Interview: Chaostheorien
by ilene - July 28th, 2010 4:58 pm
Interview: Chaostheorien
Courtesy of Karl Denninger at The Market Ticker
Good reading here, if you’re interested in my views "in a nutshell":
Karl Denninger, the publisher of “The Market Ticker”, in an exclusive interview for chaostheorien.de: “In order to honestly assess what’s going on and what has to be done to fix the problems, we first must admit our mistakes.” Furthermore he says why the financial system is more and more a farce, gives his stance on the prospects of a military dictatorship in the United States, and explains his position with regard to Peak Oil.
Have a read….. but grab a beer first.
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High-Frequency Trading: Something Black?
by ilene - July 27th, 2010 10:31 pm
High-Frequency Trading: Something Black?
Courtesy of Karl Denninger at The Market Ticker
Now this is interesting, coming from the annual "black hat" conference in Las Vegas (for those not involved in the computer security world, that’s an annual gathering of hackers where various presentations are made that amount to brags and bags that have or can be run on various parts of information technology):
Among the talks conspicuously absent from this year’s schedule: a presentation exposing security vulnerabilities in banks’ high-speed trading systems.
The talk, planned by security researchers Varun Uppal and Gyan Chawdhary, would have dealt with methods for hiding risky unauthorized trades in high-speed trading applications, as well as demonstrating a "sniffing" software tool capable of siphoning trading information to a faraway hacker to allow a high-tech form of real-time insider trading. But Uppal tells us that the talk has been cancelled after concerns were raised by a financial industry client of the security auditing firm he works for, Information Risk Management.
Methods eh?
I suppose we’re supposed to believe that this is all theoretical, right?
Oh, somehow I doubt it.
And why?
Well, it wouldn’t have anything to do with firms intentionally ignoring security capabilities for reasons of SPEED, would it? (Note that encryption, in particular, is rather slow comparatively. Plain text is of course very fast.)
While security measures for FIX programs are available, Uppal says he’s audited firms that ignore them for convenience or speed. Uppal says that could allow a hacker to monitor a bank’s trades and make near-simultaneous ones, or even steal a bank’s unique trading algorithm.
Oh, they would do that. That’s very nice.
New? Oh no. It’s not new either
In a 2007 Black Hat presentation, David Goldsmith and Jeremy Rauch of Matasano Security listed systematic problems with the security of high speed trading systems such as the difficulty of encrypting trade data and banks’ reluctance to add any security that might slow down the transactions,
Right. Speed before security. Engage in an arms race and if someone else gets unlawful advantage as a consequence of your refusal to follow best practices, well, that’s too damn bad.
Let’s contrast that with what happens in the Interbank (e.g. Visa, MasterCard, Discover, etc) networks. There if you store unencrypted cardholder data (it’s faster and easier!) or if you use unencrypted transport between…
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I Love 33:1 Leverage – BIS
by ilene - July 27th, 2010 5:52 pm
I Love 33:1 Leverage – BIS
Courtesy of Karl Denninger at The Market Ticker
Amusing news here out of BIS….
When it comes to the calibration, the Committee is proposing to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.
Ah, now that’s nice. How do we get that sort of leverage ratio being "allowed"? I wonder if Germany’s banks might have something to do with that….
I’ve read the entire report; Bloomberg has a "sanitized" version is that is mostly ok in it’s interpretation – the key point being:
July 26 (Bloomberg) — The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules …..
Right.
Someone needs to tell these clowns that both Lehman and Bear blew to the sky with leverage ratios around 30:1, and that their "proposal" allows more than double the former legal limit for investment banks in the US (before Hanky Panky Paulson got the SEC to remove the limit, of course.)
I suppose we need another global financial detonation before people start taking the words "leverage" and "reserves" seriously. Heh, you all know my view on this: One Dollar of Capital.
But if you do that, you have banks that are clearing agents for the economy and utility providers of credit, with each dollar of risk they take being pre-funded by an equity or debt purchaser who stuck THEIR money into the pot, knew they could lose it, and will demand a REASONABLE return.
That is, banks would be stodgy businesses again that paid out most of what they earned in dividends, and that would typically be 5 or 7% a year – and that’s it.
The common bankster’s salary would be a middle-class wage in the middle of America – a middling-five-figure number.
And the looting of the world’s commerce through finding some way to skim off a piece of each and every transaction, amounting in the totality of the marketplace to a colossal tax of well over a trillion dollars in the United States alone each and every year, would end.
