To Do Lists vs Not To Do Lists

Posted in Uncategorized on April 14, 2014 by Mark St.Cyr

It’s one thing to focus on priorities, or the proverbial “what needs to be done” however, it’s just as important (if not more so) to focus on tasks that need to be avoided. Then: Avoid them!

Understanding there are tasks that need to be avoided: then doing just that, allows one the ability to both remain or increase one’s focus in accomplishing the most important priorities at hand.

In today’s world of “productivity enhancers” one thing they seem to have more in common than ever before is the ability to distract attention away from what one should be doing with a feeling of pseudo accomplishment.

Busy work is just that, “busy.” Just because you’re checking your email or your social network status for the trillionth time before coffee accomplishes squat. Sitting still and taking time to think and plan mentally in that same time period many times is far, far, far, (did I say far?) more effective for productivity.

If you’ve had issues with getting tasks done, or even making a list then following it, try this and see if it yields tangible results you can actually benefit from.

Instead of writing 10 things you need to get done today or tomorrow, try writing down just ONE. That’s not a typo.

Write down “the” most important thing you need to get done where you will not end your day without accomplishing. Something that once accomplished or completed would give you satisfaction and help move you forward in what ever your quest. Then…

Write down ONE disrupting, time draining, distraction you do during the day.

Write it in bold letters in a place where it will remind you too not do it! e.g., Put a large note right next to your keyboard or a sticky on your phone as to curb impulsively checking emails, social networks, playing games, etc. Something you know you do that if you changed your habits: the world would not spin-off its axis. e.g., If someone “Likes” you in the morning, I’ll bet they’ll still like you by the PM. And if not, they really didn’t care to begin with so forget about them and get busy liking yourself getting things accomplished.

Emails can be checked on a scheduled time. i.e., Once in the morning, then noon, then mid afternoon. (Of course unless you’re on-call but again, you check “who” then if not a priority message, you don’t even open it till your designated time. And for some of the others, do I really need to even explain?

Start with this simple idea and premise first. Try it for at least 14 days. Go through the withdrawals, then reassess whether to expand or to adjust. You just might find you’ll get far more done by focusing on what not to do than trying to do everything in a substandard manner, all because you’ve been distracted with looking busy rather than actually accomplishing.

© 2014 Mark St.Cyr

Watching For The Goldman Ticket

Posted in Uncategorized with tags , on April 10, 2014 by Mark St.Cyr

In a world filled with innuendo, false flags, and more one thing remains constant: What is Goldman Sachs (GS) up to and more importantly – why?

No matter what one “thinks” about this firm one thing is incontrovertible: they didn’t get where they are because they’re stupid. Far from it.

There’s probably no other company on the world stage that has had more influence in financial matters than GS. Love them or hate them, it doesn’t matter. Yet, to ignore them or to take your eyes off as to discount even their smallest moves as “irrelevant” is at one’s own peril. For GS doesn’t make any move (even taking out the trash) without first considering all the ramifications or exploitations that can come of it first. Period.

Over the last few years to say things in the financial markets have changed would be an understatement. People, technology, regulations, and more have morphed for even the people who once were considered brilliant.

Even those amongst the financial media are now appearing to be scratching their heads more as the markets morph into something unrecognizable to a veteran market maven just 5 short years ago. And the one who seems to be quietly morphing and making moves uncharacteristically associated with Wall Street as one previously imagined is none other than GS itself.

Just the mere mention of GS conjures up conspiracy theories of puppet masters, influence peddling and more. It’s almost as if one is venturing down the path of an old-time parlor game of charades when trying to discuss or comprehend their financial implications or moves. However, the best way around all this is to employ a prism brought forward years ago by the late  Andrew Carnegie (I’m paraphrasing) : “The older I get the less I listen to what people say and the more I pay attention to what they do.” And GS is doing quite a few very interesting things that just leaves one thinking: Hmmmmmm.

When it comes to business, finance, or even politics one thing is certain: you need to look past the notion of impossible or improbable and contemplate that might be exactly why they’ll do.  For no one thinks they will – giving them the edge. And to forget GS is always in search of an edge is to do so at one’s own peril. (e.g., Genghis Kahn ordered his tribes to scale seemingly impossible mountains to attack his enemies precisely for those reasons – and he won)

What might seem as improbable or impossible at first blush just might be the determining factor for producing a profiting reality: no matter how far-reaching it seems. So with that in mind let’s hypothesize regardless how far-fetched or conspiratorial it may seem. And again, the why.

Over the past weeks HFT and all its effects were brought front and center via Michael Lewis’ book, Flash Boys (2014 W. W. Norton & Company). What it also brought attention to if one stepped back taking in a broader view, was the possibly of seeing the missing puzzle piece that helps explain GS’ moves over the past few years, possibly clarifying what too many looked more like a Rorschach test, rather than an unfinished puzzle it just might be.

Remember back in 2012 Reuters™ wrote an article: “Special report: Goldman’s promised land: Salt Lake City” (original article here)

Many were left thinking, “Yeah, OK big deal a new office closer to the west coast. So what?” However, it just struck me a little strange, Utah? As opposed to California, or anywhere else? Why would a company that has always been in the absolute middle of where people, business, and more move there?

Unless that’s exactly what they now want: to be away from the very aspects they once coveted, for those very aspects have shown they may now have possibly become threatening liabilities to both infrastructure as well as staff. Let me explain…

Back in 2009 GS was wooed into choosing Salt Lake City with special tax breaks and incentives to open additional operations there. Probably these decisions were more in line with coming operations under the new regulations and more since it had now become a bank after the 2008 financial crisis, rather than just the investment firm it was known as. But then something interesting happened: The Occupy Wall Street (OWS) movement.

