Doomsdayers Not Cynical Enough
By: Rick Ackerman
Thursday, 9 September 2010
[Like your editor, Rick’s Picks forum regular Wayne Razzi (aka “Red Will”) is a veteran floor-trader who grew up in South Jersey. When I asked him if he would like to contribute a guest commentary, I was not expecting the provocative tour de force that unfolds, step by step, below. In the essay, Will asserts nothing less that that the impending collapse of our economic system was meticulously engineered by financial and political sociopaths. Let me attest that his is not some whack-o conspiracy theory; rather, it is the closely-reasoned argument of a highly intelligent person who values truth sufficiently to have searched for it, in the form of an answer to a profoundly disturbing question, for many years. Judge for yourself whether his conclusions tally with your own thoughts as to why the American Dream is about to go bust. RA]
As a regular reader of Rick’s Picks and occasional commentator within the forum, I was happy to accept Rick’s offer to contribute a guest commentary. Unfortunately, my happiness faded rather quickly as each day of the week passed and with each, more and more commentary appeared within the forum. Normally I am pleased to read through the robust collection of viewpoints and argumentation. However, and quite regrettably, these are not normal times! With each day, and each comment, and each reply, I witnessed a slow motion, apathetic paraphrasing of much of my prepared commentary by faceless strangers!
So with my best-written plans bested by many of you bloviators. ;- ) , I elected to go with something entirely different instead of offering my all-too-similar take on many of the economic issues that were covered and subsequently expanded upon within the forum.
I have a few things in common with Rick, one of which is having been born and raised in southern New Jersey. We also share the fact that both of us spent at least a decade or so as a professional on-floor equity options market maker. I note this commonality because there is a tendency amongst peer traders to assume that everyone “knows what we know” and ironically, many of the same traders also believe that they have some sort of proprietary edge that many other traders do not possess. Thinking of this is what helped me to find what I hope will be a little fresh material for you.
I am going to present few disparate items here but I believe that there is one singular lesson that is worth learning and worth learning now more than at any other time in my career. I will start off with the “micro,” by which I mean something that I can testify to from having witnessed it within my own little world. I cannot speak for Rick, but I would suspect the same.
Incompetent, But Curious
After being hazed all day and into most evenings by my firm’s Options Specialists for about six months, I was given a seat on the trading floor. It is from that point on that I began the conversion from business school idealist to incompetent cynic. In fact, well before I officially became a trader, I witnessed “broad daylight” collusion every day. The myths of the “fair and orderly market” and the “competitive open outcry system” were dispelled almost immediately as soon as I had learned enough as a trainee to be able to slow down the frenetic action to a pace that was comprehensible. What do I mean? Why is this important? Well, in theory, the traders of options on a given stock are supposed to be competitors that do not cooperate with other members to set market prices on which the public will execute trades. The reality is that the main trader, typically the specialist, makes the bid-ask spread market and the majority of the time the entire trading crowd simply states their level of commitment to the market that he has made. Here is the problem, OUR watch-dog, the SEC, rarely if ever has done anything about this clear violation of the law. Many techniques and devices are employed to encourage market makers to play ball. Any time spent on some of the options floors over the years would have revealed this to the SEC. This means… they know it and they just do not care. They have always known it. This may not be a revelation here in 2010 with Rick’s “crowd” being a rather enlightened one, but 20 years ago this matter-of-fact flouting of the law initially stunned this “Econ/Finance” dual-major as these business practices were conspicuously absent from the textbooks. What does this prove? It proves what many of you — but until recently not nearly enough people — believed: The government is entirely about strategic, selective prosecution. Shocked, right? The government and the markets are corrupt! I am sure that many of you are floored! Hold on though, I am “going somewhere” with this as it is stated.
As you have probably already guessed, this “welcome to the real world of our markets” experience put me on a path that would shatter nearly all of my idealistic beliefs about a country with systems that I was raised to revere. Just in case you weren’t sure how corrupt things actually are within our markets, it’s my hope that any faith that you may have reserved is fully gone by now because if it can happen in plain view amongst competitors then much more can clearly occur behind closed doors. Let’s get back to that “assume that others know what you know” concept and in doing so, we’ll leap ahead in time by about five years.
Beneath the Surface
As the years in the options markets and on the floors and desks began to add up, less and less of the reality being presented to me actually made any sense to me at all. For the first five or so years of my career, the Internet wasn’t there to reference at all. The next few years brought some maturation to the Internet but the information available from it wasn’t nearly as raw and diverse as it is for us today. This made for tedious times when I would search for hours nearly every weeknight in an ongoing effort to learn more of the truth that I believed was out there somewhere. I gradually stopped feeling as though the marketplace was littered with cheaters and manipulators, as it always had been, and began to feel as though there was much more at work beneath the surface.
Yes, you are on to me again, I sensed the dreaded “conspiracy.” “Conspiracy theorist” isn’t the kind of description that most people would seek to invite upon themselves, but labels never really bothered me. I raise this because I want to encourage folks to stay on the path they are on in seeking the truth, despite the fact that I do not hold the answers, as I believe that the trends and developments that we’ve had to contend with over the past 20 years cannot be purely coincidental. These persistent and evolving feelings continued to develop and eventually led me to think of things within a simplistic biological construct in an attempt to draw the best analogy that I could. This was somewhat ironic because biology could very well be my area of greatest ignorance and not for a lack of competition. Fortunately, after searching for commentary that contained the analogies I was drawing, and before I was forced to relearn all the “stuff” from high school bio that I’d forgotten, a much more intelligent and well informed commentator brought forth the best description that I have found to describe what has and is happening to Uncle Sam and by extension his subjects. Her name is Catherine Austin Fitts, and although it remains impossible for me to verify her claims and research, her “take” on things seems the most plausible to me of all that I’ve researched and considered. Her profile has risen dramatically since I first encountered some of her work about 12 years ago but, in the case that readers haven’t come across her work, I encourage them to stop by her site even just to briefly peruse her writings. Her “type” of information (things like $2.3 TRILLION missing from our Federal Government) is what I was referring to when I noted how traders assume that other traders possess the same information. I hope that she will not mind me sharing this from her Solari website, as it is the basis for the operating thesis that I’ve co-opted ever since then:
In a tapeworm economy a small group of insiders centralize political and economic power at the expense of people, living things and the environment, in a manner that destroys real wealth. A tapeworm economy is one in which it is considered acceptable to make money from our popsicle index (Ed.- established societal standards) going down. In investment terms, it is an economy with a negative return on investment. It is parasitic in nature.
The way an actual tapeworm operates is to inject its host with a chemical that makes the host crave what is good for the tapeworm and bad for the host. So the Tapeworm Economy is adept at using media and education and numerous financial incentives to get us acting against our own strategic interests and instead supporting and depending on the Tapeworm.
The symptoms of the Tapeworm are many – narcotics trafficking that targets our children, runaway exploitive and predatory corporate practices such as the patenting of life, terminator seed and the destruction of our topsoil and food supply, fraudulent inducement of debt to homeowners, students and consumers, suppression of knowledge and renewable energy technology, criminal mismanagement of government credit and resources, black budget operations and the manipulation of currency, financial and precious metal prices and markets. These practices introduce organized crime throughout all aspects of our lives… these transactions drain our families and neighborhoods on a daily basis – much like a tapeworm drains its host.
A Revelation from Ms. Fitts