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Oil Spew Update: Where’s The Doom?
by ilene - July 16th, 2010 9:38 pm
Karl Denninger separates fact and fiction in the Gulf Oil Spill story.
Oil Spew Update: Where’s The Doom?
I was promised an earth-shattering ka-doom!
Well, not really.
And the spew is not, in fact, funny.
But what’s even less funny is the number of people who have come completely unhinged with their "imminent death of everything and everyone" nonsense.
Let’s go down the list of the some of the better ones:
Everyone who worked on the Exxon Valdez spill is dead (or alternatively, that across the entire population of those who worked on the Valdez spill, the average age of death is 51.)
Really? Can you source that? I’ve been trying. Yeah, I’ve found the claim – 10 seconds with Google finds it. It’s been repeated everywhere. CNN had an alleged "expert" on who made the 51 year life expectancy claim – "almost all who worked on the Exxon Valdez cleanup are now dead."
Can I find an actual documented source for the claim? Nope. And I’ve tried to find it. No luck.
The same interviewee claimed that the components of the dispersent, Corexit, were not disclosed. This we know to be false; there are two formulations and we know what’s in them. The nastiest component is called "Butyl Cellusolve", and is indeed a nasty chemical solvent. The question is concentration; incidentally, you can buy cleaning solutions containing butyl cellusolve at Home Depot, among other places. I don’t recommend drinking it.
All of these claims appear to be traceable to one so-called self-identified "expert." If she has actual evidence, such as a roster of all the people who worked on the Exxon Valdez, their ages, and the disposition of their health (and death, as she alleges) then let’s have it. This sort of extreme claim requires strict proof. Period.
There is a second well that BP (and/or Diamond Offshore) is hiding that is the real leak that is five (or alternatively seven) miles away; this is a sideshow and they can’t plug either. The pressures are off the charts, never encountered before.
Really? Then how come they just did plug the well? Off the charts? About two weeks ago there was a pressure gauge on one of the downhole lines, and it read 7,000 psi. The water at that depth exerts ~2,000 psi. If this was an absolute gauge (probably true) then the in-bore relative pressure (relative to the sea floor) was…
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Apple Needs Some RF Design Engineers
by ilene - July 13th, 2010 8:09 pm
Apple Needs Some RF Design Engineers
Courtesy of Karl Denninger at The Market Ticker
It’s official. Consumer Reports’ engineers have just completed testing the iPhone 4, and have confirmed that there is a problem with its reception. When your finger or hand touches a spot on the phone’s lower left side—an easy thing, especially for lefties—the signal can significantly degrade enough to cause you to lose your connection altogether if you’re in an area with a weak signal. Due to this problem, we can’t recommend the iPhone 4.
That’s Consumer Reports, incidentally, which put the phone in an RF-isolated room to perform their tests along with a base-station emulator.
Oops – that’s about as close to proof as you’re going to find. In an RF-quiet environment it’s pretty easy to prove your case, and it appears that CR did so.
The tests also indicate that AT&T’s network might not be the primary suspect in the iPhone 4′s much-reported signal woes.
"Might" not? 
I have never been impressed with the iPhone (any generation) in terms of RF. Ever. It has always been a "form before function" device from my perspective, all the way back to the original units. Then again I’m spoiled – the best RF-performing GSM phone I’ve ever used was a Nokia 3395. I may still have one laying around here somewhere, and all of my old Nokias (including a 6610 which was nearly as good) still work just fine. Old, yes, but one thing Nokia does know how to do is design and build an RF section.
Incidentally, buying devices that work before selecting them for "sex appeal" may be why I’ve never had a material problem with the "can you hear me?" BS that so many suffer with when it comes to cellphones. I guess my view is that a cellphone is for communicating rather than trying to shag some hot chick at the local bar by flashing my "bling."
This is a common flaw for consumer devices – be sexy rather than be smart – or good. Of course sex sells, and so the more "sexy" you can make something look the better it sells, and as long as you remain within the "acceptable" functionality envelope you don’t get hurt – too badly. Witness Motorola, which had the "hot" phone for a long time…
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Market Manipulation On Display
by ilene - July 5th, 2010 4:45 am
Market Manipulation On Display
Courtesy of Karl Denninger at The Market Ticker
Rarely does it get this blatant….. this sort of crap goes on every day, but once in a while it’s just "in your face."
Tonight was one of those examples.
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Whistling Past The Graveyard?
by Chart School - May 28th, 2010 12:50 pm
Whistling Past The Graveyard?