Suddenly the once heralded upper echelon of world financiers were thrown into a media stew of  “destroyers of the universe” rather than the “masters” they once embraced.

Since then operations and hiring has picked up at a pace more resembling a growing thriving industry rather than the downsizing, melee currently taking place in New York. Another thing you have far fewer of in Salt Lake than in NY is the amount of people locally to protest your industry and commandeer valuable infrastructure and most of all – the people themselves.

Salt Lake City has a growing, thriving population, but it aint no NYC by any means. However, the make up of business culture, and the sheer fewer amount of people to organize into protesters can be quite enticing to an industry that watched thousands parade banners, effigies, and more outside one’s place of work. Let alone when it seemed there were a complicit press more preoccupied with covering the story of an occupy mob on a bankers lawn, rather than worrying about whether the occupants or children inside were safe or not.

Then in 2012 Hurricane Sandy hit the east coast sending the region into total disarray. One of the things we learned during this storm is just how intertwined HFT is to the markets and quite possibly now dictates whether or not the markets will open unless HFT approves – first. (If one remembers the markets were closed two days by what was reported as HFT influence over the exchanges.)

One thing GS doesn’t like being is #2 in anything, and HFT seemed to be making that more of a reality. In a game where the arms race is merely speed: All that money, time, and effort put into people or the obtaining of people in positions of power as to benefit from such cultivation, becomes nearly null and void when your competitor only needs a faster computer to front run your own organic “front running” infrastructure.

There is no other choice than to either – you yourself re-arm and redeploy, or – decide you no longer will fight or play on that battlefield. Hence, the implications of that decision with the following ZH article: Triple Whammy Shocker: Goldman Shutting Down Sigma X? (Link here)

Put this into the context of where it’s now widely reported that GS has become a client of the HFT debilitating exchange IEX Group Inc. headed by CEO Brad Katsuyama featured in Mr. Lewis’ book where GS now seems to be back on (at the least) a level playing field for order execution. And the advantage pendulum once again swings back to GS’.

Not only is their human capital once again returned to Mt. Olympus status, but they get to tear up that page of the ledger dedicated to infrastructure spending on HFT ancillary items. What’s that worth? Millions? Billions? I’ll bet its enough to effect an earnings report that would make a non-GAAP social darling blush.

Throw in the newest mayoral election that installed what many deem as an anti-Wall Street, tax everything that moves or stands still legislature, and you not only get people looking for greener pastures, you bring back to the front of mind that just maybe they no longer need to “look”: they can grow their own even in the desert next to a lake of salt.

Maybe proximity isn’t worth as much as it once was. And quite possibly getting away from that once coveted proximity could be the new edge for the new “Wall Street.”

Imagine you are renowned for hiring the best and brightest for they flock to your doors because they can earn money in amounts unfathomable to middle America. But the “price” for those people trying to earn is also unfathomable once they fully understand a million dollars really doesn’t get you much in NYC after taxes and expenses. And both of those are on the rise seemingly faster there than anywhere else in the country.

But half of that gets you a whole lot more in middle America does it not? I’ll bet it goes more than double that in NYC. And the best and brightest might want to beat an even greater path to GS’ new front door if they don’t have to live in NY or NJ. It’s not like they are moving there in droves, quite the opposite, the exodus has already begun.

Move to Florida, California, Texas, or somewhere else you say? At least you have scenery, cityscape, and all the other attributes at least similar (although not exactly) as NY. But you would be forgetting that first item I stated earlier: A large population base where an OWS inspired group could easily (easily is the operative word) form and wreak havoc.

In Utah? Sure, but I’ll bet dollars to doughnuts far fewer in numbers. Plus, the culture doesn’t seem to lend itself easily for that styled or formed outrage. I could be wrong, but it’s something I would fit into my decision process if safety in another financial calamity happened again. Especially if I thought it could be even worse next time.

A few years back I wrote an article: A “Flick of the Switch”…could this be the next Nightmare on Main St.? In it I posited:

“A flick of the switch means if I have a business in location X, I can just flick a switch and operate in location Y. In years past most companies needed some sort of brick and mortar facility to conduct meaningful trade. That is no longer the norm. As a matter of fact, most of the newer successful businesses of the last decade have been ones that can operate anywhere.”  Followed with:

“…all of Wall St, all Insurance Companies, all Banks, all Online Retailers, all Accounting Firms, all _________ ( you fill in the blank). All of these fall into the “flick of the switch”  type of businesses. They can relocate anywhere in the world in the equivalent of a New York minute. I’m just scratching the surface.”

If we sat down over coffee and I asked your opinion on what you would make of quite possibly the worlds most influential wheelhouse of both political and financial headquarters opening a secondary office in a place many see as the antithesis of NYC and its financial centers. Along with the near sudden shift not only to disengage from former revenue streams but rather jettison them for pennies on the dollar, just at the time when Wall Street is once again being cast in a light of “rigged.”

Adding to that the demonstrated proof that the Federal Reserve as of now is still holding tight to the roll down of QE, and the markets are seemingly showing signs of stress. While at the same time the very firm that quite possibly has an insider edge and view unrivaled amongst its peers is calling or signaling the need for great caution. What would you think?

I know what I’d be thinking…

Who’s in charge of booking executive travel for GS? And has the term Sigma X changed to “Golden ticket?” For just like in the movie 2012 (Centropolis Entertainment 2009) the protagonist was only saved when he knew the type and color of the top 1% tickets.

And Goldman’s I would presume, just like their parachutes – are golden.

© 2014 Mark St.Cyr

As I Warn To Watch Your Step, I Fall Down

Posted in Uncategorized on April 8, 2014 by Mark St.Cyr

Irony has its moments, and it’s never more ironic than when that moment happens to one’s self.

