Leon Cooperman was on CNBC yesterday for a lengthy interview. Below we have every video, plus the title of the video, and the computer generated transcript. Enjoy!
Can SEC Stop Wall Street Casino?
Leon Cooperman, chairman & CEO of Omega Advisors, says the SEC must put a stop to “casino markets.”
has wall street turned into a giant casino and what can be done to return wall street to its original purpose? leon cooperman wrote an op-ed in the financial times last month along with themist trader joe salusi. mark cuban is still with us. mr. cooperman, why did you feel a need to pen an op-ed about this topic right now? i guess to quote there’s an old-timer who headed up the office of mgts and budget by the name of burt lance and he coined the if it ain’t broke, don’t fix it. if it’s broke, fix it. how much incidents does the s.e.c. have to say, they couldn’t open their own offering, facebook, 70% of daily volume has nothing to do with research and the slicing and dicing. it has driven the public out of the market and raised the cost of capital to business. the s.e.c. has been very big on competitive markets, narrowing spreads. it’s in the s.e.c. and public’sinterest that the brokerage community have recent property or they’ll withdra from the business and stop providing services. i think the s.e.c. should step forth. the uptick rule was institutedin the ’30s as a result of the abuses coming out of the greatdepression. it serves the markets well for i don’t know 70-odd years. we had the problems arise subsequent to removal of thuptick rule. the first step as a trial would be to reinstate the uptick rule and incapacitate the high frequency traders and see what happens to the market as a result of this, the marketmechanism. that’s my view, don’t fix it. i don’t get the whole hftthing, but i’m not appear plektic as the people on the panel.investment confidence has been ruined by jon corzine, berniemadoff, the list goes on and on. is the individual investor hurt by hft? they’re trading for tenths of a cents. he’s not trying to — by how much, sir? how much? why should they be able to run the public out? how hurt are they being? that’s my point. how hurt?why is should they be hurt at all or abused? we’re talking about tenths of cents and hundredths the cents. why not get the individual investors to write them a check? that’s crazy. ichl an apologist for hft at all. i think there are other ills out there, and nobody convinced me, by the way, that it was hft that caused the flash crash candidly. nobody identified what happened, and the knight stuff was more — that’s so not true. that’s so not true. a great resource is nanax.net. they go into enormous detail about the flash crash from 2010, but all the mini flash crashes that happen every single day. it’s not like this is just hypothetical. it happens, and it’s out there every day. there’s no value. look, you have to ask yourself, what is the purpose of wall street? its original purpose was too create capital for companies to grow.what we’ve seen over the last 20-plus years is that the numberof companies coming public has dropped dramatically. if you want to talk about correlations, look at the correlation between the drop in the nobody ipos, 60 million and others and unemployment. as the number of ipos in that range goes down, unemployment goes up. that’s because you can’t come to wall street anymore like uktd in the ’80s and ’90s and have an ipo raise money and grow your company. there’s a lot of differentreasons for it but a lot is with algorithmic trading and everybody is looking for a tenth of a cent and they’re doing it a million times a second and trying to add it up. there is no value to hft, period, end of story. mark, it’s joe. you’re right on, and you’ve been right on the entire time. lee is a long-term investor, and this is what people are missing in the argument. when a long-term investor has a conflict, the s.e.c.’s mandate is always to side with thelodge-term investor to facilitate capital formulation like mark is talking about. that’s what the s.e.c. is supposed to be doing?supposed to be doing and doing are two different things. i have the testimony from mary shapiro or at least the commentary she’s giving on chill today. in it she says after the flash crash, the agency — heez are her words — were well-positioned to respond. baloney or what? it tooks five months to create a report. there’s no way to reconstruct the events of may 6th, and it took five months. they don’t have the futures market in the audited trail pro pfl. 15 years of regulation got us into this fragmented market. 15 years of things like regular ats, reagan-ms. the real market maker who had obligations to their customers when they were trading got lost. they left. they left the markets. there’s no more economics in it for them now. they’ve been replaced by the automated market who doesn’t have customers. they trade proprietarily. long-term investors trovethat phenomena as well without a doubt. they drove down costs so they couldn’t make money and now they blame hfts. the brokerage firm dent on dell mallization. there’s a desire to reduce trading costs, reduce the spread between the bid and ask and et cetera. they’re driven it to the point where the brokerage firms are no longer profitable so they exit it. calling the markets a casino is that a big exfreem? it was up six points at one time today and down six points. it has logical movement.the high frequency traders, they talk about the liquidity theycreate for the market. what’s the quality of the liquidity of the market. it’s flat at night and the morning. the holding period is a minute or two. it’s seconds. some say it’s ironic that a man who beat the house so to speak wants to change thebusiness. to be honest with you, i’m going to benefit from all this stuff. i’m not going to be victimized, because i have a terrific team of 17 analysts work with me. we’re calling on companydirectly and not relying on wall street research. to the extent that wall street research goes away and creates more inefficiencies, people that have the ability to do the research can can do better. sometimes i advocate things not in my self-interest. the system is broken. enough event vs taken place to suggest there’s a problem, and when you talk to duncan, i believe he’s say 730% of the new york stock exchange volume has nothing to do with fundamental investing. it’s the high frequency tradersand slicing and dicing of etfs. we know the public has left themarket. why? since the industry sdint self-police and less it fester for years, the europes are talking about banning things and stopping things. they’re going to come in heavy-handed.the s.e.c. hasn’t gone near there. you don’t want to ban things.you do want to smartly attack the issue and get rid of thepayment for order flow. wait, wait, wait. why wouldn’t you ban it?you haven’t given one reason why it should exist? mark, you can do things to make it go away. take the profit incentive away. it will disappear on its own. the key is how you respond when you recognize things didn’t go the way you expected. now we got to respond, but just saying hft is there doesn’t mean you should keep it. that’s a very good observation. i’m just kind of a gradualist. i’m saying at a minimum there’s a human cry from professional investors like myself that they made a mistake by taking out of uptick rule. why don’t they reinstate it for a trial period to see where the shenanigans go away and the market is more rational. the public doesn’t understand the market. a large number of professionals don’t understand the market. this is not good. we have to deal with it. i won’t let you run withoutgiving me a comment on the markets either. how do you see it right now? we’ve been very optimistic for two and a