Posts by Vladimir Plouzhnikov

Re: national security

I can't blame SpaceX for acting on an opportunity and playing the political and judicial system to gain a commercial advantage - they are a business trying to carve out a piece of the market dominated by big boys and must be aggressive to survive.

However, the system that can be played so blatantly and easily is a rubbish system.

Re: Because the alternative, progressive taxation, is just too hard.

"But over £1M and it's easier again, and total tax pressure dips to 30%."

Where did you get that from?

Re: Because the alternative, progressive taxation, is just too hard.

And if you add the VAT (20% of most things you buy except food and books) - you are actually paying closer to 70%-75% if you are in the "additional" tax band.

Re: Because the alternative, progressive taxation, is just too hard.

"Except that they did accept giving away more than half."

LOL! No, they didn't - which is why the system had to be changed. When you are taxed that much it becomes better to risk the consequences and evade tax than to pay up.

Re: Because the alternative, progressive taxation, is just too hard.

People will never accept having to give away half or more of what they personally earn (in fact, they already give away more than half if you count the NI and indirect taxes but it does not count quite as much psychologically). The higher you put the tax rate, the less tax you will collect.

Re: Because the alternative, progressive taxation, is just too hard.

Progressive taxation? We already have progressive taxation, haven't you heard? And it has already reached the max limit of what it can ever be. What then do you actually propose?

Re: Interestingly*

I'll see how they'll oppose their thumbs against a charge of birdshot! Bwahahahah!

Re: Interestingly*

"The sex chromosomes of birds (referred to as Z and W) work the other way round to the mammalian XY system."

What do you expect from a bunch of bloody dinosaurs?

Re: I don't think investor is a fair term anymore

"High speed trading removed rumors and gossip and simply algorithmically trade based on much narrower trends which have no logic or reason behind them." and "So now, even less than ever before is the stock market based on the actual performance of a company."

This is simply not true. Without saying whether algo trading is good or bad, no one has banned you from trading according to whatever system you like. You want to buy? You want to sell? Follow the chart? Use technicals? Read the FT? Throw dice? I guarantee you will not notice any impact of algo (or HFT) trading at all unless you day trade.

"No education is needed by the investors and just a "big ol' set of balls" is needed to gamble and risk large amounts of money."

Do you believe that stock markets were originally the abode of high scholars and professors of fine art?

Re: Speculation!!!! It's worse than that...

Firstly, these 20k are not brokerage fees, they are the trading P&L and if a brokerage house is doing what you described in your example, that profit belongs to the principal client, not to the brokers.

Quite separately, the broker will charge the client its fee for doing the trades - those will be the brokerage fees. If there is very little or no benefit or necessity for the client to do these trades but the broker is doing them anyway, this is known as "churning" and is a form of fraud or breach of fiduciary duty, but that's a whole different story...

Back to your example - let's assume that the broker is acting in good faith and has found an arbitrage opportunity which is likely to benefit his client. Let's also assume for simplicity that the best offer in Chicago and the best bid in NY are precisely 1 million MSFT shares.

When the broker buys MSFT shares in Chicago at 39.67 the exchange fills the order and all offers at that price are taken up, the next best offer is 36.68. In New York, the broker similarly sells the million shares 36.69 and the new best bid is now also 36.68.

By making his arbitrage trade the broker caused the two markets to synchronise.

You call it "coin flipping" but it is exactly the opposite. It's known as "risk-free" transaction and whenever an opportunity for a risk-free profit exists it is a sign of inefficiency in the market. After that trade there is no more opportunity for a risk-free profit and therefore the inefficiency is gone (for now).

If, however, the broker were to just buy some MSFT shares for the client in the hope that eventually its value will rise - that would have been coin flipping, aka speculation. But, oh, wait - the ultra-leftist public here calls this an "investment", go figure...

Re: Tim Worstall, Devil's Advocate

Bam! You have just killed your strawman. You are hereby charged with aggravated murder-death-kill of an economic argument by drowning it in a flood of unrelated ideological manure.

"they are nothing but parasites."

You forgot the Dragons. Ask Mage here - [s]he knows all about Dragons...

