Results tagged “Facebook” from Timely Objections Blog

The First Amendment of Brandon J. Raub

August 22, 2012

The First Amendment of Brandon Raub

By R Tamara de Silva

August 22, 2012

 

       The point of demarcation between political expression and dangerous dissent is being discerned in much the same manner the Romans augured the future by looking at the entrails of birds.  Enter social media, which has been flexing its muscles on the topic even managing to draw the somnolent Media to bring national attention to the odd arrest and detention of a 26 year old former combat Marine, Brandon J. Raub.  Brandon, who had served his country in Iraq and Afghanistan from 2005-2011, was taken from his home by this same government in the form of the FBI, Secret Service and police agents for what looks to the outside world as his expression of his First Amendment right to criticize his government and his President. Is he the first known victim of the National Defense Authorization Act or Virginia's involuntary commitment statute? 

       One of my favorite people at the University of Chicago was the late Allan Bloom.  He once suggested that the First Amendment was a grand waste- no longer needed in America.  He said this because he observed that most people simply have nothing to say.  Most people may have opinions about many things but they are merely repeating what someone told them seeming to be incapable of forming a worthwhile thought on their own.  He was right in that as he went on to say, peoples' opinions are about as distinct and undifferentiated as the individual Kleenex are in a tissue box. 

       Social media bears this ought.  Except Brandon Raub was not using his Facebook account to post the perfunctory braggadocio or a travel itinerary.  Or the equally common antipode of the plea of a starving third world child- a picture of a full plate of food with an introduction about how good it is.  Brandon's posts were not so excruciatingly dull, as to be entirely devoted to self aggrandizement or the scatological- but they have all the marks of seditiousness in a Soviet Russia or Hussein's Iraq.  But in America, Brandon, like many Americans was expressing his discontent at the state of his country and its government.  Like many other of his countrymen, intellectually engaged in matters of governance, Brandon Raub used Facebook for what is inarguably its highest use-a gargantuan virtual public square.   Used this way, Facebook is not an ode to the elevation of the miniscule and mundane but a truly interesting and potentially important phenomenon.  Important because it is perhaps also a guardian of liberty in every way the Fourth Estate has been. 

       Opinions expressed in a public square can be diverse and some may even be out there.  However, were the American Revolutionaries alive today and speaking of sedition as they did then, they would not be called Patriots as history has called them-they would today be called terrorists.    This country was the birthplace of sedition and the refuge of many people the Crown considered way too "out there"-a remote place across a vast ocean fitting for the lunatic fringe. 

       The concerns of many about young Brandon are that free speech must be protected especially when what rights we were given by the Constitution have come under an onslaught of multiple new assaults like the monitoring of online computer searches, indefinite detention, indefinite detention without any due process of law [Mr. Eric Holder's invention of something called "Executive due process," which provides for a kind of due process and judgment but with no lawyer, no court of law and no trial] regular warrantless taping and tapping of all cellphone calls, the tracking and sale of customer information via credit card use, and the Department of Homeland Security's tracking of social media and all use of the internet,  tracking of all online activity, tracking of all financial transactions, the National Defense Authorization Act ("NDAA"), etc.-with all this, the willingness to still speak at all is a singularly brave but crucial act.  The law has not kept up with technology and most people are unaware of what their rights are in its wake.  The First Amendment safeguards that one act, speech, which may be one of the few gossamer threads that yet binds together our fragile and aging civil liberties. 

       Admittedly, some of Raub's postings were outside of mainstream thought in that he cited conspiracy theories related to 9/11 being an inside job and appeared to post a threat when he wrote that he would, "Sharpen up my axe; I'm here to sever heads"-repeating the words of a song called, "Bring Me Down."[1] 

       Were his posting lyrics to this song tantamount to a national security threat?  After the Colorado shootings and the shootings at Virginia Tech, many would argue it makes sense to preemptively lock people up for communications that are even ambiguously threatening.   The problem with this line of thought is that it is a slippery slope and it vests a dangerous amount of discretion in the hands of the government that can easily be abused.   It is also profoundly un-American. 

