Later On

A blog written for those whose interests more or less match mine.

Archive for July 1st, 2019

Reimagining the Structure of Wall Street in the National Interest

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An interesting idea set out in Wall Street on Parade by Pam Martens and Russ Martens:

The current fragmented, opaque, and deeply conflicted structure of the U.S. stock market as well as the structure of the giant Wall Street banks that interact in every imaginable way with capital formation in America, is not in the public interest, the national interest or in the interest of capitalism itself.

Let’s start with the structure of the stock market. Those quaint video clips that you see on television of traders mulling about on the floor of the New York Stock Exchange at 11 Wall Street in Manhattan, as executives from some new company that just listed its shares ring the bell to begin stock trading, is meant to lull the public into a sense of confidence that humans are still in charge and looking out for your retirement investments in your 401(k) or public pension plan.

But 11 Wall Street is no longer the epicenter of stock trading in the United States. The truth is, there is no epicenter but rather a sprawling, opaque global network of Dark Pools owned by the big Wall Street banks trading stocks in darkness; the same Wall Street banks trading stocks in a system known as “internalization”; and more than a dozen stock exchanges, the names of which are unknown to the average American.

In a June 3 speech by Brett Redfearn, the Director of the Division of Trading and Markets at the Securities and Exchange Commission (who is, himself, legally ensnarled in this mess of a market), he described the U.S. market as follows: there are 13 stock exchanges that “collectively execute around 63 percent of volume in U.S. listed stocks but “no single exchange has even a 20 percent market share.” Then there are 32 Dark Pools, also known as “Alternative Trading Systems (ATSs)” which Redfearn politely describe as allowing “their participants to interact in a more discreet fashion.” In fact, the SEC and other regulators have repeatedly charged these secretive Dark Pools, which are owned by the biggest banks on Wall Street, with gaming the system. (See related articles below.) And yet, the Dark Pools continue to flourish under the nose of the SEC.

While television serves up those quaint men in trader jackets on the floor of the New York Stock Exchange like a comfort blanket to disarm the psyche of the American people, Redfearn goes on in his speech to describe where the real action is taking place:

Instead of a trading floor in Manhattan, the locus of exchange trading is now largely in suburban data centers in places like Mahwah, Secaucus, and Carteret, New Jersey. These data centers contain rows and rows of server racks, and vital trading advantages can go to those trading firms that have their machines ‘co-located’ in these racks. In addition, exchanges now sell a spectrum of data products and connectivity services in their data centers that have helped fuel a low-latency arms race. These include proprietary data products with expansive trading information, as well as low-latency connectivity services, such as 40 Gb cross-connects and microwave transmission of data among geographically dispersed data centers. These data products and connectivity services can shave crucial microseconds off of the latencies of competing brokers and trading firms.

Add high-frequency traders and algorithms and artificial intelligence software to this mess and it’s easy to see that the iconic American stock market has been replaced with a Frankenstein’s monster version of stock trading.

At a Senate Banking Subcommittee hearing in June of 2014, Senator Elizabeth Warren explained who benefits from this high-speed arms race and opaque, fragmented trading venues. Warren stated:

For me the term high frequency trading seems wrong. You know this isn’t trading. Traders have good days and bad days. Some days they make good trades and they make lots of money and some days they have bad trades and they lose a lot of money. But high frequency traders have only good days.

In its recent IPO filing, the high frequency trading firm, Virtu, reported that it had been trading for 1,238 days and it had made money on 1,237 of those days…The question is that high frequency trading firms aren’t making money by taking on risks. They’re making money by charging a very small fee to investors. And the question is whether they’re charging that fee in return for providing a valuable service or they’re charging that fee by just skimming a little money off the top of every trade…

High frequency trading reminds me a little of the scam in Office Space. You know, you take just a little bit of money from every trade in the hope that no one will complain. But taking a little bit of money from zillions of trades adds up to billions of dollars in profits for these high frequency traders and billions of dollars in losses for our retirement funds and our mutual funds and everybody else in the market place. It also means a tilt in the playing field for those who don’t have the information or have the access to the speed or big enough to play in this game.

