Wednesday, August 26, 2015

The Stock Market - Machines versus Man and Womankind - the People have no chance!


It sure is great to know that President Obama solved our economic woes and saved the American public from the greed mongers on Wall Street.  He brought solid growth to our economy and stability to our markets.  Drove the unemployment rate down and kept the interest rate low.

Well, at least that is the political spin.

The truth is quite the opposite if truth were exposed to the people but that will never happen with the corporate, political, news media merger of special interests assuring no one is in a position to tell the truth.

Take our financial crisis now underway in which the American stock markets have lost over Four trillion dollars in eight days, most likely the greatest loss of value in history.  Not a single word from our President, Treasury Secretary, nor Chairwoman of the Federal Reserve Bank.

The world is in a financial meltdown and NOTHING from our president!  Makes one wonder who he is trying to protect?

High Frequency Trading (HFT) has taken over our stock markets and taken down the world financial system and our leaders have not even blinked.

Do you know what HFT means to us?  It means no more brains, with a heart and soul, can control the market trends.  It means our banks have insulated themselves so well they have no responsibility for what happens to the market.

It means market volatility is imbedded in a market that was supposed to maintain stability.

In short, our government and our banks have sold their souls to the Devil and the Devil is in the shape of an algorithm.

An algorithm (pronounced AL-go-rith-um) is a procedure or formula for solving a problem. The word derives from the name of the mathematician, Mohammed ibn-Musa al-Khwarizmi, who was part of the royal court in Baghdad and who lived from about 780 to 850.

Contribution of Al-Khwarizmi to Mathematics and Geography

Muhammad ibn Musa Al-Khwarizmi is one of the greatest scientific minds of the medieval period and a most important Muslim mathematician who was justly called the 'father of algebra'. Besides his founding the science of jabr, he made major contributions in astronomy and mathematical geography. In this article, focus is laid on his mathematical work in the field of algebra and his contribution in setting the foundation of the Islamic tradition of mathematical geography and cartography.


Islam gave birth to a new civilization that spread from China in the east, India in the south east, Russia in the north, and Anatolia in the west of Asia, to East and North Africa up to the Mediterranean regions of Southern Europe. This civilisation was marked by a deep interest in science. In the heart of the Islamic scientific tradition lays the queen of sciences, mathematics, where the scholars of bilad al-Islam (lands of Islam) excelled in all its branches practiced in pre-modern times.

One of the greatest minds of the early mathematical production in Arabic was Abu Abdullah Muhammad ibn Musa al-Khwarizmi (b. before 800, d. after 847 in Baghdad) who was a mathematician and astronomer as well as a geographer and a historian. It is said that he is the author in Arabic of one of the oldest astronomical tables, of one the oldest works on arithmetic and the oldest work on algebra; some of his scientific contributions were translated into Latin and were used until the 16th century as the principal mathematical textbooks in European universities. Originally he belonged to Khwârazm (modern Khiwa) situated in Turkistan but he carried on his scientific career in Baghdad and all his works are in Arabic.

He was summoned to Baghdad by Abbasid Caliph Al-Ma'mun (213-833), who was a patron of knowledge and learning. Al-Ma'mun established the famous Bayt al-Hikma (House of Wisdom) which worked on the model of a library and a research academy. It had a large and rich library (Khizânat Kutub al-Hikma) and distinguished scholars of various faiths were assembled to produce scientific masterpieces as well as to translate faithfully nearly all the great and important ancient works of Greek, Sanskrit, Pahlavi and of other languages into Arabic. Muhammad al-Khwarizmi, according to Ibn al-Nadîm and Ibn al-Qiftî  (and as it is quoted by the late Aydin Sayili), was attached to (or devoted himself entirely to) Khizânat al-Hikma.

It is also said that he was appointed court astronomer of Caliph Al-Ma'mun who also commissioned him to prepare abstracts from one of the Indian books entitled Surya Siddhanta which was called al-Sindhind in Arabic. Al-Khwarizmi's name is linked to the translation into Arabic of certain Greek works and he also produced his own scholarly works not only on astronomy and mathematics but also in geography and history. It was for Caliph al-Ma'mun that Al-Khwarizmi composed his astronomical treatise and dedicated his book on Algebra.

Muhammad ibn Musa Al-Khwarizmi is one of the greatest scientific minds of the medieval period and the most important Muslim mathematician, justly called the 'father of algebra'. He wrote the Kitâb al-Jem wa'l Tafrîq bi Hisâb al-Hind also called Kitâb Hisâb al-adad al-Hindî on arithmetic in which he used Indian numerals including zero in place of depicting numbers by the letters of the alphabet and the decimal notations or numeration by position for the first time. It deals with the four basic operations of addition, subtraction, multiplication and division as well as with both common and sexagesimal fractions and the extraction of the square root. The original Arabic text of the book is lost and only its Latin translation is available.

Now you know, our financial trading system consists of High Frequency Trading formulas based on the work of a Persian Islamist developed over 1,500 years ago.

These algorithms enable a select number of super computers to buy and sell stock at a speed far beyond the human capacity to direct, let alone manage. On a normal trading day High Frequency Trading is responsible for about 50% of the trades and seven billion shares are about the number traded daily.

Black Monday of this week saw 13.9 billion shares traded, almost double the normal volume, as the market began a wild three-day spiral that ended a week of high tension investing and left traders staggering at what happened.  The vast majority of those trades were by HFTs. 

Most of the increased volume was HFT, which is formula not human driven.  Events took place showing humans have clearly lost control of our markets.  Stocks dropped over 1,000 points in less than an hour, far more than the greatest single day loss in history of 777 points.

In just two days, the S&P 500 lost $900 billion in value, and total losses across the world for just the last week were over FOUR TRILLION DOLLARS.  That is more than the entire United States budget ($3.8 trillion) for 2015.  In the US alone over $2.1 trillion was lost in six days.

Imagine that, the market lost 1,000 points before anyone could react.  All the new gimmicks the Obama administration ordered to protect stock manipulation failed because the algorithms knew exactly when to stop driving the market up or down to avoid detection by the SEC.  On Tuesday the market lost almost 700 points the last 30 minutes.

So what about the circuit-breakers that are supposed to suspend trading and calm the market, well on Monday there were 1,200 market stops and they had no control over events that took place.  It was still the largest market loss in history.

Installed after the May 2010 flash crash, the so-called circuit breakers are designed to slow down dramatic selling or buying. They are typically triggered when stocks dive or spike by a certain amount in a matter of minutes. Think of it as a time out. Trading is halted for five minutes, giving investors a chance to calm down and allowing cooler heads to step into the market.

China is blamed for our troubles but in truth, greed is feeding the market and the High Frequency Trading is stealing billions for a very limited number of beneficiaries.  Our loss of control is so severe Congressional and Justice Department investigations should be launched, but are not even being discussed by our elected officials.

Where is the outcry?  Where are the protectors of the people?  Have we finally lost control to the machines?

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