French Socialists to Doom EU

Jeff  Carter
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Posted: Jun 26, 2012 12:01 AM

The election of France’s socialist government will doom the EU. Why should Germany foot the bill for the largesse of the communists and socialists in Europe? Spain today asked to recapitalize it’s banks. Does anyone think that Greece isn’t going to need money? Just because an election gave everyone a sigh of relief doesn’t mean they are actually going to reform anything. They want to go slower. How about Italy? Portugal? Any better off?

Now with France electing to join the stupidity, the Euro is doomed.

The French are going to make it extremely hard to fire anyone. The are going to increase the costs. What does that mean? It means no one will get hired. French GDP is going to take a nose dive. Established companies are heading for the exits to go to lower tax countries. England is a beneficiary of the French stupidity.

However, even entrepreneurs are leaving. Typically taxes don’t affect start ups since they don’t make any money. However, regulation does, and the new French regulations penalize all business severely.

If I am the Germans I feel like the weightlifter on the bench press that just had a couple of manhole covers added to the bar. How can you have a European Union, when only one country in Europe is productive? Socialism is like that. They direct and regulate, you produce.

California, Illinois, New York, Rhode Island are the PIIGS equivalent in the United States. Obama and his administration epitomize the EU socialists in the US. As the world macro economy takes another downturn, it will be interesting to see how they weather the storm.

How HFT ruins markets

Funny, everytime I put a big order in on the screen, an order immediately jumps in front of me. Everytime.

It’s a computer program. Some algo. When I cancel the order, the front runner goes away. When markets spin out of control in a flash crash, or flash rally, I never get filled at the top or bottom of the range. An HFT order jumps ahead of me.

But I can just about guarantee that whenever I put a big stop order in the market I will get filled as algo’s go sniffing for them.

Is this what we want electronic trading to look like? It remimds me of the Pork Belly pit. The bellies were a great trade until the market moved away from them as producers began using fresh versus frozen bellies. So many people played so many shenanigans with the market intraday that the retail trade left. Eventually, the contract died and there is no centralized marketplace to hedge risk. It’s one of the reasons the cost of bacon is higher than it used to be.

We are in danger of reliving the same thing in grains($ZC_F, $ZS_F, $ZW_F), hogs($HE_F) and cattle($LE_F). These are necessary marketplaces that allow users of the market that are exposed to markets transfer risk. Without them, they have to go to the underground OTC market to hedge. That decreases market transparency, and only benefits huge arbitragers that can price one market against the other.

The end game is that all prices will be higher because it won’t be as cheap to transfer risk.

Currently, the exchanges ($CME, $ICE) are deaf when it comes to thinking about structural changes in the marketplace. All they can see is the almighty dollar. They are misinterpretating the volume. Liquidity hasn’t been enhanced in ag markets. It’s short sighted. But businesses aren’t known for taking the long view anymore. They are prey to quarter by quarter earnings.

Regulators are deaf and dumb too. Either they are populated by a revolving door of personnel that have companies benefitting from the anomolies in the market, or they have career government people that were appointed there and don’t really understand the structure of the marketplace.

The end game is the retail investor and consumer will get screwed. Prices will go higher, and faith in competitive marketplaces will be permanently damaged. There is enough technology out there, and enough innovative minds to create a better way. The way we are structuring the marketplace today is killing it.