As many of you may be aware I’ve been an avid runner for nearly 30 years. On average I run the equivalent of a marathon weekly and continue to this day. (5 miles a day – 4 to 7 times weekly)

I have run all that time outdoors in all weather conditions, heat, cold, freezing temps, rain, and so forth. I’m not crazy, I just have bought the proper gear over the years to do it comfortably for if I only ran in good weather – I would still be waiting for the right day to start.

Since my latest move to Columbus I have yet found a comfortable running route where I wouldn’t either get clipped by people not paying attention as I cross a street or entry way (I’m not one of those I’m running so you stop, I give cars the right of way) but I have found for some reason here, it’s as if I have a sign taped on me with a bounty “Hit this guy and win a free prize.” It’s been a little disconcerting.

Since the bad weather started last fall I decided to do what I deplore: running on a treadmill. However, I decided just maybe it’s for the best and so far its worked out and I was beginning to get used to it, although I couldn’t wait for the weather to break and look for a better route outside.

Since I’m at the facility here on the property during office hours I routinely bring issues up that may require a maintenance check for I probably use the machines collectively more than any other resident. What I began to notice were the treadmills (there are 2) were showing signs that something was amiss. So, as usual, I told the staff and they called for maintenance. One machine’s plug was pulled for the issue was obvious yet the other stayed in operation for it seemed fine to everyone else: except me.

For those not familiar with real running on a treadmill, if the belt for any reason (usually from wear) sticks as in momentarily freezes or slows for any reason, it can be enough to stutter step your run and you can find yourself in free-fall. It can be almost insusceptible to someone watching, but for the runner it can be unsettling.

Since the other machine was on a service call I decided to call one of the staff members in to demonstrate exactly what I was talking about for everyone else thought it was just fine. (most people were using it to walk rather than run) I showed them what was happening and what to look for and why they might not be aware, but I expressed it was truly a dangerous issue and needed to be fixed.

I then went on giving an explanation why I was still able to use it, for I knew how to work with such an issue until it was repaired (Just ran a little more to one side) and that I knew what I was doing, but not to think just because I was running on it meant there were no issue. They understood, thanked me, and went about their business.

Just two days later as the sun is shining and I’m deciding whether or not this is the “right” day as to look for a new route I decide: Nah, I’ll finish the week on the treadmill. So off to the clubhouse I go.

About a half a mile into my run yours truly, “the guy who knows how to run on these as to have no issue” has an issue and the machine stutters at exactly the wrong time, for I have both hands next to my head as I’m adjusting my headphones and running at a 10 minute mile pace.

I lose my balance and crash one leg onto the spinning tread and the other crashes across the shin on the side of the railed platform which in turn throws my legs out from underneath me in a spinning motion.

I go to place my hand as to save my face from the nearing spinning track only to have my hand once it hits spin underneath me bending my fingers into an unnatural, ungodly, nature not intentioned posture whipping me into a spinning bulk of flesh slamming me sideways parallel to the ground lodging me between a wall, the machine, and its spinning track against my back singing…Wrrrrrrrrrrrrrrrr!

I was a little more than dazed and wondered just how foolish I looked till I then tried to rise only to find my fingers dislocated in as I said before, an unnatural looking grotesque way.

In the end I was able to relocate my finger on my own although my hand in general blew up like a balloon for many of the knuckles themselves were jammed and painfully so. (So much so as I type this it’s been a little difficult.) What I hadn’t noticed was I was so preoccupied with my hand not until the next day did I notice I did near an equivalent job on my shin for it too swelled like a balloon.

All in all I was thankful (although I got pretty well banged up) for it could have been far worse.

So the moral of this story and the life lesson I’ve taken away from this whole experience is this:

If it’s dangerous, and you know it. The moment you say or think:” Yeah, but I’ll be OK” is exactly when you should stay away from it. For it will be exactly in that moment you’ll find out just how stupid you can be when you think you’re “so smart.”

© 2014 Mark St.Cyr

Stuck In A Psycho Babble Rut

Posted in Uncategorized with tags , on April 6, 2014 by Mark St.Cyr

For years many (and maybe more still) embraced the dribble that was touted as “defining characteristics” of what type of person one was. e.g., “If you were a tree, what type of tree would you be?” Absolute nonsense and irrelevant I have stated many times.

However, that didn’t stop it from being pushed through nearly every Human Resource (HR) department where one was instructed to use such qualifiers to gauge both prospective, as well as hired personnel to predetermine whether or not someone should be hired or promoted.

Personally I believe this has probably hurt or held back more qualified candidates from positions they may have been perfect for by affixing some “label” of: “This person picked the wrong tree so we cut them down.”

This type of thinking only needs to take hold in one HR office to then be spread throughout the corporate world propagating in a manner and form that would make a virus blush for its tenacity.

The other issue that I believe is hurting more companies than actually helping is this mindset and set of qualifiers seems to never evolve nor is back tested by the very people promoting it to see if the damn process is valid or even works!

I will bet dollars to doughnuts what never gets discussed in an exit meeting whether for voluntary separation or mandatory is the discussion of…

“Well, they weren’t right for that position because as it’s written here, for what tree they answered:  Ailanthus altissima. It’s so obvious. Quick, get our resident botanist in here and demand they answer why they didn’t catch this mismatch!”

Sounds foolish and it is. Yet, asking in the first place and giving the “correct” answer can make, break, or chainsaw one’s chances. And it’s still being perpetuated today. Why? Because it just seems so damn compelling regardless if it can pass the scientific method.

Can you imagine if you walked into an interview and were asked: What astrological sign are you? Most (I would hope all) would be appalled with good reason. However, the “what tree” hypothesis is pretty much the same is it not? e.g., “We really need an Aries for this job. Sorry, but Gemini’s are just too spooky with that mirror image thing for this company. Again sorry. Next!”