Courtesy of Karl Denninger, The Market Ticker
In less than two minutes, here it is….
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Has Alan Grayson Lost His Mind?
by ilene - May 24th, 2010 4:43 pm
Karl Denninger on Alan Grayson’s proposal:
Has Alan Grayson Lost His Mind?
I generally like Alan so I was stunned to see this bit of pandering - although perhaps I shouldn’t be, given that it’s election season and every one of the critters in Congress is trying desperately to justify their salaries.
5 minutes of worthwhile video, but….. (you knew there would be a "but", right?)
Yes, we could cut the separate funding for Afghanistan and Iraq. Of course we would then have the troops here, which still results in them being paid salaries, right?
The cost of a war isn’t just fuel for planes, bombs to drop and bullets to shoot. It is also salaries for our soldiers, salaries for the development of weapons, salaries for places like Eglin and other bases. If the total spent goes down that support to the economy goes down too.
You won’t see me argue for greater federal spending in the general sense. But I will argue that until and unless you deal with the energy situation and our 40 years of stupidity in that regard walking away from the sources of our nation’s energy isn’t exactly smart.
Worse, however, Alan Grayson wants to give 90% of the money he would "save" through this move to "the people", thereby not actually withdrawing the deficit spending (which we should do), but instead shifting it.
$16 billion of "deficit reduction", so he claims. But he’s not mentioning the $1.6 trillion in deficit that we have.
Cutting $160 billion wouldn’t be all that bad of an idea – that would be 10% of the deficit, and might actually matter. Indeed, it would be what I’d call "a good start."
But 1%?
That’s pissing into a hurricane.
Nice try at populism draped in a false cloak of "fiscal responsibility" Alan.
It’s unfortunate that "on the numbers" your bill displays an IQ smaller than your shoe size.
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To Greece: Nut Up Or Shut Up
by ilene - May 20th, 2010 2:23 am
Karl Denninger’s advice…
To Greece: Nut Up Or Shut Up
The euro fell from the session high against the dollar and Swiss franc on Wednesday after Greece categorically denied market rumors which said it was considering leaving the European Union or the euro zone.
Of course that didn’t take long to be "officially denied":
"We categorically deny any thought of leaving the European Union, or the euro zone," said government spokesman George Petalotis.
Then you have no chance.
Let’s be clear: The only way to do this is by surprise. Unilaterally, without any discussion with anyone else. Just like Germany did.
And Greece should do it right here, right now, today.
Nail those European Banks that played "too cute by half" and bought Greek debt expecting an intervention and "sticksave", then effectively extorted the Eurozone nations into providing it, exactly as happened here in the US with Fannie and Freddie paper.
Note that Spain was unable to make its debt auction yesterday; they are thus going to be unable to fund the alleged bailout. As such the promises Greece was made are in fact empty, and intended to screw the Greek people and their government.
It is time for someone to stand up and say in return "screw you!" to such tactics. Germany has laid the groundwork, now Greece needs to deliver the "coup de grace" to Sarcozy and his butt-buddies in Brussels.
Depart the Euro and at the same time declare by fiat all Euro-denominated Greek debt held…
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FOMC Analysis 4/28
by ilene - April 28th, 2010 6:56 pm
FOMC Analysis 4/28
Courtesy of Karl Denninger
Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve.
Borrowing and spending 10% of GDP makes it appear the economy is doing reasonably well and has improved. We continue to accumulate GDP distortions, however, and now are up to about 52%, or twice what we were going into 1931.
Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
That 52% distortion comes out of private demand, of course, and that shows up directly in unemployment, lack of real income growth (it’s negative when one removes transfer payments and handouts) and house prices. No banker in their right mind will lend to someone without a job or assets, ergo, credit remains tight.
Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls.
Business people are not as stupid as we think you are. Indeed, they’re putting pins in the Kewpie dolls with my name on them – daily.
Housing starts have edged up but remain at a depressed level.
Without a job you can’t buy a house, and nobody in their right mind would buy an overpriced house irrespective of income. We did that before and conned America – they wised up. Damn.
While bank lending continues to contract, financial market conditions remain supportive of economic growth.
Goldman Sachs’ HFT algorythm has been successful in passing shares of stock between each other and producing faux "prosperity" in the stock market. Ain’t it grand?
Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
The stock market, on the other hand, has priced in a roaring recovery. Oh, and that claim of "price stability"? Don’t look at oil, eh? No inflation there!
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
Yes, we have record oil inventories…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site