We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Just finishing Michael Lewis' Flash Boys, a terrific history of high frequency trading, front-running and markets in general. It reads like a thriller. You'd expect a Wall Street drama to be all about ego, bad guys ripping people off, and money being 'stolen'. Certainly that all plays a role, but it's not central to the story.
One of the best parts is the side story of Serge Aleynikov, one of the few people arrested, tried, and imprisoned after the crash in 2008. What's truly sad is that he had little to no involvement in any of the events leading up to that, nor was he involved in any transaction coding or theft of any kind (though Goldman Sachs and the US Government said otherwise). It's a sad state of affairs when someone capable of 'fixing' the problems that lead to flash crashes and other tech-driven market impairments is listed as a 'bad guy'.
At any rate, he lost his money, his family, his reputation - but eventually won his case and was freed. He has a great quote:
“If the incarceration experience doesn’t break your spirit, it changes you in a way that you lose many fears. You begin to realize that your life is not ruled by your ego and ambition and that it can end at any time. So why worry? You learn that just like on the street, there is life in prison, and random people get there based on the jeopardy of the system. The prisons are filled by people who crossed the law, as well as by those who were incidentally and circumstantially picked and crushed by somebody else’s agenda. On the other hand, as a vivid benefit, you become very much independent of material property and learn to appreciate very simple pleasures in life such as the sunlight and morning breeze.”~Serge Aleynikov
Bulldog - the "flash crash" was in May 2010, but there was of course the market crash of Sept 2008 that led to the bear market of '08-09. You probably meant 2010 above?
Lewis is one of my favorite authors and anything he writes about financial markets is worth reading.
I worked for a tech company that was a leading edge provider of low latency messaging software and all their customers were in the HFT space. Their needs were speed, followed by speed, and then of course, speed. Interesting times in 2008-10...
I see he wrote "The Big Short," which I very much enjoyed in both its movie and its audible-book form. (I loved "The Last Days of Goldman Sachs," too.) I've just downloaded "Flash Crash," which should take me through my extended porch-painting project now that our 5-inch rain is over.
It's comforting to start the most grueling part of summer with both cistern and pond topped off.
No, I meant 2008, and I said it for a reason. The assumption is that any crash, including the flash crash, has some kind of conspiratorial nature to it.
Certainly 2008 was driven by bad debt and predatory lending. The flash crash (which was one of many flash crashes, though probably the largest and most memorable).
And yet - for some reason (unbeknownst to me, you or anyone), in this case they chose to go after a guy who wrote code. He didn't make trades, he didn't set policy, he didn't manage policy, he didn't do anything of a nature which would 'cause' a crash of any kind.
In fact, his role was to actually 'fix' the things that broke along the way.
So yes, it looks odd - but the reality is I mention it only because WHY, after all the predatory behavior in markets was exposed, did THIS GUY get hauled into court?
The flash crash (which was one of many flash crashes, though probably the largest and most memorable) was caused by technology breakdown - overlapping codes of some sort that exacerbated a particular direction, most likely.
Thanks for the recommendation. Lewis covers the details in his books, making them most educational, but I missed this one.
MF needs a regular book post along with BD's high-points on flora and fauna, which brought me here so many years ago, plus the photos, walk-abouts, workout routines and other imports in our lives. We, who invest time in reading/listening to new publishing efforts appreciate such direction from those less inclined to be paid for four-star reviews.
Oh, I didn't mean to leave out the music...great music.
Well, kinda. Flash crashes are due to the essential nature of software: the code can only do what it was designed and written to do.
It’s not really a conspiratorial situation there because all of the HFT programs connected to the market feeds act like a giant AI system taking in prices and trades from the markets and then making decisions based on that info, possibly sending new trades as quickly as possible to take advantage of new price information. This causes new prices to be sent via the market feeds to all other connected programs, very quickly, causing them to do the same thing, etc. it’s all interconnected in ways that can exaggerate flaws VERY QUICKLY under under certain conditions.
Similar in one key way to the 737 software problem: unanticipated conditions can and do cause the software to do exactly the wrong thing because there is no human ability to step back from some unusual situation and say “hmm what exactly is going on here?” before taking action.
There’s no “measure twice cut once” capability.
Anyway I should definitely read this book. Thanks for the info and I agree with you on that quote. They probably chose him so they could hang a scalp on the wall and say “see we fixed it!”