I’ve also written and spoke on one of my pet peeves, the “right brain – left brain” argument or qualifier. I’ve stated many times I believe this subject has been brain-dead for years. But again. you’ll hear it used near everywhere even though it’s now been proven via the scientific method (the only true standard that means anything) it was junk as in pseudoscience.

Its been debunked. (you can read more here) Yet, how often do you yourself still hear or read this theory as if it is now proven fact? I’ll bet you don’t have to think that hard, which gives weight to my point all the more.

In the mid 80′s when this form of psychometric was in its infancy as a prerequisite for hiring at larger companies, I came face to face with a near booklet resembling War and Peace in thickness of psyche styled questions that needed to be answered first as to move me to the next stage of the interview process. I indignantly refused to a then aghast HR director.

I shot back this question as I leafed through the pages: “Who evaluates my answers to these questions?” The reply?” Well  I do.” Then I followed with: “Where is your degree in psychology? I don’t see it hanging next to any other certification you have hanging on your wall. I don’t care what this job pays if this what it takes to be hired at this company – forget it!”

Believe it or not, I won that argument with some give and take on their part. I agreed to answer what I thought was appropriate – they agreed what ever I left blank was fine. I left nearly 80% blank. It seemed all they cared about was they could check off on a list I “filled” it out. This is why HR has so many issues that need to be addressed. They are more concerned with process rather than outcome. But that’s for another column.

After approximately 90 days on the job I was causing quite a ruckus. As a manager I shook up my department (I was in charge of the cook operation for a national roast-beef company.) The department was a mess. The staff was frustrated with other departments treating them like broken toys. Requests for needed upgrades and more fell on deaf ears. They were working long hours with mandatory overtime to keep up production and a whole lot of other issues too numerous to mention. I thought it was deplorable for a company of this stature. It was unnecessary and I decided to do something about it. For after all, this was now “my baby.”

I demanded needed or upgraded items. When I felt was being blown off, I put on a vivid demonstration that would make P.T.Barnum proud.

After the crew complaining for nearly a year about a problem maintenance would not solve with the ovens I shut everything down, taped 100′s of strips of paper inside the ovens as to show the issues with air flow, called the head of quality control, and the senior management to the cook room. Then as if I was on stage I told everyone to focus on the oven windows, hit the switch and let the little strips of paper speak for me. Then I said…

“How do you expect this department to put out a quality product to meet our schedule and customers demands when I can’t get these ovens not only adjusted: But even looked at?  And people want to hold this department accountable for low production numbers as if it’s our fault? I’ll stand here as long as it takes till someone wants to explain it too me.”

The problem was rectified 48 hours later. Our production went through the roof. So much so overtime dropped to near zero, and although I made a difference it also seemed I made some very jealous and angry coworkers. i.e., other department managers.

After about a month of smooth sailing I was called for a meeting with HR. The topic? Why wasn’t I coming in on Saturdays or only working 40 hours unlike the other departments that are running overtime? My response? “Because we don’t need to. Production is ahead of schedule, the staff is clearly now in control of the cook facility, and as you can see by our metrics we’re kicking butt against all other department. I really don’t fully understand the questioning. Am I missing something?”

Apparently I was, for it became abundantly clear they were thrilled with my turn around of the department however, the other managers were complaining that if they needed to be there late at night or on Saturdays that I should be compelled to do the same. Regardless if I was needed or not.

I was appalled (yes this does seem to be a recurring thing for me) the insinuation was clear, to quell the childlike behavior it was implied I needed to come in as to make the others “happy.” I would have none of it.

I shot back: “You mean to tell me that rather than use me as an example for them to get their departments in order so that they too can stop all the overtime issues they are facing as well as the company, you want to punish me for doing the right things so that people incapable of doing their own jobs get the satisfaction of seeing me held hostage as some form of compensation for their incompetence? Am I hearing this all correctly?”

After hemming and hawing it was finally admitted that that was exactly what they were implying. So, I did what seemed like my only true option: I quit. (They also had a policy where the management hierarchy would wear different colored hats to signify rank. Gold, then blue, then green, and so forth. When I started it was decided to not hurt anyone’s self-esteem and that everyone would now wear the same color regardless which became blue. I still have this hard hat some 30 years later for I saved it to remind me of the ridiculous thought processes displayed within a once very cutting edge company. For this thinking went hand in hand with the “what tree” philosophy.)

That company only a few short years later would close putting hundreds out of work. Personally as many of you know I did quite well over the years. I wonder still to this day what trees the other managers gave as answers on their questionnaires.

Again, I would bet dollars to doughnuts if I was able to view them I would read: Mighty Oak, Douglas Fir, Aspen, Ash, and so on. What I’ll bet you wouldn’t read was: Weeping Willow. At least then it might have a chance of having some validity for which has been proved, it does not. The only thing left to ponder on this whole notion in my view is: If a tree falls in a bankruptcy court, does it affect the judgement of the judge? But I digress.

Maybe you think I’m coming down hard on this topic for who am I to question psychological markers or traits that can be beneficial to the hiring process. It’s not like I have a degree or something. I mean, I didn’t even graduate from high school. (actually I have a GED from the University of Southern Maine. How many have a high school diploma from a University? Huh? Huh? Although that’s true I am trying to be funny for people get sooooo uptight about degrees or alphabet soup suffixes) However as it be, I think it’s a fair question so I’ll end with this:

I had been asked my opinion on a psychological evaluation form a person I’m close to received. As I went over it I was left slack-jawed that it was basically the same formulation of questions that I knew were garbage 30 years ago! Yet, there they were as if this were some revelation process that would tell HR or other management clues as to this persons makeup or more.

