Two views of Wall Street: from 2014 and 1923

Fash Boys

“Flash Boys, A Wall Street Revolt”, by Michael Lewis, 2014

This non-fictional account of high-tech rigging of the stock market reads like a novel with a dramatic storyline and a cast of fully developed characters.  True to the non-fiction genre, it is also full of detailed information about electronic trading and addresses a pertinent, real issue of unfairness in the current economy and financial sector.   The time period is from 1987 (the “flash-crash”) to the end of 2013 with an emphasis on the years from 2007 onward, after a regulation took effect which allowed high frequency traders to “front run” orders (interpose themselves between buyer and seller for profit).    Collusion between the nine big banks on Wall Street, the for-profit exchanges, and a compliant SEC, allowed this fleecing to exist and perpetuate.  The cost to the economy is between $10 and $22 billion dollars per year.  If you have a 401k invested in stock funds, a pension fund,  a mutual fund, or own stocks through any other vehicles, the high frequency traders are taking your money.

 “That money is a tax on investment, paid for by the economy; and the more that productive enterprise must pay for capital, the less productive enterprise there will be.”

Brad Katsuyama, a Canadian trader for the Royal Bank of Canada, noticed after 2007 that his computer screens weren’t showing him an accurate picture of the market.  Over the course of several months, he figured out why, and set about assembling a team of computer and market experts to overcome the problem.  They began an informational campaign to inform fund managers and other legitimate traders why the market seemed to be “running away from them” when they placed large orders.  Eventually, they concIuded that opening up their own exchange with a built-in delay was the best way to undermine the high frequency traders and achieve a fair market.  As of December 2013, Brad Katsuyama’s exchange, “IEX”, opened for trading and the large banks were gradually persuaded to route orders there.  The release of “Flash Boys” has triggered law suites against the firms involved in high frequency trading, including the exchanges which facilitated it, on the grounds that the practices “violate the anti-fraud provisions of the federal securities laws”.  Throughout the history of the US stock market there have always been ways to game the system.  As new laws fix one set of problems they create new loopholes to be exploited, and the cycle repeats itself.

Stock OperatorIn stark juxtaposition to “Flash Boys”,  is the classic novel “Reminiscences of a Stock Trader“, written by Edwin  Lefevre and published in 1923.  It is a fictionalized biography or roman-a-clef of the legendary trader, Jesse Livermore.   He was active in the markets from the 1890’s up until 1940. In this book he is referred to as Lawrence Livingston. The larger events were told accurately and only the names of characters and minor details were changed from their historical counterparts.  In spite of the fictionalization, it gives sage advice, much of which is true even today for market investors.  In the story Lawrence progresses from a fourteen year old “Boy Plunger” in bucket shops (venues for legal betting on stocks) to “The Great Bear of Wall Street”, buying and selling millions of dollars of stocks at a time.  In each chapter new circumstances arise and he learns a lesson, sometimes from losses, sometimes from profits.  Through analyzing these, solutions emerge to each of his trading problems, thus advancing his skills. The real life Jesse Livermore was known for building multi-million dollar fortunes, going broke, and then regaining his fortune.  In contrast to “Flash Boys”, in which modern high-tech parasites without trading skills make risk-free transactions,  Lawrence does it all the hard way; with courage, talent, perseverance, and discipline.  Needless to say, the pace of the markets: modern vs. turn of the 20th century is drastically different. What both books have in common is the endless supply of scoundrels employing subterfuge to gain unfair advantage.  “Reminiscences” is full of shady characters attempting to rig the game.  Lawrence plays by the rules even though his huge successes suggest to the public that he is also a rogue.  Author, Edwin Lefevre’s turn of the century slang and colorful tales help bring the setting to life.  He was an author, journalist, and stock broker who knew Jesse Livermore personally.   

“All the Light We Cannot See”, by Anthony Doerr, 2014

All the Light We Cannot SeeThis bestseller focuses on the life of a blind French girl and a German boy-soldier along with a cast of supporting characters during World War II.  The central theme is one of people trapped in dire circumstances beyond their control.  What will they do within their limited range of choices; go along with the flow to survive, or do the morally right thing and risk the consequences?

Marie-Laure lives with her father in Paris before the war and he works at the natural history museum as a master of locks.  The museum has a brilliant 133 caret diamond, called the “sea of flames”, which they make three replicas of and entrust each of the four stones to a different employee of the museum in hopes of keeping the real jewel out of the hands of the Germans.  Marie-Laure’s father is given one of the stones to safeguard.  As the war encroaches on their lives with the German invasion of France, father and daughter flee to the west and end up in Saint-Malo on the coast of Brittany, France.   Meanwhile, in Germany, in a coal mining town, a bright young  orphan, Werner, is teaching himself about radios, physics, and math, and applies to a boarding school to escape becoming a coal miner at age 15.  He is accepted to the school which turns out to be a Nazi institution for training students for the military or science careers to advance the war effort.  He is appalled by the brutality at the school, but avoids objecting because he wants to get through school and become a scientist.  Eventually he is assigned duty in the Army as a private using a radio triangulation system which he developed to locate enemy transceivers.  During the course of the war things get more desperate on both sides.  Marie-Laure’s father is called back to Paris by the museum and is captured and sent to a  prison camp.  Marie-Laure is living with her uncle and his housekeeper who gets involved in the resistance and brings the other two in to help.  Their lives become increasingly restricted by the Germans and shortages of everything.  Eventually, Werner’s unit is called into Saint-Malo to ferret out a resistance transmitter which turns out to be in the attic of the house that Marie-Laure lives in and is operated by her uncle.  Witnessing the horrors of war has transformed Werner and he progresses from a passive enabler of Nazi brutality to a resister, by purposely not ‘seeing’ the location of Marie-Laure’s uncle’s transmitter.  After an Allied bombing raid on Saint-Malo, Werner is trapped in a cellar across town from Marie-Laure who is trapped in the attic of her uncle’s house.  A German officer who is looking for the diamond is in the house downstairs and unaware of her presence upstairs.  Marie-Laure transmits a distress call which Werner hears on his receiver.  He finds her house and saves her from the German officer.  Werner leads her to escape from the bombed out city and they part company.  In the epilogue we learn that Marie-Laure has survived to the present and has a daughter and grandson.

