Flashboys

Is the title of a 2014 non-fiction book by Michael Lewis about high-frequency trading (HFT).

The story is told about a trader, Brad Katsuyama who discovers that computer programs on exchanges play dirty when it comes to buying shares.

The computer programs operated by ‘stock scalpers’ allow you to purchase part of the stock, so they know that you’re in the market for buying. Then they race to other exchanges and then buy the stock ahead of you to only sell it on to you at higher prices and make a handsome profit.

In essence this is AI at it’s worst, allowing crooks to manipulate the markets and if trained traders didn’t even know this was happening, the ordinary punter doesn’t stand a chance.

It’s incredible to think that we are living in a world where we are all trying to make money from each other for the benefit of ourselves instead of the greater good.

There are millions, no billions of people on the poverty line on this planet, hundreds of thousands of individuals who are homeless in the Western World and we have traders who are making billions from other traders by manipulating the systems with AI.

Thankfully Brad Katsuyama is doing something about it although he’s getting a rough time and is having to fight against the trading exchanges mafia.

Happy trading!

Michael de Groot

Bitcoin

There’s so much hype these days about bitcoin and many different (1,300) crypto currencies are going on the bandwagon too. Governments are supposedly coming up with the rules and regulations for trading them too. Likely that the US stock markets will be first.

Doesn’t this go against the whole concept of bitcoin? The whole reason is to exclude the current monetary system in existence and that includes governments, right?

There have already been crimes committed in the short existence of bitcoin and people have gone to jail accused of using bitcoin to sell drugs and use it for money laundering. Interesting then that nobody has gone to jail for the 2008 global financial crash and banks receive tiny fines for their banks being used to fund terrorists. There are suggestions of a two-tier system being created.

Bitcoin is not a physical currency, like we know today and many commentators suggest that it will never be a mainstream currency either.

So why has the price gone up so significantly over the past year (2017)?

For me it is the same reason the stock market goes up and down, ‘emotion’.

When investors and the public influenced by investors start discussing a way of making lots of money, albeit in a currency nobody can actually touch and hold, everyone’s emotional brain engages in that direction.

As soon as something rises so fast it has the potential to drop even faster. Remember the .com boom and bust?

Warren Buffet, probably the world’s most successful investor has suggested to stay away from it, but what happens when other famous investors do go after Bitcoin? Does Joe Public follow too? Trouble is experienced investors do not have their money in one basket and that means they spread their risk. Joe Public will likely take their savings and invest it into bitcoin with the potential of losing all their money, invested in one non-mainstream currency.

Or worse still they will bet on the currency going up and down, which will likely cause stress and fear.

As humans we are consumed by greed and it is true that greed for money and stuff runs through everyone’s veins.

My philosophy is simple. Unless you are happy to lose all your investment, like gambling then invest, if not, stay away.

More reading:
https://www.washingtonpost.com/news/wonk/wp/2018/01/08/bitcoin-is-the-new-middle-ages

https://medium.com/the-new-york-times/how-the-winklevoss-twins-found-vindication-in-a-bitcoin-fortune-1e78981452bc

Michael de Groot