In what turned into a quest I decided to look into this further for I really couldn’t believe a major company of this size and scale would even be remotely affiliated using this criteria. (this is a publicly held company with Billions in market cap)

I looked back through my library and I found one of my books written by one of the top consultants in the country. He has worked not only for, but has provided one on one leadership counseling and developed strategies for some of the Fortune 50™ let alone 500.

In one of his books written back in the time period (the mid 80′s) of where much of this had originated. He himself had conducted and implemented proprietary metrics that seemed truly note worthy.

They were serious questions and criteria to be filled out with plotting, diagrams, and formulations that helped round out one category from another and so forth. The work and its implications even to a skeptic like myself were compelling. I knew this author and have admired his work for many years so I reached out to him and asked a simple question. (The conversation was private and I didn’t ask if I could share his name so I’m not being coy it’s in respect of inferred confidentiality. However what I can state, is this person does have a Ph.D in psychology, and at one time was the president of a company that specialized in psychometric analyzing tests. So it’s not as if this person doesn’t have standing on this very subject.)

I asked:

“Two quick questions to ask. Both pertain to the same book.

In your book XXXXX you illustrate many samplings of where one would enter numbers and answers then plot these within a system that produces lines or symbols that one can then visually reference to behavior patterns and so forth.

Would you (or do you) still use these as they stand today?

I am only asking because the book is now 25 years old. And sometimes what we once thought as gospel we later find wasn’t as relevant as we first thought.
Personally I find it fascinating and if I was ever to cite or demonstrate it, I want to make sure I give credit where credit is due properly.”

The response:

“I do not use this today. I no longer believe in “labeling” of any kind.

The material is not validated and is way out of date. I would discourage any use of it today.”

(There was a bit more but that’s all that’s needed to make the point)

That is exactly what people on the top of their game do. Even if they may have developed what they thought or considered cutting edge at the time. If it’s proven to not be what they first thought: they move on to better strategies or tactics. Even if it means calling their own past work irrelevant for today’s business world. That’s why I personally consider him a valuable resource.

Too few have the self-confidence and introspective to question themselves or their work and state openly their opinions even if it means calling themselves or their past work out of date or worse, possibly wrong. His candor was a breath of fresh air. So many others (others I know personally) would have went around and jawbone this or that in some dazzling display of trying to baffle with BS as they tried to do anything and everything not to contradict their own work regardless.

Which is probably the reason why we’ll find many of them still trying to convince any and all HR departments that their “New and Improved” version of psycho babble is different from the last.

Problem for the great majority…Some are still buying it.

© 2014 Mark St.Cyr

Am I Frontrunning The HFT Story?

Posted in Uncategorized with tags , on April 4, 2014 by Mark St.Cyr

I was asked the above question the other day. It was asked in a tone as if I just happened to write about the topic that now has both the financial, as well as main stream media in an uproar. i.e., right place, right time coincidence. I thought it was a fair question for the person asking was really not that familiar with me and they themselves just became aware of this topic. So, I figured I’d explain why I have standing in this story as opposed to many that suddenly are writing, speaking, and more on a topic they seemed oblivious to just yesterday.

I’ve written and spoken many times over the years on the dangers of what has been transpiring in the markets via High Frequency Trading (HFT) as its being implemented since the financial meltdown of 2008. So for the sake of brevity here is an excerpt from one of my articles back in 2012 where I opined my thoughts specifically on HFT, the markets overall, and why one needed to think or understand the markets and anything that can jeopardize them, for after all, they truly are the greatest bastion for capitalism via free markets that the world has ever known. They’re the life’s blood of capital formation and enterprise however, they seemed to be no longer exactly that.

Implying they just might be morphing into something or already have changed into something more along the lines of a casino I was warning when hurricane Sandy threatened the East Coast and I posted the article below. To wit:

Adding Fuel To The Fire: With Water

In the article I raised these points…

“How could the electronic markets be closed all day Monday when Sandy was off shore not due to reach landfall till near 8pm EST. Closed all day Tuesday when Sandy had passed and the aftermath apparent. Yet the switches are turned on at 6pm EST Monday night while Sandy was actually overhead wreaking havoc, flooding subways, businesses, and more. Only to watch the electronic markets operate what appeared as flawlessly overnight through all that destructive may lay causing massive blackouts and wind damage leaving millions of people without power.

And yet not as much as a blip. The only blips on the screens (or lack there of) seems to be caused by the continued hand wringing of whether or not to open Wednesday. Something just seems wrong with the reasoning given.”

Followed with this…

“Could it be that the markets were actually closed not because they couldn’t operate but rather that the HFT computers couldn’t operate because what they rely on for their advantage would be gone? i.e., Their proximity.

If the algo’s lost their advantage of order execution they would be at the mercy of efficient markets. You know, that thing they always say they’re responsible for. Heaven forbid there would be a Bid and Ask not generated by them with the ability to be pulled in nano seconds. Rather by an actual order placed with someone willing to actually Buy at said price or Sell. Oh the humanity if that is the case.

Would the markets themselves also have a stake in making sure the illusion of “deep markets” was perpetuated? Imagine if the markets opened and to what is normally reported 70% of all the markets trading didn’t show up because the HFT computers couldn’t play? Would something like this almost be more frightening to the markets than the chaos currently being dealt with in the aftermath of Sandy?”

At the time there were far and few between even bringing up this type of thought. Yet, as we now see, the few of us that were pounding our keyboards or fist making such claims were basically ignored. So much so that the industry itself couldn’t look in the mirror and see how much it was putting at risk the very nature we as a civilized world depended on for a way of life that allows companies to form, people to bring ideas to fruition, a bastion for retiree’s savings, home buying, computers, internet, you name it.

Everything we touch is somehow connected in one way or another to our capital markets. Sure, there will always be winners and losers, that’s capitalism, but what capitalism should never be is in bed with anything remotely resembling something “rigged.” I don’t care how much lipstick the so-called “smart crowd” wanted or wants to put on it. It’s still a pig and it stinks. Period.

