Published on Oct 11, 2012 by RussiaToday

In this episode, Max Keiser and Stacy Herbert discuss the very civil lawsuits that are oh so amiable, benevolent, benign, clubby, cordial, courteous and cozy but available only for financial crooks. They also discuss the mysterious algorithm with an unknown motive that accounted for 4% of all quotes on the US stock markets last week. In the second half of the show, Max Keiser talks to Jon Najarian of about options trading, high frequency trading and naked short selling.

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Wells Fargo just served with civil suit.

A mysterious algorithm was making some people mysteriously wealthy – designed to steal people’s money.

I was laughing my butt off when I heard Max stating “we just accidentally made money today.  We accidentally found this wallet in the same place everyday….”

 This algorithm has been made faster and set to steal even more money than the one used in the previous stock market crash in 1987.

NY Stock Exchange was actually participating in this algorithm.  They have allowed others to co-locate additional servers tied into this “to gain a money making arbitrage opportunity.”

Inaccurate price marks or price rigging are being found within energy industry.  Bench marks rigged and similar to LIBOR scandal.

Oil Companies and Banks make more money by trading rather than doing the actual business.

He discusses options with – a derivative that lets people use leverage in their favor ultimately.  Options trading has exploding in the US lately.  People can take a small piece of an expensive stock and get a piece of it.  This is the article that Max was referring to:

Here is a quote: “It was the holy grail of investors. The Black-Scholes equation, brainchild of economists Fischer Black and Myron Scholes, provided a rational way to price a financial contract when it still had time to run. It was like buying or selling a bet on a horse, halfway through the race. It opened up a new world of ever more complex investments, blossoming into a gigantic global industry. But when the sub-prime mortgage market turned sour, the darling of the financial markets became the Black Hole equation, sucking money out of the universe in an unending stream.”

You buy an option on a theoretical price to something way out of the current price.  There is no intrinsic value.  People profit on panic bets to the downside.  There are 5-15 times the number of shares to the actual existing number.

You are not supposed to sell more than the existing number of shares but it happens.

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