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Diary of a Hedgehog: Biggs' Final Words on the Markets by Barton Biggs

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The Valley of Death

August 15, 2011

Here we go again, “half a league, half a league onward” into the Valley of Death that is the August 2011 stock markets. The last couple of weeks from time to time I’ve felt as though I were caught in “The Charge of the Light Brigade” in Tennyson’s wonderful poem. I’ll give you just two stanzas for titillation.

Cannon to the right of them,

Cannon to the left of them

Cannon in front of them

Volley’d and thunder’d;

Storm’d at by shot and shell,

Boldly they rode and well,

Into the jaws of Death,

Into the mouth of Hell

Rode the six hundred.

Flash’d all their sabers bare,

Flash’d as they turned in air

Sabring the gunners there.

Charging an army while

All the world wonder’d.

Plunged in the battery-smoke

Right thro’ the line they broke;

Cossack and Russian

Reel’d from the sabre-stroke

Shatter’d and sunder’d.

Then they rode back, but not

Not the six-hundred.

The troopers in that historic charge “knew someone had blundered” but “theirs not to make reply; theirs but to do and die.” However, we are different and I’m outraged to learn from Bloomberg that 75% of the volume so far this month has been from high-frequency trading (HFT). My beloved stock market, the citadel of free market capitalism, and a key barometer of business and consumer confidence, has been over-run, violated, raped by HFT. I don’t believe I know any HFT people, much less how their algorithms work, but as I understand it, as explained by Bloomberg, HFT is a technique that relies on the ...

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