Category Archives: Rogues and Rascals

See Something Say Something


From USA Today:

An armed school deputy rushed to the Florida high school building where terrified students ran from a killer with an assault rifle, but then sat outside for about four minutes and never went inside.

The school resource deputy for Marjory Stoneman Douglas High School, Scot Peterson, was under investigation for his response to the shooting but then decided to resign his post, Broward County Sheriff Scott Israel said Thursday……..

Israel said surveillance footage captured Peterson responding to the building where the shooting was unfolding. He said the deputy got there within a minute and a half of when the gunfire started. He positioned himself outside the building but never went in, Israel said.

The shooting lasted a total of six minutes. Peterson sat outside the building for four of those minutes, Israel said. In the end, 17 people were killed.

Peterson, 54, started working for the Broward County Sheriff’s Office in 1985 and since 2009 has been a school resource officer at the high school, appointed to keep the school and its students safe. In 2016, his annual salary was more than $75,600.

Apparently Peterson will be eligible for full retirement benefits. This is why government does not keep your children safe. This is why government employees do not give a damn about you or your children – there is no accountability and their pay and benefits far exceed those of the private sector.

Look Out Below

The volatility shorts are back with a vengeance, slamming the VIX at the open this morning. Rebuilding these positions at this point virtually guarantees a serious crash.

I Spoke Too Soon

I thought the massive crush of the short VIX ETFs and serious losses for anyone short volatility would have discouraged the VIX sellers.

Well, no. They’re back, using VIX slams to pump the market today and yesterday. Sigh.

Why are we wasting money on a do-nothing SEC and CFTC who are allowing this kind of conduct?


Thomas Peterffy
November 14, 2017

J. Christopher Giancarlo
Chairman, Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Re: Dangers of Clearing Bitcoin and Cryptocurrency Derivatives in Same Clearing Organization as Other Products

Dear Chairman Giancarlo:

I am the Chairman and founder of Interactive Brokers LLC, a futures commission merchant and broker-dealer with over $ 3.8 billion in regulatory net capital and over $1.2 billion in client margin funds (Interactive Brokers Group is publicly traded on Nasdaq with a market cap of over $22 billion).

As a CME clearing member, we are deeply concerned with proposals that would allow Bitcoin and other cryptocurrency derivatives to be cleared in the same clearing organization as other products. This letter is to request that the Commission require that any clearing organization that wishes to clear any cryptocurrency or derivative of a cryptocurrency do so in a separate clearing system isolated from other products. There is no fundamental basis for valuation of Bitcoin and other cryptocurrencies, and they may assume any price from one day to the next. This has been illustrated quite clearly in 2017 as the price of Bitcoin has increased by nearly 1000%. Cryptocurrencies do not have a mature, regulated and tested underlying market. The products and their markets have existed for fewer than 10 years and bear little if any relationship to any economic circumstance or reality in the real world.

Margining such a product in a reasonable manner is impossible. While the buyer (the long side) of a cryptocurrency futures contract or call option could be required to put up 100% of the value to ensure safety, determining the margin requirement for the seller (the short side) is impossible. Instituting daily price move limits on cryptocurrency derivatives does not solve the problem. In a runaway upward market for example (like the silver market in the 1980’s caused by the Hunt brothers), the futures price gets locked limit-up day after day with little or no trading and the short sellers are unable to cover, leading them (and potentially their clearing firms) to ruin. If the Chicago Mercantile Exchange or any other clearing organization clears a cryptocurrency together with other products, then a large cryptocurrency price move that destabilizes members that clear cryptocurrencies will destabilize the clearing organization itself and its ability to satisfy its fundamental obligation to pay the winners and collect from the losers on the other products in the same clearing pool. Accordingly, even clearing members who do not wish to clear cryptocurrencies because they judge the risk to be too great cannot isolate themselves and their customers from a potentially catastrophic loss from cryptocurrency risk at the clearing organization. Thus, it is no answer for the proponents of clearing these products to suggest that objecting clearing members can simply charge very large margins or not offer cryptocurrencies at all. In a central clearing organization, all members are at risk for the activities of any member (and of the clearing organization itself).

Unless the risk of clearing cryptocurrency is isolated and segregated from other products, a catastrophe in the cryptocurrency market that destabilizes a clearing organization will destabilize the real economy, as critical equity index and commodity markets cleared in the same clearing organization become infected. The only way to protect clearing organizations and their members (and the financial system as a whole) from the unique risks inherent in clearing cryptocurrencies is to require that they be cleared in a separate clearing system, isolated from other products.

We would be happy to discuss this with you or to provide any further information at your convenience.


Two Easy Pieces

Another excellent piece by Matt Tabibi – The Great College Loan Swindle.

The education industry as a whole is a con. In fact, since the mortgage business blew up in 2008, education and student debt is probably our reigning unexposed nation-wide scam.

One for the history file from zero hedge – The ‘Hyper-Crash’ Is Coming – It’s Not The Everything Bubble, It’s The Global Short Volatility Bubble

  • Instead of being an external measure of risk, volatility has become a tradeable input – making it reflexive in nature;
  • As volatility falls, investors (using leverage) take bigger bets in the same direction, so lower volatility begets lower volatility.
  • The global short volatility trade is more than $2 trillion;

Making volatility easily tradeable will, IMO, turn out to have been the biggest regulatory error in history. It has long been possible to trade volatility by the use of long out-of-the-money put options, but this trading was never large and does not seem to have been pernicious.

Risk and volatility are equated in the algorithmic trader’s lexicon. But risk never goes away – it can be moved around but not eliminated. Tradeable volatility is giving the illusion that this axiom is false, that risk can be eliminated with a few taps of a magic wand on the VIX futures. I don’t think so.


Apparently there is even a cryptocurrency futures market (BitMex).

You really can’t make this stuff up.

Oh, and that $240 million ICO? Principals are squabbling, no “coins” forthcoming.


It appears that Obamacare reform is now dead. No surprise, the insurance industry spent huge sums to get it passed in the first place. It is fair to assume that they are strategically spending more to ensure that their investment is not wasted. There is no such thing as principle in the US legislature, it is all about the money.

The only question now is whether or not Trump will continue to subsidize it by diverting the profits from Fannie and Freddie to the insurers.

To Hear Is To Obey

Hillary Clinton’s take-away from George Orwell’s 1984 is that we should all respect authority more. Of course we should, because she is smarter and more capable than us. Unless the authority is someone named Trump, of course.

Here is a good example of the contrary view, an analysis of Baltimore’s education system, which is entrusted with the responsibility of giving children the basic skills they need to have good lives. Big government simply sees this trust as an opportunity for looting taxpayer money.

Those of us of the libertarian view (that would be me) view government in general as large scale theft. In the USA, 42% of GDP (and rising) goes down that black hole. That’s why real incomes are declining. That’s why inner-city kids can’t read.

Nothing To See Here

The dip-buyers and volatility-sellers are quickly reversing the overnight selloff, due to the Korean missile crisis.

These strategies work until they don’t. The absolute lack of fear is totally consistent with market tops.

The good news is that Treasuries are holding on to most of their overnight gains. When the bond and stock markets disagree, the bond market is usually right.