       When faced with any crisis or a 24 hour news-media human interest story, we seem to think it best to make more laws and invest the government with even more authority to "fix it" -never fully understanding that powers so eagerly bestowed can be abused and turned against their bestower.  As Benjamin Franklin famously wrote and anyone with even a cursory reading of history will understand, "those who can give up essential liberty to obtain a little temporary safety, deserve neither liberty not safety."

       One nation that has effectively used the pretext of danger to the state to imprison all who would criticize it is the Soviet Union.  All societies have normative values and at times some of them are pretextual-designed to mask much baser values.  Security is a value of the Soviet system used to hide the interests of its leaders from Nikita Krushchev to Vladimir Putin, to control the population and public opinion.  Putin's record of repressive psychiatry and the imprisonment of anyone who would insult his distastefully enormous opinion of himself belies any claim that he has divested himself fully of Khrushchev's repressive regime.  Police psychiatry allows for the routine imprisonment of dissidents in mental health institutions effectively silencing all dissidents and protestors from Garry Kasparov and Andrei Sakharov to current human rights lawyers.   Before we magnanimously proffer up parts of the First Amendment on the altar of security, we should imagine living in any one of the many parts of the world where the expression of dissent is met with death, a Soviet labor camp or more typically imprisonment in an asylum.  America must never strive to be a Soviet Union.

       There is little evidence if any, to suggest that Brandon Raub is being detained or was taken into custody for violation of the NDAA.   By all appearances Brandon Raub was involuntarily taken into custody and detained under Virginia's civil commitment law.[2]  Most states have some variant of this law by which on the word of someone in the mental health profession, or a doctor, a nurse or even a social worker, a person can be locked up if they are deemed either a threat to themselves or others.  The standard of proof the person wishing to have someone else locked up under must meet is the presence of "clear and convincing evidence" at an hearing before a magistrate at which the accused is not provided an opportunity to have an independent mental health expert rebut or evaluate the evidence offered.  

       The problems with this are numerous.  Judges and lawyers are ill equipped to evaluate mental illness.   The concept of mental illness itself is a bit like ether, "[M]ental disorder is such a vacuous phrase that the law should consider dispensing with it as an independent criterion for intervention and instead simply identify as precisely as possible the types of mental dysfunction it wants to treat specially."[3]  Social workers and mental health professionals may have no basis by which to discern the difference between sincere political protest and the condition of "dangerousness to society."   Unfortunately for those involuntarily committed by other people, the clear and convincing standard is not difficult to overcome because it is not objective when applied to cases of civil commitment. 

       The Diagnostic and Statistical Manuel of Mental Disorders ("DSM") is used to categorize mental disorders but its categorizations are constantly being revised and subject to debate within the mental health field.   The authors of the DSM themselves warn against using the DSM for legal proceedings because of the danger that the diagnostic descriptions contained within it will be misunderstood and misused.   Of course, I do not mean to presume that the social worker or health care person calling for involuntary commitment has read the DSM.

       The Fifth and Fourteenth Amendments of the United States Constitution prohibit the government from taking from taking away a person's "life, liberty or property" without due process of law.   Civil commitment hearings perform an end run around due process-taking away liberty without the protections given to a criminal defendant.

       This all begs the question what was it about Brandon Raub's Facebook posts that the FBI and Secret Service considered a threat?   Several of Brandon's posts expressed concern about an elite ruling class, the Federal Reserve, and the enormity of the Federal government.  He must be insane for being critical of the government in the following post written on his Facebook wall on November 11, 2011,

The Truth 
by Brandon J Raub on Friday, November 11, 2011 at 10:00 am

America has lost itself. We have lost who we truly are. This is the land of the free and the home of the brave.

This is the land of Thomas Jefferson.

This is the land of Benjamin Franklin.

This is the land of Fredrick Douglas.

This is the land of Smedley Butler.

This is the land John F. Kennedy.

This is the land of Martin Luther King.

This is the land where the cowboy wins. This is the land where you can start from the bottom and get to the top. This is the land where regardless of you race and ethnicity you can succeed and build a better life for you and your family. This is the land where every race coexists peacefully. This is the land where justice wins. This is the land where liberty dwells. This is the land where freedom reigns. This is the land where we help the poor, and people help each other. This is land where people beat racism.

