the institutions that raped the economy through "innovation" experience a little of Greenspan's "creative destruction." Even Bakunin could be right once in a while and Ayn Rand could be wrong.
S&P and Moody's? Are those guys still in business? Where is the Justice Department and the SEC?
What about mortgages "under water" but not yet distressed. Systemic abuses by originators and real estate industry, as well as rosy comments by Bernanke created a market where home buyers were forces to compete with speculators, and are now trapped in overpriced houses. Worse, they are stranded if asked to relocate, and must make choices that are unfair. Since government policies contributed to the mess, let the Fed buy mortgages based on fair appraisal, at rates a percentage point above the 10 year treasury. This would introduce competition into the mortgage market and banks would have to choose whether they really want to be in the lending business.
Wow great analysis....We cant now expect anything to come out of America its gone...its really high time that, some other nation take a lead in guiding the worlds destiny.
Capitalism and democracy are both failures and America has unfortunately got both tangled in its neck. Only a revolution can save Americas not wall st or capitol hill.
I have getting screwed fatigue at this point.
Excellent blogpost by Reich
From Reuters
So, this blackbox code - which may be able to manipulate the markets could be open source now.
Yeah, can't see any problems there....
I've got four articles on the subject on my blog Outside the Autistic Asylum. I would suggest not doing it here.
-------------------------------------
Maximum jobs, not maximum profits.
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