Public exchanges significantly minimize systemic risk
The Markets

OPEN MARKETS: WHY OTC DERIVATES MUST BE ABOLISHED

In his vastly underrated book, Traders, Guns and Money, the sharp-as-a-tack Satyajit Das takes us on a wild ride through the dazzling world of OTC derivatives. In it, he explains – in very entertaining fashion – why these markets are essentially festering piles of shit. Glossing over the (presumable) implementation of Dodd-Frank, it would appear that we have finally cleaned up this pile. Yet appearances, as they often tend to be, are deceiving. Despite regulation requiring central clearinghouses for OTC derivatives, all we’ve really done is slap some lipstick on the proverbial pig. And oh, what a pig it is. The…

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Global banking at its finest.
Signs of the Apocalypse, The Markets

PUTTING THE SHIT BACK INTO THE HORSE: IT’S TIME TO ENFORCE FAILURE

I won’t belabor the Cyprus debacle anymore than I’ve already done (I’ll leave that to my Twitter feed). Instead, I’ll talk about the bigger point, which is the complete breakdown of that age-old market truism known as Failure. Yes, failure is a cruel, cruel mistress. It’s also a part of any functioning economy. And as has been the case since the 1998 LTCM bailout, failure is not something central bankers and governments seem to keen to enforce. You may think that Cyprus represents failure at its best (or worst), given that many depositors will be taking a rather large haircut…

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Maybe it's time to rethink that tagline, fellas.
Macro View, Signs of the Apocalypse

KNEE DEEP IN BATS-SHIT: THE HFT SAGA CONTINUES…

It’s official: BATS has broken the not-so-new news that the technological wizardry behind its dark pool exchange likely violated SEC rules on order execution. From the WSJ: “Stock-exchange operator BATS Global Markets Inc. said Wednesday that a ‘system issue’ allowed hundreds of thousands of transactions in a four-year period to be executed at prices that might’ve violated securities rules.” In yet another example of how broken our markets have become, BATS has admitted to violating pricing rules, specifically NBBO rules. Of course, this is just the tiniest tip of the iceberg. Below the surface lies the rotting, festering corpse of…

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Will Nero finally issue a coin in his own image?
Signs of the Apocalypse

LIQUIDITY TRAP, MY ASS: MORE KRUGMAN MADNESS

I’ve tried to avoid the debate about the new-fangled trillion-dollar coin, mostly because I find it to be too fucking idiotic to warrant my time. But a man only has so much discipline, and it seems mine has been exhausted at this point – by none other than my new bestie, Paul Krugman, Esq. Krugman, as you may know pens a NY Times column entitled, “Conscience of a Liberal”. (“Rantings of a Fucking Idiot” somehow seems more appropriate.) In his most recent editorial, Krugman once again claims that we are in a liquidity trap. You know, I didn’t win the Nobel…

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Does this man scare you? He probably should.
Macro View, Signs of the Apocalypse

SIGNS OF THE APOCALYPSE: PAUL KRUGMAN FOR TREASURY SECRETARY

Let’s face it: we’re all pretty much screwed. Sure, we could all fret about this unseemly fact, but to be honest, that just doesn’t sound like much fun. Instead, it’s much more enjoyable to simply point out a few examples of why, precisely, we are all going to hell. Feel free to start drinking at any time. Without further adieu, the inaugural weekly installment of Signs of the Apocalypse: Paul Krugman For Treasury Secretary I don’t know whether to laugh or cry, after reading this chestnut of a headline from the Guardian’s website: Why Paul Krugman should be President Obama’s…

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The splendid exchange
The Markets

THE INAUGURAL: WELCOME TO LIMIT DOWN

As with all things, there must be a first, and so this is it. The first post on Limit Down, the blog with the mostest. I’m a bit of a mix, a mutt, if you will. On one hand, a brutal, wiseass cynic, waxing poetic about the epic amounts of misinformation, propaganda and B.S. violating our airwaves, brokerage accounts and politics. I’m also a hopeless idealist. I believe in free markets. I believe in the pricing mechanism. I believe in the specter of failure as the key to our overall economic success. I believe in competition and have no compunctions…

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The EU's grand achievement: squeezing risk premia to dangerous levels
The Markets

THE SPREAD COMPRESSION CONTINUES

I just read this post from The Big Picture blog about the continued spread compression in Europe. Since I don’t have permission, I can’t duplicate it, but go here to read it. My Take: This is just fucking insane. Central banks are squeezing the risk premium out of every conceivable market. The result is that traders & investors are essentially being forced into riskier assets, just to gain a modicum of yield. But with the pricing of higher-risk assets being squeezed both by spread compression and the sheer volume of trades going into these markets, the price of risk is…

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Yes, you should be upset...
The Markets

THIS WILL END IN TEARS: THE LUNACY OF PENSION FUNDS

While the media seems to be endlessly fixed on the non-starter that is the Fiscal Cliff, there is another cliff which many companies are about to drive straight off: the underfunding of pensions. Everywhere. In fact, ZeroHedge has entire section dedicated to it, and it makes for scintillating night-time reading: Pension funds have no hope of ever filling their funding gaps, short of the Treasury actually minting their trillion-dollar coin and sending the Dow straight to Pluto (before it inevitably collapse back into one of Dante’s circles of Hell…). And it’s all due to some very mistaken beliefs about what…

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Govt-Spending-Needs-Inflation
Macro View

WHY GOVERNMENT SPENDING REQUIRES ENDLESS INFLATION

With the funding requirements of endless government social programs rising, perhaps it’s time to address the real question: How can we possibly afford any of this? Back in the pre-World War I glory days, there was very little in the way of modern government social programs. Of course, the world then had to go blow itself up a couple of times, and what do you know? – the people wanted some form of lifestyle protection. And thus was born unemployment benefits, health care, public pensions, social security and other government spending programs designed to keep us all safe and happy….

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