The Federal Reserve is wrong. They have designed a system based off of greed and fear. They designed a system to crush the middle class between taxes and inflation. This is wrong, and it is unjust. It is wrong.

We have allowed ourselves to be deceived and seduced by the powers of the printing press. It is not a good system. It discourages saving: the foundation for all stable economic activity. The Federal Reserve is artificially manipulating interest rates and creating phony economic data.

This thing has deceived our entire nation.

They created it in 1913. They also created the income tax in 1913. They encouraged the growth of debt so they can tax you on it. There is interest on the debt. Your government is in bed with these people. They want to enslave you to the government so that they can control every aspect of your lives. It is an empire based on lies. They operate of greed and fear.

There is a better way. It's called freedom. Freedom is called a lot of things. But there is a true meaning. It means very simply that you have the right to do whatever you want as long as you are not infringing on the freedoms of other people.

I firmly believe that God set America apart from the other nations of the world. He saved a place where people could come to to escape bad systems of goverment. This system we have created works. It really works.

There is evil going on all around the world. The United States was meant to lead the charge against injustice, but through our example not our force. People do not respond to having liberty and freedom forced on them.

Men and Women follow courage. They follow leadership, and courage. Our example has paved the way for people all around the world to change their forms of government.

Force is not the way because liberty is a powerful concept. The idea that men can govern themselves is the basis for every just form of government.

We can govern ourselves. We do not need to be governed by men who want to install a one world banking system. These men have machine hearts. Machine and unnatural hearts.

They have blocked out the possibility of a better world. They fear human progress. They have monopolies on everything.

This life can be free and beautiful. There are enough resources on this earth to support the world's population. There are enough resources on this earth to feed everyone. There is enough land for everyone to own their own land and farm, and produce their own energy.

These people have been hiding technology. There are ways to create power easily. There is technology that can provide free cheap power for everyone. There are farming techniques that can feed the entire world.

The Bill of Rights is being systematically dismantled. Men have spilled their blood for those rights.

Your sons and daughters, your brothers and sisters, and Americas best young men and women are losing their limbs. They are losing their lives. They are losing the hearts. They do not know why they are fighting. They are killing. And they do not know why.

They have done some extraordinary acts. Their deeds go before them. But these wars are lies. They are lies. They deceived our entire nation with terrorism. They have gotten us to hand them our rights. Our Rights! Men died for those rights!

September Eleventh was an inside job. They blew up a third building in broad daylight. Building 7.

Your leaders betrayed you.

You elected an aristocracy. They are beholden to special interests. They were brainwashed through the Council on Foreign Relations. Your leaders are planning to merge the United States into a one world banking system. They want to put computer chips in you.

These men have evil hearts. They have tricked you into supporting corporate fascism. We gave them the keys to our country. We were not vigilant with our republic.

There is hope. BUT WE MUST TAKE OUR REPUBLIC BACK.[4]

 

 

       President Andrew Jackson was also critical of the central bank and would most certainly be detained as a lunatic or worse were he alive today by both political parties and the pundit class,   

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."

 

 

       The Department of Homeland Security would consider Brandon a potential terrorist as they would also consider most of the people that express views critical of the government as potential terrorists.   According to a study by the National Consortium for the Study of Terrorism and Responses to Terrorism entitled, "Hot Spots of Terrorism and Other Crimes in the United States, 1970-2008," funded by the Department of Homeland Security, terrorists are likely people, "reverent of individual liberty...suspicious of centralized federal authority or anti-government," including people who are extremely conservative or extremely liberal.[5] 

       Do not depend on some judge or lawyer to protect your First Amendment rights.  Too often I have observed judges and lawyers slavishly reciting precedence and statute with the Constitution being but a tertiary concern.  Law review articles about involuntary civil commitment regurgitate a parade of judicial affronts on due process.   Given this way or reasoning, which is the absence of reasoning but mere recitation of the past as authority binding on the future, un-Constitutional decisions have a theoretically infinite half-life.  We need to pay attention to Brandon Raub's fate just as much as John Bradford observed the fate of fellow going to the scaffold from the Tower of London and remarked, "there but for the grace of God, goes John Bradford."  The scaffold is still there and the tower remains claiming many inhabitants who thought they would certainly never reside there.@

