Tuesday, October 18, 2011


The Grauniad announced today that the EU rescue facility would be leveraged to upwards of 2 trillion Euros. A typo no doubt, then again the newspaper gets it wrong so many times that one thinks it must be affiliated with The Times with whom it shares a unique view of the world from the far left.  Unaware of the reputation of the source, the stock boys bought everything in sight and reversed a dreadful daily performance to a 140 point DOW gain at the close.  For the life of me I simply don't understand how this mob on Wall Street has any credability left.  Alost makes one want to pull out one's bell-bottom, psychedelic-dyed, 1969 bottoms, get stoned and join the sit in at Zuccotti Park.  Radical, Dude. Maybe these guys are right...now we just gotta figure out what they're right about but aint it fun?

Come to think of it, the take over Wall Street movement has a lot in common with the Street's reaction to the events in Europe: neither mob has the slightest idea of what the hell is going on.  What astonishes me is the complete absence of any comment from the Exchange executives condemming the "trading on rumor" activities of the past few sessions for, after all, this is real money we're talking about here.  It is clear that no thought is going into this thing at all with key words and the push of a button (or however the hell they do it) moving markets by 300 points in the blink of an eye.  They all seem to have bought their algorithms from the same vendor as well because once it starts it's one way traffic from then on.  I wonder if there is anything about this in Dodd/Frank?

Speaking of that legislative jewel, I have spent more than a few hours pouring over it and for the life of me I have never reaad a more confusing, inpenatrable, improbable mis-mash in my life.  It's so bad the the high priced and high powered firm of Jones, Day, Reavis & Pogue have actually developed a web site to walk interested parties through the morass and developments in the formation of laws to implement the legislation.  Unless you are getting tired of self-flagelation, don't go there.  Stick with the whips, chains or whatever you have handy.  If away from home, poke yourself in the eye but DON'T GO THERE!  Aside from the fact that the legislation was written in large measure to score political points and extract a pound of flesh, what is worse it seems to have been written with really very little thought or actual knowledge of the activities it seeks to regulate.

The latest argument and the one receiving the most press primarily because of its sponsor is that over the "Volker Rule" which seeks to ban trading on the part of deposit takers for one's own account or in the acronym, "Prop Trading."  A number of institutions have already shut down their prop trading desks in anticipation of the rules being written but was has recently occurred has been a disagreement as to what constituties prop trading not just beetween the industry and the rule-writers but among the rule-writers and enforcers as well.  What, for example is the best way to fill a client's order?  To operate essentially in the "spot" market or to pre-position product that as a result of the relationship with the client creats the awareness of a future demand?  Does that constitute prop trading?  To an extent part of the problem is that the Fed doesn't like Treasury, Treasury doesn't like the commodity boys and they all loath the FDIC which is in part a legacy of The Bair of Very Little Brain.  It also is a reflection of how poorly the legislation was drafted in the first palce...which is of course a microcausim of the mess that is Washington is at the present moment.  As a result of all of this, I've decided that I simply can't comment on how issuess should be resolved--I have neither the resources nor the time--but reserve my efforts to commentary as to the manner in which they are resolved and the possible future effect these decisions will have.  To the extent I can offer suggestions I shall, but allow me to express my apologies for the self-imposed limitations of a solitary comintator.  Dodd/Frank has beaten me.  I have the solice of being certain I will not be alone.  Later, dudes.

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