As an entrepreneur myself and as one who tries and bring sanity to that field. Not saying anything is a kin to agreeing with it. And I do not. Regardless of how much money one can make in the HFT genre. Capitalism, and free markets are too damn important.

Level playing fields matter. You wouldn’t let your kid play a game where he was on the losing team game, after game, after game knowing full well they’re losing because the umpires are in the pockets of the winning side. So why in the world would you let your business, pension, and more play on a field where at any time – you can lose not because you made a bad decision, but because you were the new putz because the other team just paid more money to make you exactly that.

Truly think about that statement above. It’s not that far removed as an example of what I feel has been going on.

Personally I have no idea of exactly where or how I fit into this whole story as it’s unfolding. I am grateful for the sites that have carried my articles (e.g. Slope of Hope™, ZeroHedge™, and others) when they could have easily dismissed them as commentary running counter intuitive or unproductive to trading and all that’s related to it on Wall Street.

I am also grateful to the very few others voices that kept shouting and pounding in unison similar thoughts or observations I was making. Barry Ritholtz is one, Mark Cuban another and there are others however, there were very few. For a clue on just how few look at the number clamoring and circling the wagons that has taken place throughout the media in defense of HFT. It seems like a thousand to one.

It finally took a writer with enough intellectual and literary standing combined with the testicular fortitude to argue face to face with the financial elite and tell them honestly and forthright when they say: they’re making ice cream, to respond back – who are you kidding? That’s not ice cream and it stinks! And if it’s so good, here – you eat it!

Michael Lewis has been a breath of fresh air with his candor and his tenacity to not only defend his book and the positions he’s taken in it, but to throw all the detractors accusations back at them and make them defend theirs. To that I say bravo.

So again as to answer the initial question I’ll let that be up to you. For it doesn’t really matter what I think in the end as much as it matters what you think. But let me add the following for you consideration.

As of Sunday night of this week the issue of HFT wasn’t even on the radar screen for most of Main St. The issue itself of possible wrong doing or unfair tactics was blatantly dismissed by HFT, the financial media, and Wall Street at large.

By Monday it was topic De-jure across the financial media. By Tuesday afternoon it was still being defended wildly as a “necessity” or “providing a valuable service to the financial markets.” I wrote, then posted my article on this (my own) blog right about noon time and near immediately it was getting hits from across the globe. Then at approx 4pm EST it hit the front page of THE website of record ZeroHedge on this very topic. The headline?

If Algos Were People They’d Be Perp Walked

Nobody, and I mean nobody was making that type of statement. However, it seemed to have struck a chord. For only hours later Bloomberg reported the delay of the most anticipated HFT firms IPO. (link to original story here) And contained within that story the following line: “New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.”

Add to that as of today the following:

 

Screenshot courtesy of ZeroHedge

Screenshot courtesy of ZeroHedge

And that’s not all. Currently as I’m typing this post it is being reported: The Nasdaq OMX suddenly dropped in a mini-flash crash . Original story link here) Along with BATS you know that HFT company whose CEO took the airwaves and blasted Michael Lewis and Mr. Katsuyama for spewing untruths, only to have the firm publicly state and recant in the press the one who was lying was the CEO himself. Yes that company. (Link to article here) Looks like all that “efficiency” isn’t all that efficient. To wit:

Market Breaks: BATS, NASDAQ Declare Self-Help Against Chicago (link to original article here)

But don’t worry, they play a valuable service as they’re so vehemently wanting to tell everyone.

We all just better hope they have a line to the repair crew that’s just as fast to the exchanges for if not…

We’re all in trouble.

© 2014 Mark St.Cyr

Addendum: I was reminded by a reader after I posted the article of the exchange between Michael Lewis and Jon Stewart on The Daily Show® (Comedy Central) that evening. The exchange was quite candid but what was interesting were the points Mr. Stewart and the phrasing of them that caught this viewers ears. They said: “It sounded like he was reading the points you made in your article verbatim. I nearly fell over!”

Honestly I have no idea. Coincidence? Sure. All I’ll say too that is this. No one was making that case, put that way, using that terminology, especially within the time of the release of Mr. Lewis’ book and that interview to my knowledge, but me. If you look at the clips you can see Mr. Lewis himself seems to be hearing it put precisely that way for the first time as he thinks and answers. All I can say is my points were on the site of record that has been THE leading edge for bringing this subject to light for nearly 5 years and relentlessly making the case where no one else would. So would the writers of that show go there as to get background on this subject and possibly have read my points and decided to use them? Sure why not. But again, it doesn’t matter what I think, it’s what you think that matters in the end. I’ll post the 2 clips below and you can judge for yourself.

I tried getting the source code for the clips however for what it’s worth I’ll just post the link where they ran on  ZeroHedge and you can see them there. Sorry for so many links but in retrospect it’s just easier.

Jon Stewart On HFT: “It’s Not American; It’s Not Even Capitalism. It’s Cheating”

If HFT Algo’s Were People They’d Be Perp Walked

Posted in Uncategorized with tags , on April 1, 2014 by Mark St.Cyr

Suddenly the world is a buzz with the revelations that High Frequency Trading (HFT) may be doing more than actually harming the markets, it might be destroying the illusion they still are markets.

This past Sunday the world at large was introduced that maybe, just maybe, something was amiss in the financial markets. However, anyone with more than a passing interest in business, finance, and a little common sense could feel in their gut that something just wasn’t copacetic.

Between the Federal Reserves massive QE experiment amplified by the arms race of algorithmic technologies (aka HFT) to shave off a piece of that pie for themselves has been nothing more than breathtaking.

Currently I am staggered as I watch or read many in the so-called “smart crowd” taking to the financial media outlets professing their ire at (wait for it….) Michael Lewis’ assertion that: “the markets are rigged.”  This is where they have an issue? Really? I mean…Really?