R. Tamara de Silva

Chicago, Illinois

August 22, 2012

 

R. Tamara de Silva is a securities lawyer and independent trader

 


[1] http://abcnews.go.com/blogs/politics/2012/08/former-marine-detained-after-alleged-facebook-threats/

[2] http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+37.2-814

[3] Christopher Slogogin, Rethinking Legally Relevant Mental Disorder, 29 OHIO N.U.L. REV. 497, 498 (2003).

[5] http://start.umd.edu/start/publications/research_briefs/LaFree_Bersani_HotSpotsOfUSTerrorism.pdf

Facebook's IPO, NASDAQ and the Illiquid Electronic Marketplace Revisited

May 24, 2012
Facebook's IPO, NASDAQ and the Illiquid Electronic Marketplace Revisited


By R Tamara de Silva

May 24, 2012



According to the news people, there is blame to be had all around after shares of the largest initial public offering in history, Facebook (FB), lost almost twenty percent of their value in the first three days of being publicly traded. However, the lasting lesson of FB's IPO is that the financial world's increasing reliance exclusively on electronic trading often leads to catastrophic problems during critical market events.

Discontent over FB's IPO is heard from regulators and especially investors who saw the value of the their investment drop, to those who consider that the IPO was priced to perfection at 106 times its last 12 month's earnings or at 5 times the value of the most valuable (according to market capitalization) company in the world, Apple. The possibility of investing in FB's initial public offering, as in any other IPO, always bore the risk of buying an IPO at a price above its market price-that is the price it has in the publicly traded market. That said, very public examples of less than elegant IPOs are said, (whether in practice their impact is meaningful or not), to threaten the investing public's appetite for prospective IPOs. Another concern with FB's IPO is the possibility that FB, and its lead underwriters including Morgan Stanley, J.P. Morgan, and Goldman, Sachs & Co., failed to disclose material information involving new information about FB's revenue prospects during the IPO roadshow to all but a handful of their large clients-not the public supposedly because their larger clients had paid for the seemingly "inside information." Keep in mind that under the federal Securities laws, information about revenue, operations and prospects of a planned IPO are considered "material information" and must be divulged to the public in a very scripted manner. This has already resulted in a class action lawsuit filed for $15 billion in damages to the investing public. Another and more significant class action lawsuit was filed on the third day of FB becoming public, a lawsuit which picks up on the most important aspect of FB's IPO - the failure of one of the world's largest and its fastest electronic trading platforms-the NASDAQ.[1 ] Traders and investors who placed orders in FB on the day of its IPO were stuck in limbo as the electronic exchange that calls itself, "the power behind 1 in 10 of the world's securities transactions" froze and stopped working. NASDAQ's software issues constitute neither a reasonable failure nor an excusable one. Let the world take note that we will rue the end of the trading floor and open outcry as FB's IPO demonstrates how we are hostage to electronic software that like all software will fail or have glitches and show us how worthless electronic markets are when they are completely illiquid and we are held hostage to them.

All market transactions involve a degree of risk. In the law as in the markets, there is a presumption, albeit rebuttable, that the greater the amount of information a market participant has, the better able the participant is to assume and understand the risk behind a transaction. Information is valuable in decision making until such time that too much information leads to diminishing returns because the amount of information incapacitates the decision-maker and prevents him from making a decision. Risk increases dramatically when a market participant's information about price and order execution becomes nil. This is precisely what happened to the traders of close to 30 million shares of FB on the day of its IPO because of a software glitch at the NASDAQ.
What happened on the day of FB's IPO to most of the traders of FB shares is a condition little understood-the state of high illiquidity along with a lack of transparency. Transparency refers to the degree of information that is available. In a perfectly transparent market all relevant information about a market transaction from the price, order size, order flow, trading volume, identity of the traders/counterparties, all bids and offers available, etc. would theoretically be discoverable.