Much of the thematic examination in the story is conveyed through extensive use of symbols of dark and light.  Even the radio waves which Werner uses are alluded to as a form of light in a children’s science show that Werner hears before the war, coincidently broadcast by Marie-Laure’s uncle:

“What do we call visible light?  We call it color.  But the electromagnetic spectrum runs to zero in one direction and infinity in the other, so really, children, mathematically, all of light is invisible.”

Other symbols of light and dark include: the diamond, the coal mines, the dark cellar of a bombed hotel, a tunnel underneath the fortress wall at Saint-Malo, and Marie-Laure’s blindness, to name a few.  In a more figurative sense, light and dark are used to represent reason, knowledge, wisdom, moral sense, and courage verses fear, chaos, barbarism, killing, destruction, thievery, and oppression. The “light we cannot see” suggests a source of light obscured by the state of war and the loss in ability of many people to behave humanely; a mass blindness.  The irony of a blind girl “seeing the light” through her courage and sense of right and wrong carries home the central theme of the story.

I found the book entertaining and captivating from the first page. The close up, intimate look at the main characters makes the war personal and is counterbalanced by the broad sweep of time, location, and events through which the characters navigate. Anthony Doerr’s writing style is reader-friendly with short chapters, which alternate scenes between the French and Germans, and converge, propelling the action to a crescendo.  The book is highly visual and the scenes told from Marie-Laure’s point of view give a detailed impression of vulnerability and moving about the world without sight.  This is a likely candidate for a movie script.

Bill Sargeant

 

 

“The Round House” by Louise Erdrich, 2012

The Round HouseWinner of the National Book Award in 2012, among other honors, this novel unfolds at the intersection of tribal law and sovereignty vs. federal and state law, traditional culture vs. dominant (white) culture, justice vs. injustice, women’s equality vs. exploitation, and the spiritual realm vs. the earthly realm. It is largely a coming-of-age story with an element of criminal mystery. The setting is the summer of 1988 in North Dakota on a Chippewa Indian reservation. Joe, the main character/narrator is thirteen and lives with his parents; Bazil, an Indian judge, and Geraldine, an Indian genealogist and record keeper.   One day Geraldine is raped by a mystery assailant at a remote Indian spiritual lodge. While Geraldine retreats into a bed ridden, withdrawn state, Bazil seeks the perpetrator to bring him to justice. Meanwhile, Joe pursues his own search with his three buddies.   Eventually the rapist is found and released due to legal entanglement and unfair laws governing Indian reservations. Ultimately, a higher form of justice is served and Joe is transformed from child to adult.

The round house, as a symbol, represents traditional Indian culture as was built according to the instructions of a buffalo spirit by Nanapush and Mooshum as told in the story related by Mooshum while sleep-talking.  Catholicism, historically, was foisted on the Indians.  Traditional Indian religion (practiced at the round house) became illegal (until 1978) and Bibles replaced spirit drums.  The abduction and rape which takes place at the round house (there is also a second woman there who is murdered) alludes to the broader cultural rape, genocide, and land theft of the Indians by the whites. Near the end of the story the narrator says, “they built that place to keep their people together and to ask for mercy from the Creator, since justice was so sketchily applied on earth.”

Louise Erdrich, author and Chippewa Indian, has written a complex novel, rich in detail, and exploring many related themes.  Although the story is fictional, it is based on several actual cases.  Embedded in the tale is a factual account of existing federal, state, and reservation laws which apply to the circumstances told.  I found the book moving and awe-inspiring in the author’s ability to bring together so many moving parts in a believable, purposeful way.

Bill Sargeant

“Virtual Unreality” by Charles Seife, 2014

Virtual Unreality_cr“Virtual Unreality” looks into internet subterfuge and how today’s digital capability impacts our perception of the world and relationship to information. Chapter by chapter, Charles Seife relates anecdotes of deception, and the drowning out of ‘signal’ by noise.  Many of these accounts have a humorous side to them, such as: the “Harvard-trained experimental psychologist and relationship expert” who corresponds with “Ivana”,  whom he met through an online dating service.  After trading emails for two months, he finally figures out that she is a computer program in Russia.   Another humorous tale is Newt Gingrich’s campaign in 2011 and his bragging about a strong Twitter following; “I have six times as many Twitter followers as all the other candidates combined”, he crowed.  Eventually it was discovered that only 8 percent of them were real human beings.  In addition to fake people, there are phony companies, junk science journals, deteriorating news reporting, and ‘photoshopped’ images. A good example of the latter is an image of Bert from Sesame Street sitting behind Osama Bin Laden which was unwittingly picked up by Reuters and the Associated Press, and even made into protest posters.  There is a chapter about extreme or delusional points of view finding followers and influence through the connectivity of the web.  Many of these phenomena are scams directed at the individual internet user and others affect society at large.  At the end of the book is a list of safeguards when using or seeking information on the internet. Charles Seife’s art of turning a phrase and journalistic skill make this an entertaining and informative work in a succinct 207 pages.