Let’s put a few things into its proper perspective. HFT is currently a catch-all phrase or moniker. At one time when it was first introduced it could be (and was) argued it had a legitimate use in making markets more efficient. However that was some 10 years ago. Today’s HFT seems to have been on an evolution of exploitation and adulterated well past the point of resembling the good idea it once was hailed to be.

Efficient markets are when: real buyers, and real sellers meet, agree, and exchange with the least amount of friction to transact. Note the emphasis on real, it’s not there for style, real means an actual buyer or seller. Period. (Just so we’re clear and not falling down the black hole of what “is” is.)

This point is one of the underlying problems in the markets today. It’s not the only one HFT has adulterated, but it just might be the most important to this discussion. For what everyone seems to be missing as they defend HFT as the great market liquidity engine, that so-called “liquidity” more often than not is fake. So I ask: Is fake now acceptable in the financial markets? For if that’s true: Bernie Madoff might be looking for his get out of jail card.

We have laws on the books to protect the markets from people trading on inside information, fraud, and more. People get arrested and perp walked in front of the media as to make examples to show, “This can happen too you!” Yet, if machines are doing the same in an equivalent manner, that’s OK. For this is technology we’re talking here, and we all know without technology, the markets are nothing more than the pits. (pun intended)

Sometimes complicated issues have to be reduced to their smallest form to get an indication on whether or not something is good, bad, or indifferent. And once one reduces this all down to just basic common sense, you don’t need a supercomputer spinning algorithms near the speed of light to come up with the obvious answer of – Duh!

When someone within the financial markets comes across information that is deemed “confidential” then uses that information as to front run said information and profit by it, we throw them in jail for insider trading.

If a machine can detect you placing an order then within nanoseconds execute buy and sell orders throughout the exchanges as to skim a piece or to push markets in a beneficial direction to enrich itself. That’s fine. Are you kidding me?

Since when is it “legal” to insert oneself into a transaction they had no business being involved in? That is not “facilitating” that’s fraudulent skimming, for that “inserted freeloader” was not needed to transact. That’s front running pure and simple. And like I said earlier we perp walk people for that. But an HFT? Nope, that’s now looked upon as “improving liquidity” by the so-called “smart crowd.” Simply jaw dropping in my view.

Add to this the insane notion that these HFT outlets are providing, “deep markets.” Again, I’ll ask, what are we talking about here? Real buyers? Or, the illusion of real buyers? For if anyone remembers, the “Flash Crash” showed everyone just how real and deep the markets were.

All those quotes of illusive bids and ask were anything but illusive: they were illusions. The term “quote stuffing” and its consequences were first highlighted there. Now, it’s as if it never happened or better yet, is defended in an “ancient history” type dismissal.

Ancient history or not, if someone were to set up shop selling land deals at bargain prices touting that the demand was high and pointed to the surrounding landscape pointing out the row upon row of newly constructed facades as proof, you might think or find comfort in the notion, “Well if I need to sell there’s a chance I might find a buyer.”

Then you walked over unbeknownst to find all those freshly constructed home facades were just that – facades resembling a Hollywood movie set. Then what would you think? I know what one should be thinking: “How do I contact the authorities? These people need to be put in jail!”

But if it’s a machine rendering a “virtual reality” showing demands of large bids or asks in any given instrument that’s OK, they’re providing a valuable service to the community showing what it could be like if there were real buyers and sellers I guess. Just don’t think of ever trying to sell or buy one of them, for they disappear faster than a snake-oil salesman can close up shop.

The only good thing that has come out lately on this whole issue of HFT is maybe for the first time in years the cover has been thrown off exposing the parasitic beast that’s been living just beneath the surface passing itself off as a symbiotic entity, rather than the pernicious monster its grown to be.

Now the only question left to ask is: Can they invoke the death penalty for this creature…

Without killing the patient?

© 2014 Mark St.Cyr

The Facebook Affect

Posted in Uncategorized with tags on March 30, 2014 by Mark St.Cyr

Nothing conjures up visions of grandeur today faster than anything related to social media. No not using it, that’s for the uninformed.  The real place one wants to focus their eyeballs is in the mad rush to develop something that sounds as if it can make money, then, don’t try selling it to users first. No, first things first. Sell it to the most highly coveted customers known in tech today: the investors.

Get this group on board first and customers be damned for we’re talking cha-ching here. Actual customers or users are secondary to today’s silicon valley mindset. You just need the “story” of users or customers to sell the idea first, not the other way around.

This way of thinking was once laughed upon, but now? It’s the new psyche (or reborn) mindset of tech and just as it was in the 1990′s, this mindset comes to fruition at exactly the wrong time: Right before the bubble bursts.

Social media for all intents and purposes came along at precisely the right time. No not as something spectacular and groundbreaking as connecting people around the globe and more. No, it came at precisely the time Wall Street needed a place (and a story for it) to allocate all that speculative money afforded them via the Federal Reserves QE programs. This was where the real “social networking” story took place. For there is no other place on earth where, the speculation of a customer – trumps an actual one, like on Wall Street.

If you think this is off base just imagine this hypothetical scenario playing out in any closed room meeting.
First pitch: We’ve created this widget that allows customers to do A, B, or C with their devices as never before. Currently we are still developing but we have 25K current users that pay a subscription fee of X, and are looking to expand and offer plans at levels of Y and Z. We are cash flow positive and believe $350 million would take this to the next level. The response? Next!!!

