Not that I have any particular credibility around here (let me put it this way, I have INFINITELY more claim to “inventing the Internet” than Al Gore does), but for whatever it’s worth, Peter2 is absolutely right. If anything, he’s understating the technical situation.

The exchanges will provide you rack space, power, and one or more (for redundency) ports of up to 10 Gbs (think of your best office network speed and multiply by 100) to very high end, expensive and sophisticated network switches (probably from Cisco), switches way bigger than the things they are attached to.

The switch routing is completely programmable, right down to the particular message origin/destination, type…, so “following the physical wires” doesn’t prove anything. Aside from normal routing, messages can be broadcast to multiple locations, logged, disgarded, and so forth. These capibilities are used for network debugging, performance monitoring, error detection, and to support (hopefully) legal wiretapping.

Switches can be hacked, and network administrators can be bribed. If I were writing a Tom Clancy novel (does HE even do this anymore?) I’d have GS power Cisco into putting backdoors right into the switch internal software. Heck, you could put the trading algorithms right into the switch software and none would be the wiser.

One would fervently hope that the exchanges and those watching the exchanges and those watching the watchers prevent this sort of thing.

If not, it’s time to get out some folding tables, and start trading stocks amongst ourselves down in Battery Park. No algos, no computers, no brokers, no CNBC, no sales people, no market makers.

Hmmmm…. I kinda like it!

Right price plus and adequate amount of time factored in will eventually reduce all scalping profits to zero.

Now I will tell you the law of the jungle:

There are all different types of beasts in the trading jungle. You have elephants(pension, mutual funds), you have water buffalo(retail traders) and you have cheetahs(high speed computer firms like GS). When the food sources grow thin and the big eaters(elephants) get hungry, they migrate. The cheetahs, being quick, can dart in and out from the herd stealing scraps of food. If they try to stop an elephant on his way to his next feeding ground through battle, they will get stepped on over the long run. The cheetah can also beat the water buffalo over the short run but if the water buffalo understands the cheetah and itself, the cheetah cannot take anything from it over the long run.

So we have defined how the cheetah and the elephant feed. How does the water buffalo feed? By ‘knowing thyself’. Many water buffaloes go into the jungle thinking they are cheetahs and they try to live like cheetahs and steal lunch like cheetahs. Unfortunately, if they are dumb, water buffaloes eventually starve due to all the real and quicker cheetahs in the jungle. That is the first stage of a water buffaloes maturity. They learn they are not a cheetah

The next stage is learning they are not an elephant. Many try to be elephants. They try to do the work of forging ahead through the jungle in a search for greener pastures(forcing prices) and on the short run it works…until a real elephant comes along and sees a free meal of unnatural prices. Those are quickly taken away. Even if there is a group of water buffaloes forging ahead the elephant can just call out to its mates and by their sheer brute strength they can push any number of water buffaloes any which way they choose. The water buffaloes can win for a long time. There is the old saying that a herd of water buffalo can remain foolish longer than an individual water buffalo can keep from starving. Refer back to the internet bubble for that.

Eventually though the law if the jungle will reexert its natural order and the water buffaloes will lose their strength pushing through to greener pastures.

That is the second level of maturity that water buffaloes have to pass through to be able to live in the jungle. They then become full grown mature water buffaloes when they finally learn the rules of the jungle for the benefit and feeding of the water buffalo. Here they are:

1. You never try to fight a cheetah for his lunch. You’ll only make him laugh

2. You eat the same type of food as an elephant. Not a cheetah

3. When elephants are out of food don’t try to stop them from finding more food. They will step on you and eat your lunch

4. The best and most cost effective way for a water buffalo to eat is follow closely behind an elephant. They make pathways through the jungle a whole herd of water buffaloes can pass with ease. So they will ‘pave the way’ to greener pastures. Plus they will be the ones ‘feeding and doing battle with the cheetahs’.

5. Know that you are more agile and quieter than an elephant and you can avoid being stepped on by them in their hunger when they want to go a certain direction. So you will more likely avoid detection by all the cheetahs

So the moral of the story is:

As a water buffalo it is your job to watch the elephants and learn their desires and herd movements in order to get your free meal. Don’t not try to be or fight a cheetah because the real cheetahs will eat your lunch

They get a much better market picture than the typical portfolio manager does. And if you try to convince me that they don’t use that info, I won’t buy it. It’s so totally against human nature.

True or false there’s lots of info, dialog and sharing.

Seems pretty obvious this is not the market most thought/think it is/was.

Transparency. Yeah right. In your dreams and up your ….. Just re-election words.

My suspicion is there’s more to learn. But at least we’re someplace we would not have been without blogs like this one and others.

MSM is more like TASS every day.

It isn’t enough that the privileged few get to survive, they also get to steal all that they can through any method they can. The coverage on ZeroHedge has been outstanding and in trying to connect the dots they have exposed just a fraction of the shenanigans of the banksters. And the chosen few also get bonuses as well.

Do I think that GS, who is the annointed bank of the government, uses programs to defraud investors? Does a bear shit in the woods? They have been picking our pockets for generations only now they are more sophisticated about doing so, and rarely have they had the cooperation and blessing of the government to do so.

I suspect what GS(or someone) does is pick a point where they think they can drive it to, and purchase enough puts and calls that are out of the money, and then drive the market there gradually, in the last week or so. Certainly it’s something a computer could control.