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Lewis Likens Einhorn to ‘Dumb Tourist’ in Fixed Card Game

April 02, 2014

Michael Lewis Says Einhorn Was Like a ‘Dumb Tourist’ in Market

Poker players, counter clockwise from left: David Einhorn, president of Greenlight Capital Inc.; Steve Kuhn, head of fixed income trading at Pine River Capital Management; Jim Chanos, founder of Kynikos Associates Ltd.; John Rogers, chairman and chief executive officer of Ariel investments LLC; Mario Gabelli, chairman and chief executive officer of Gamco Investors Inc., and Bill Perkins, founder of Skylar Capital Management LP, at a poker table in Atlantic City, New Jersey, on July 22, 2013. Photographer: Scott Eells/Bloomberg

In today’s “rigged” U.S. stock market, large investors such as Greenlight Capital Inc.’s David Einhorn are like “dumb tourists” led to a casino where the card games are fixed, according to Michael Lewis, whose book “Flash Boys” has touched off a national debate about high-frequency trading.

“It’s very clear people are being front-run,” Lewis, whose book paints a portrait of markets rigged by insiders with advanced computers, said in a Bloomberg Television interview today with Erik Schatzker and Stephanie Ruhle.

Einhorn, whose Greenlight Capital hedge fund manages billions of dollars, didn’t initially understand what was going on, Lewis said. Einhorn’s reaction when he learned: “Oh my God. This I did not know,” Lewis said. Einhorn declined to comment on Lewis’s analogy.


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Debate about whether equity exchanges are fair has raged for three days since “Flash Boys” was published. While Lewis sees exploitation rampant among the more than 50 public and private venues that make up the American stock market, his thesis has drawn rebuttals from executives such as Bill O’Brien, the president of exchange operator Bats Global Markets Inc.

Regarding his book’s revelations about the stock market, Lewis said, “I don’t think you can put it down and think it’s not rigged.”

Profitable Loopholes

High-frequency trading firms, however, aren’t all villains, Lewis said. They’re simply profiting off loopholes in the system.

Blaming HFT firms is “like blaming the lion for eating the antelope,” Lewis said. “They are wired that way. The system is screwed up.”

Man, Machine and the U.S. Stock Market

One of the heroes in the book, Brad Katsuyama, created market operator IEX Group Inc. that aims to curb the impact of the fastest trading firms and make trading more fair. Einhorn is one of IEX’s shareholders.

IEX, which has curbs that slow down the pace of buying and selling, aims to “surgically” remove the bad from the good services that high-frequency trading firms provide, IEX Chief Executive Officer Katsuyama said on Bloomberg Television today.

“Not all high-frequency trading is bad,” Katsuyama said.

Speed trading stayed in the news yesterday when one of its practitioners, Virtu Financial Inc., delayed the marketing of its initial public offering to weeks later than bankers anticipated, two people with knowledge of the matter said.

Senator McCain

Separately, people familiar with the matter said Goldman Sachs Group Inc. is negotiating to sell its New York Stock Exchange floor-trading unit to Dutch firm IMC Financial Markets.

Senator John McCain said Congress, as well the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission, should investigate high-frequency trading issues and “pursue proposals that can minimize systemic risk and bolster trust in our markets,” according to a statement.

Manoj Narang, the CEO of high-speed trading firm Tradeworx Inc., appeared on Bloomberg Television with Lewis and Katsuyama. He criticized “Flash Boys.”

“It’s a compelling narrative,” Narang said. “But really it’s just fiction masquerading as journalist expose. I have major issues with virtually every assertion” Lewis made.

The book and IEX’s approach are “just a marketing gimmick,” said Narang, whose firm helped the SEC build a system, called Midas, to track trading.

Like ‘Moneyball’

Lewis said in today’s Bloomberg Television interview that the uproar caused by “Flash Boys” reminds him of the reaction among baseball insiders to “Moneyball,” his 2003 book that showed how statisticians had figured out a better way to evaluate players.

He drew a parallel between IEX’s Katsuyama and Billy Beane, the Oakland Athletics executive who served as the hero of “Moneyball.” Beane’s techniques, which were once fringe ideas in baseball, are now mainstream. “Moneyball” was turned into a movie in 2011.

The reaction is similar, though “they weren’t threatening to throw old baseball scouts in jail for what they did,” Lewis said. “But the disruption to the industry that that caused feels a lot like this.”

To contact the reporters on this story: Nick Baker in Chicago at; Sam Mamudi in New York at

To contact the editors responsible for this story: Nick Baker at Michael P. Regan

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