Transparency's value in the marketplace is best explained by its absence- a condition of opaqueness. Lack of transparency in the financial markets is called opaqueness. The environment that led to the past credit crisis was opaque. In the past mortgage debacle, few of the players knew what the baskets of mortgages they were packaging, buying and selling were actually worth. The participants in instruments that led to that last crisis operated in a very opaque if not downright murky environment. The mortgage related securities being traded from brokers to banks and between banks were not pegged to the value of anything tangible and often marked by model to myth. One could make the case that they were not even derivatives because their value was effectively not derived from an underlying anything.[ 2]

Illiquid and opaque markets occurred during FB's IPO. The opposite of illiquidity in the market is liquidity. Liquidity is the lifeblood of well functioning trading markets. In its simplest terms, liquidity is the ability of a market participant to trade at his or her price-that is to get in and out of the market at their chosen price. A history of the financial markets shows that liquidity requires a broad based collection of market makers to keep markets liquid. The more market participants the better. Without market makers, we see wide illiquid market spreads. These wide bid offer spreads in turn lead to market maker defection, to volume decreases and unfavorable trading markets for the public at large.

The regulated futures market, long a stepchild of the financial markets, with open outcry and electronic trading is the most liquid and transparent market in the world. It has been remarkably free from systemic financial crisis . . .with the exception of a certain salad oil scandal. All over the world at any given time, the value and the price of an S&P500 futures contract are known. What is more impressive is that during all major crises from the market crashes to presidential assassinations, the futures markets with open outcry have maintained their liquidity and their ability to absorb even the world's crisis level order flow or volume-without a glitch.

But most people, even corporate governance committees at financial exchanges conflate volume for liquidity-they are completely distinct. Most of the trading volume now on the largest domestic trading exchanges is in the form of electronic trading or more precisely in the equity markets, it is in high frequency trading. High frequency trading is spreading from securities to other markets like futures, currencies, derivatives, and debt instruments and to the overseas exchanges. To put this in perspective, in 2003 high frequency trading accounted for only 5% of all trading volume while today it is well over 70%.

High frequency trading firms ("HFTs") utilize a series of algorithms to take advantage of the computers' speed and proximity to the marketplaces to get information about orders and price before every other market participant. Three types of institutions comprise the trading volume of HFTs and are what is meant by HFTs: 48% proprietary high frequency trading firms, 46% investment banks and 6% hedge funds. Investment banks often have dual roles in owning proprietary high frequency trading firms and directing investment bank trade to and from these firms.

The physical exchanges like NYSE, NASDAQ and CBOE lease out space to HFTs that allows them to place their supercomputers directly next to the supercomputers of the exchanges thereby giving the HFTs advantages of milliseconds and microseconds-to see price and order information (inside information) before anyone else that is not paying for co-location and does not have a supercomputer with algorithms at the physical exchange. Their proximity to the servers at the physical exchanges give them an insurmountable advantage which they utilize to "trade," or effectively front-run everyone else's orders. Any argument that we have a level playing field in terms of price and order information in the market today is simply false.

It should be said that for the majority of the time and in non-crisis conditions, HFT works and is the major revenue generator for the electronic equity exchanges. It is argued that HFTs, like their human counterparts, are market makers in that they provide price discovery. I am profoundly skeptical of the argument that HFTs are pure market makers as this term has historically been understood because they are not active market makers. HFTs are quintessentially passive, largely using their location and software advantage to detect volume and to see order flow before everyone else and to react to it. Their market making activities are essentially different from the floor trader and floor broker who will take an unqualified risk even in the most volatile times, HFTs make markets passively by reacting to other people's activities that they are able to see happening before anyone else can. HFTs hold their market positions for milliseconds up to a few hours. Often HFTs fish for what order flow is out there by sending out false quotes to induce a reaction and therefore gauge the type of order flow that is out there in milliseconds before retracting its bids and offers-long before anyone would react to them...things non HFTs simply cannot do and what would on the trading floor be called the jailable offenses front-running and trading on inside information...but I digress.