Pitch 2: We’ve created this platform that currently is underdevelopment, has under 10K active users however all the users think it’s currently “the bomb.” It’s a little “buggy” (as in barely works without crashing) yet we feel it’s the alternative to every other similar platform not currently making any money either. If just 1 current user gets 2 of their friends to even try us, we’re talking global with billions, and billions, if nor even more billions of eyeballs to sell ads to. Dude, all we want is $3 BILLION and you can own us: forget about investing for only a piece. It’s a no-brainier! Response? Sold!!!

This is the affect of the tech world’s psyche today. However, this is now being accelerated and perpetuated by none other than the original darling of Wall Street itself, Facebook™ as in, don’t worry, create it and we’ll buy it. For we understand the hearts and brains of hackers unlike anyone else. So don’t worry, just keep window shopping for that Ferrari™. After all, this is silicon valley, and we do things our way, regardless if it makes business sense or not.

The real issue that is troubling from my view is that Zuck and crew are not doing all these so-called “visionary” moves or acquisitions out of strength. I firmly believe they are out of panic, Why?

Well, if history is any guide, to paraphrase the late Andrew Carnegie: “The older I get the less I listen to what people say and the more I pay attention to what they do.” And to my eye Facebook is doing anything but what it should be doing first: Making money that justifies its market cap based on the narrative touted for its existence in the first place: A place that can sell ads that people and companies want to buy consistently because they prove their value to those very customers via the social media platform. Period.

Suddenly throughout the social media space there seems to be outright panic in the once heralded narrative where ad sales would solve all ills along with curing cancer. Guess what? Not only has it not solved or cured anything, the patients seem to be relapsing. Suddenly the prescription of where ad revenues were the only choice for a healthy bottom line, has given way to “alternative medicine.” e.g., Virtual reality and more.

Suddenly we find the Wall Street darlings of today talking, buying, suggesting, hypothesizing anything and everything under the sun other than the business model one thought was their raison d’être: Eyeballs for advertisers to buy ads for. As I said earlier “suddenly” why does one think this is? Well as they say, let’s go to the charts shall we….

 

Charts courtesy of SlopeOfHope.com

Chart courtesy of SlopeOfHope.com

These two bellwethers of the social media space have been on a near meteoric rise. Then seemingly out of nowhere the “book” has been dropped on top of the songbird. However, one thing you haven’t heard to fix this dilemma is anything related to the selling of more ads. Now it’s music and virtual reality.

Yep, that’s the new plan. But wait didn’t we hear that type of talk once before? When was changing the original business model for a newer, better, brighter, more bubblicious model prevalent before fulfilling the promises of the first? Oh yes, that’s right, during the 90′s tech bubble. Imagine that.

As you can see in the above chart Twitter™ it would seem morphed into the proverbial “canary in the coal mine.” In an unrelenting surge to market heights nearly doubling from its IPO debut, it is now flirting with the unthinkable: losing money. (or value)

And where or when did it peak? Right before the Fed decided to pull the plug. Since then not only is no one listening to the tweeting of the once beloved king of songbirds, the bird itself is suggesting maybe you want to hear music via their platform. Sounds novel if one wants to disregard, Pandora™, Spotify™, et al and their commercially viable successes. (or lack there of) I thought they were going to pay the bills via ads in tweets, now they need to become radios?

Facebook’s issue are much deeper and I believe far more ominous. Ponder this scenario from a viewpoint of where you know little to nothing of the player yet had to make a pure business decision on whether to keep, pull, or put more money into a company…

You were sold the narrative that investing in said company would be beneficial to your investment for the company was “the” leader in a market space. It had 1oo’s of millions of active users and was growing that base to be over a billion. The core strategy to monetize all those eyeballs were to sell advertisers the opportunity to get in front of said eyes. Then a new meme begins to take hold where no matter where one turns both people as well as companies are publicly stating they’re being gamed. So-called “likes” (one of the main metrics pushed for validation) are being fraudulently generated across the globe where you can shop online and get deals from not one, but a myriad of dealers falling over-themselves to sell you thousands for mere pennies.

Follow that with the near unrelenting pace Zuck and crew have spent Billions upon Billions of dollars in a frenzy to do what? No, not generate ad sales that help warrant existing business. No, they purchased more companies and ideas that do exactly what they are doing: Hoping these eyeballs will turn into real ad dollars that will eventually pay the expenses and investors.

However as of yet, that’s still the hope, not the reality. But don’t worry, they’ve just bought a company that manufactures virtual reality headsets you can don as to help you out with your perception of what is virtual and what is – reality.

Tack on to that they’ve only spent around $22 BILLION on these “ideas” that hey, someday will turn a profit, right? But again don’t worry because they say they are going to be soooo disruptive in future.

What would you think? I know what both myself as well as a great many others would say: “Get my money out of there - now!” And that seems to be exactly what looks to be transpiring.

FB shares in less than a month have tumbled over $10 a share. That roughly equates to a loss in market cap of around $20 Billion dollars. Tack that onto their recent buying sprees and your far from talking chump change. And I believe it’s just the start.

As it stands currently FB has bled out nearly 25% of its market cap since January between its recent spending spree and Wall Streets recent “demanding of its money back” spree. (market cap of around $170 Billion in January minus approx $20 Billion in acquisitions and another $20 Billion in fallen stock value.)

Without the free money generated via QE looking for a home (any home) where the narrative of speculation trumps true EBIDTA (not non-gap) the only narrative now being spoken will resemble, “where’s my money?”

This is shaping up to be a real psyche change that will have a stunning effect for both silicon valley and the tech world at large. For once it’s shown that the purchasing of billion dollar babies that needn’t talk results only potential results is over – the jig will be up. If it isn’t already.

Once the Federal Reserve demonstrated they were actually serious and cut QE off at the knees in January it changed everything. And I mean – everything.

And that my friends will have a far more disruptive affect neither the tech world nor silicon valley ever dreamed of. But rather – they just may now be having nightmares over.

© 2014 Mark St.Cyr

 

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