This fragmented mess of darkness for stock trading incentivized by pure greed, must return to the original concept of what a stock exchange’s function must be: a vehicle for the fair, efficient and orderly share price discovery process and capital allocation to worthy industries in America that will innovate to keep America competitive and will thrive and grow to create good-paying jobs for our nation’s citizens.

Regulation needs to be tightened on all the stock exchanges and the Dark Pools and internalizers need to be outlawed. The ability of the stock exchanges to charge over $150,000 a month to offer high-speed co-location computer services and faster data feeds to those with deep pockets also needs to be outlawed. Existing law is adequate to do just that since the stock exchanges are not allowed to discriminate against market participants.

The Wall Street banks are a bigger, darker and more conflicted mess than the stock trading platforms. More importantly, they are exponentially more dangerous — as the world realized in 2008 when they blew up the U.S. housing market, the U.S. economy, and the stock market.

Under one roof, Wall Street banks are now allowed to perform the following functions: the investment bank is allowed to put corporate mergers together or underwrite a new stock offering and collect millions of dollars in fees. Then the same bank’s research analyst frequently puts out a buy rating on the stock. That buy rating is then communicated to the thousands of retail stockbrokers (today known as financial advisors) that reside in the same bank’s brokerage firm, which feel intimidated into calling up their retail clients and suggesting they act on that “buy” recommendation. That same bank holding company is also allowed to own a giant commercial bank which holds upwards of one trillion dollars in deposits, the bulk of which are Federally-insured and backstopped by the U.S. taxpayer. Under existing law, some of those Federally-insured deposits can be used as gambling casino chips and used to make trades in high-risk derivatives.

Today, the Federally-insured commercial banks of four of the largest Wall Street firms are sitting on a powder-keg of $177 trillion in notional amount (face amount) of derivatives. That breaks down as follows as of March 31, 2019 according to the regulator of national banks, the Office of the Comptroller of the Currency: JPMorgan Chase has $59 trillion; Citibank has $51 trillion; Goldman Sachs Bank USA has $47 trillion; and Bank of America has $20 trillion. (See Table 3 in the Appendix of the OCC report here.)

No Federal regulator and no Congressional committee can explain why these four Federally-insured banks need to have $177 trillion in derivatives and why it is that they control 89 percent of all derivatives held by all 5,362 Federally-insured banks in the country. When it comes to Congress, it has not even asked the question, despite the fact that derivatives played a key role in blowing up the U.S. financial system in 2008 and four years later blew a $6.2 billion hole in depositors’ money at JPMorgan Chase. (See Looking Back on JPMorgan’s London Whale Saga.)

The late Senator John McCain, the ranking Republican member of the Senate’s Permanent Subcommittee on Investigations which formally probed the London Whale matter, issued this written statement in 2013: . . .

Continue reading. There’s much more.

Written by LeisureGuy

1 July 2019 at 9:46 am

Sea Levels Rising Faster Than Expected

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From Olive Oil Times by Isabel Putinja:

A new scientific study warns that global sea levels are rising faster than previously predicted.

According to earlier predictions elaborated in a report published in 2013 by the Intergovernmental Panel on Climate Change (IPCC), sea levels were expected to rise by between 20 inches and 39 inches by the year 2100.

But this recent study, published on May 20, 2019, in the scientific journal Proceedings of the National Academy of Sciences, claims the IPCC’s 2013 prediction is inaccurate and that the actual sea level rise will be much more – up to twice the level predicted.

This structured expert judgement study was conducted by a research team of 22 international scientists who examined the current situation in Greenland, West Antarctica and East Antarctica. Based on their findings, they estimated the future global sea level rise according to low and high temperature rises.