Re: What's wrong: "Flash boys"

Readers reviews on the Amazon page for that masterpiece are even more interesting.

Re: Speculation @Mage

You win, Mage. Can't beat Dragons, you know...

Re: Conservation of value.. @Ledswinger

I think we are, I'm afraid...

Re: Conservation of value..

"All cash money 'made' by the city and the finance 'industry' is taken directly from someone elses pocket."

It would have been true if the economy was a zero-sum game, which it isn't...

Re: Speculation

"Bollocks. Speculation is part of the bubble process and in the medium term destroys liquidity by funnelling money out of the system and into the pockets of a tiny number of aristocrats who can then live the rest of their lives without contributing anything to the economy, as can their kids."

Bollocks to you, Sir. You have responded with some wild assortment of unsubstantiated ideological slogans at the level of instinctive class-based animosity. Messrs Marx or Lenin would have chewed your "argument" to pieces and spat it out in 2 seconds. :-)

"HFT is a violation of that principle, because some players have the information before others and thus can react before others. As a consequence, economic theory states that we should be better off without them."

When you make a trade that action by itself provides information to the market. It's no different in the case of HFT.

When it buys it moves the market up, when it sells it moves it down. When it buys and sells in one market it narrows the bid/offer spread there, when it buys and sells across different markets it equalises the prices between those markets. That is the function of arbitrage which is necessary for efficient markets. Please note that it is not an opinion, it's axiomatic.

Continuing the thermodynamics analogy, you can consider HFT as a conductor between 2 systems isolated from each other (either temporally or spatially), which allows them to achieve equilibrium according to the 2nd law.

One can argue if HFT is a particularly efficient implementation of this mechanism or is manual market-making somehow a better choice. On the face of it, HFT looks more efficient and the fact that it is squeezing out traditional market-making also suggests the same.

The money that you lament HFT is apparently charging the markets for providing that function has also been charged before, except the total cost with manual market-making must necessarily have been higher for the markets than with HFT.

The big difference is that the HFT has entered the public imagination on the crest of the FUD wave and the "machines are taking over the world" hysteria, while the exchange locals were largely unknown outside the trading world and the public largely did not even know of their existence.

Re: Speculation @Don Jefe

I don't know. In my post I only addressed the issue of speculation per se. I did not talk about HFT at all. I don't think the OP did either (although [s]he seems to object to the use of the Hubble Space Telescope for some reason).

HFT is not speculation but rather an arbitrage process, so this aspect of the discussion is moot anyway.

"if there are other ways of achieving it other than having high tech parasites sucking a bit of money each time they exploit a price difference, we should be using it"

Are you hoping for some kind of economic perpetual motion? A work done at no cost?

That will violate the 1st and 2nd laws of thermodynamics, don't you think?

Re: Speculation

You obviously don't have any idea of what are you talking. It's like saying that HDDs in computers are parasitic because all they do is making a whirring noise and making a light blink.

Speculation is taking a risk (that is the definition), therefore, speculators are buying risk from those who want to reduce theirs. In doing so they automatically bring information to the market, assisting in price discovery. All of that also means that they create liquidity which makes markets more efficient and less costly for other participants.

Re: GOOD! @Vladimir Plouzhnikov

OED!? Oh, yeah, you can always trust that lot to put a French word directly into an English dictionary!

Re: GOOD! @Voland

Ahem, "Tartare" is a dish of minced raw meat which is called a "steak" so as not to frighten uninitiated customers. The sauce is called "Tartar". And it's all tatar to me...

No, they just take a long and winding road...

Re: having to take a teapot to work

"I haven't yet found another tea that I like more for every day (although I've been trying different ones for the last 6 months or so)."

Try Keemun or Russian tarakan, sorry Caravan.

Won't fit into the pound-a-day budget, though, I think...

Re: Four words ...

Are you rejecting the Revealing Science of God? You. Mister.

Re: Finally

"after painting the rims of your CDs DVDs Blu-rays black with the most exquisite black marker on the planet"

Hahahah! You've been conned - everyone knows you should use a green marker!