The fact is most volume on equity exchanges like NASDAQ and NYSE are the result of electronic order flow and HFTs. However, these "traders" or algorithms are historically the very worst market-makers when crises occur because unlike their human counterparts, they largely bolt-withdrawing and canceling bids and offers en masse. Hence in times of crisis, in the marketplace dominated by HFTs, liquidity not just lessons, in the absence of human market makers, it largely disappears. What this means for all other traders and the public is that they cannot execute their orders or trade when a market crisis occurs.

This is what happened during the Flash crash of May 6, 2010 wherein the Dow dropped almost 1,000 points (the biggest intraday loss in history) losing nearly 10% of its value in seconds along with most of the 8,000 individual stocks and exchange traded funds, some of which traded 60% below their value of seconds prior before ultimately recovering. A September 30, 2010 report by the joint staffs of the CFTC and SEC to the Joint Advisory Committee on Emerging Regulatory Issues, that studied the causes of the Flash crash found that the presence of electronic trading and its interaction with HFTs during that crisis eroded liquidity, "the interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets."[3 ]

In the case of FB's IPO, and according to sources including the trading database developer Nanex LLC, HFTs caused the NASDAQ to have to delay the opening of trading on FB because of "excessive quote cancellations," adding that this is "ironic enough, it was mostly HFTs that benefited later when NASDAQ quotes stopped coming from the Securities Information Processor (SIP) which transmits quotes for everyone who doesn't get the premium direct feeds."[ 4] In other words, NASDAQ's software could not handle the volume of bids, offers and cancellations from HFTs before FB's opening.

At this point, it would not be logical for the exchanges to commission independent research and study into the true impact of HFT on price discovery, liquidity and volatility and what this means to their markets because the volume of trades generated by HFTs constitutes their major source of revenue. The exchanges now have a conflict of interest between their vital public functions of providing price discovery and liquidity and their bottom line.[5 ] Both the SEC and CFTC noted in their joint report into the Flash Crash of May 6 2010 that "high trading volume is not necessarily a reliable indicator of market liquidity". As I stated above, liquidity erodes or disappears in a market crisis where there is a prevalence of HFTs because volume comprised of quotes and price information recorded in the milliseconds (1/1000th of a second) if not microseconds (1/millionth of a second and the current speed of many HFTs) that can be withdrawn and cancelled before ever being in danger of being executed is not only not known with certainty to be recorded, but it is "noise" in terms of its impact on price discovery and it is simply not executable liquidity.

There was a time just a few years ago when the largest exchanges in the United States were de facto public utilities. They provided the most crucial of all functions to the world, they established the price of all the metals, grain, oil and bonds the world needed to exist. Price discovery and the liquidity provided by their trading members to the world was a vital service to the world economy. The equity exchanges existed primarily to provide equity capital to businesses through the exchange in ownership of shares traded at the exchange. Now the exchanges are by and large public companies with elaborate corporate structures and well paid corporate boards whose concern has shifted away from assuring the most liquid and crisis-free markets in the world to layers of decisions made by committees all with the view to revenue and deliberately not thinking outside of the revenue generating box. This is not a problem in principle except in this case it will be because the exchanges in protecting their primary revenue source, the HFTs, will no longer function as they once did and the public will suffer. Future crises will likely result in crippling illiquidity that will harm the trading public and result in massive financial losses.@
R. Tamara de Silva

May 24, 2012
Chicago, Illinois

R. Tamara de Silva is an independent trader and lawyer

Footnotes:
1. Case 12 cv 04054 Phillip Goldberg v. NASDAQ, OMX Group, Inc. and the NASDAQ Stock Market LLC-which I am attaching here: Goldberg v. Nasdaq .pdf

2. But if they were, their value was not discoverable, or perhaps not verifiable. The values of mortgage securities were not marked to market, they were not pegged to an underlying asset, and if they were, no reasonable allowance was made for unfavorable movements in the value of the underlying assets.

3. http://www.sec.gov/news/studies/2010/marketevents-report.pdf

4. http://www.nanex.net/aqck/3099.html

5. According to one credible source, one of the Chicago exchanges has established its own HFT that will likely compete with its customers and the investing public.