In a best-case scenario where global temperatures rise by only two degrees Celsius, sea levels are predicted to rise by between 10 inches and 32 inches by 2100. This would be in line with the 2016 Paris Agreement’s aim is to keep the temperature rise below 3.6 degrees Fahrenheit.

However, if temperatures increase by nine degrees Fahrenheit due to growing greenhouse gas emissions, the scientists estimate a sea level rise of between 20 inches and 70 inches. But when factoring in thermal expansion and the contribution played by the melting ice caps in Greenland and Antarctica, the scientists warn that the increase of sea levels could even exceed 6.5 feet.

“For 2100, the ice sheet contribution is very likely in the range of seven to 178 centimeters (2.5 to 70 inches), but once you add in glaciers and ice caps outside the ice sheets and thermal expansion of the seas, you tip well over two meters (6.5 feet),” Jonathan Bamber, the study’s lead author, said.

The study’s conclusion starkly warns that a 6.5-foot rise in the global sea level would have “profound consequences for humanity.”

“Such a rise in global sea level could result in land loss of 1.79 million square kilometers (691,000 square miles), including critical regions of food production, and potential displacement of up to 187 million people,” said Bamber.

Among the areas that could be impacted most are North Africa and the Middle East, both of which account for about 21 percent of the world’s olive oil production and 58 percent of the world’s table olive production, according to the International Olive Council.

Earlier this year, the World Meteorological Organization (WMO) warned that the impacts of climate change are accelerating and that the past four years have been the warmest on record. . .

Continue reading.

And what do you think the US will do? So far, its efforts have been to increase the burning of fossil fuels, and those efforts have been successful: “CO2 Levels in Atmosphere Rise for Seventh Consecutive Year.” From that article, also by Isabel Putinja:

New data reveals that the concentration of carbon dioxide in the atmosphere rose to record levels during the month of May.

According to readings released on June 4, 2019 by the Mauna Loa Observatory in Hawaii, the U.S. National Oceanic and Atmospheric Administration (NOAA) and Scripps Institution of Oceanography at the University of California, San Diego, carbon dioxide levels averaged 414.7 parts per million (ppm) in May 2019. This is 3.5 ppm higher than the amount measured at the same time last year.

This is the seventh consecutive year that carbon dioxide levels have increased. This year’s levels also represent the highest seasonal peak recorded and the second highest annual rise in the past 60 years.

In the past decade, rising carbon dioxide levels have been reaching an average annual growth rate of 2.2 ppm compared to 1.5 ppm in the 1990s. More recently, this figure has climbed even higher and faster.

Carbon dioxide levels have been monitored since 1958 at the Mauna Loa Observatory, located in the Pacific Ocean on top of Hawaii’s biggest volcano.

“It is critically important to have these accurate long-term measurements of CO2 in order to understand how quickly fossil fuels are changing our climate,” said Pieter Tans, a senior scientist at NOAA’s Global Monitoring Division. “These are measurements of the real atmosphere, and do not depend on any models, but they help us verify climate model projections, which if anything have underestimated the rapid pace of climate change being observed.”

Increasing concentrations of carbon dioxide in the atmosphere are an indication of an increase in the burning of fossil fuels.

If we stopped immediately the burning of fossil fuels, the global climate would continue to heat for the next 60 years. I think it’s pretty clear that we are doomed.

Written by LeisureGuy

1 July 2019 at 8:18 am

I Coloniali and Hermès Eau d’orange verte with the Fine aluminum slant

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A very nice lather from I Coloniali and the Plisson European Grey Badger brush set me up for the shave, and the Fine aluminum slant is highly efficient so the result is extremely smooth. However, for me it’s not quite so comfortable in that it tends to nick, and I did get three small nicks. Not quite sure why, and that may vary somewhat by person, but I would rate it as very efficient and somewhat comfortable.

A small squirt of Hermès d’orange verte as an aftershave balm, and the new week and the new month begin.

Written by LeisureGuy

1 July 2019 at 7:58 am

Posted in Daily life

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