Update to a previous post … more questions:
And there you have it: W&R’s algo impact visualized based on a heuristical algo. In other words, according to the SEC, it is that barely visible blue wiggle that was responsible for a $1 trillion loss in market cap.
As we said, the SEC has not heard the last of this by a long shot.
IMHO:
1. Either we believe the SEC, in which case there is little reason for confidence.
2. Or, we consider contrary view points … in which case there is little reason for confidence.
Any wonder why investors are sitting on their wallets.
I’m a ree-tard when it comes to economics terminology. As far as I can, tell Durden is making the case that the SEC is attempting to mislead investors on the matter of what actually caused the so-called Flash Crash; what I can’t parse is whether he’s also drawing attention to, or suggesting – pointing to – some other (tangible) cause.
I’m hoping that some SDA commenter with more wherewithal than me can provide a Coles Notes-type summary of the piece. Is Durden saying the Flash Crash was caused by something else, something he’s referring to/alluding to, or is he just saying that it wasn’t caused by the automated execution algorithm?
Even laying aside for a moment the danger presented by the flash/crash phenomenon, the spectacle of $1340/oz gold AND a rising DOW lead me to believe the whole thing is rigged like a friggin’ three masted schooner.
The Fed is printing money like never before in history, and the market goes -up-? How stupid would I have to be to buy into that?
You wanna see some fireworks, wait until November baby. No way to tell if its going to go up or down, but either way its going to do it HARD.
It seems clear to me that the major United States stock exchanges have corrupted to the point of uselessness to ordinary investors. They’ve become rigged casinos run by the HFT shops and their enablers running the Dow, S&P, the SEC, and most of all the Federal Reserve. The house (the HFT shops) always wins (witness, for example, Goldman Sachs unbelievable run of positive trading days); for everyone else it’s a crapshoot at best.
What I wonder about, is whether the Canadian stock exchanges are heading down this path. I recently read that as much as 30% of the volume on the TSX is now HFT. If true, and if this number continues to grow, our markets will become the same rigged casino, and retail investors should just get out.
EBD: There is great suspicion that the flash crash was caused largely by HFTs (High Frequency Traders). You can get a bit of an idea of how they operate by reading the commments in the “previous” link in the post. For some reason, the SEC is bound and determined to protect the tiny minority of hedge funds that HFT. I believe it’s because since 2007 changes in rules that allow HFTs to do their magic are what have brought the markets to our present point … and those changes are the “fault” of the SEC. So, the SEC is simply covering its own arse, while offering a series of complex fixes but avoiding the simple, but big fixes. The result is a stunning net outflow of money from equity markets … fear is driving money out in the billions per week. It’s a very sobering flood.
The big money that drives equity markets is so big, that it is “slow” money … it can’t flash trade and must enter and exit in a gradual easy to telegraph manner. Big money is in the market for what markets were intended, to invest.
But, the markets are now held hostage by much smaller players, but who are the “fast” HFT traders which do anywhere from 50% to 70% of trades on any given day; but add no value (investment).
In essence, small fast money run by robots is driving out the big slow money because of lack of trust. When we talk of the need for confidence in markets, it’s the big slow that we are talking about.
Good, clear explanation. Thank you, Cjunk.
cj, ebd:
The big advantage that some HFT traders have is the SEC allows them to ‘look ahead’ at orders before they are passed to the National Best Bid/Offer (NBBO) system. That, combined with the direct connection to the NBBO, gives them milliseconds of extra time, which is a lifetime in these markets. (And some guys sitting at home with their PC’s figure they can out-trade these guys. It is to laugh!) Because of this, Goldman Sach’s prop desk made money every single day in the first quarter of this year. There just isn’t any excuse to play in Wall Street’s rigged casino, and individual investors have figured this out, hence the massive flow from stocks into treasuries.
I’m surprised there have been so few comments about this. My faith, which was previously fairly strong, has been severely shaken by the events of the past couple of years. I used to have a “long term view”, was fairly aggressive in outlook, but now have a very itchy trigger finger and short term view. If the ‘game’ is rigged, and what with the current low interest rate environment, I have big problems deciding what’s best. I’m thinking that holding precious metals, energy and food is perhaps less subject to manipulation, but what do I know? I’ve been investing for 30 years and have never been as concerned/confused as I am today!
well i have not the slightest clue of any of this all i can say is that china is next to be the big dog as far as i can see becasue they hold all of americas debt basically them and japan…..china is tring to buy cananda in a round about sort of way ie. potash ,land hotels in jasper banff ,vancover, they want or own much of the oil sands .
So today i went and added another 5k to my silver coin collection. i had baught 10k in a panic last year and was unable to sleep wondering if i made the right move …i baught 10k worth of maple leaf’s and eagles at about 14.50 (per kitco values) my actual cost was about 18.43 per coin ..i asked them man today what they are buying them at he told me 24.81 .
i sleep well.
something has got to give in my uneducated investing mind and i don’t know what is going to give first precious metals or the stock market …personally i hope it is precious metals becasue i have a fair amount more in the stock market/rrsp/mutual fund/g.i.c. type stuff
but i am tring to now offset my paper asset’s with solid precious metals ..just in case! i stand to lose somewhere but i would rather lose in my physical silver coins (as they will alway’s be with me in the flesh should anything go wrong) than my paper asset’s.
i really don’t know if this makes sence to anyone or if i am just being a paranoid freak.
I also store water ,and food. am working on my gun licenece and i was really hoping for the long gun bill to be aboloished becasue i don’t want anyone to know what i have for gun’s and now i will have to let them know and they can come takem em anytime they want!! witch suck’s
ANY COMMENT’S?
None of us knows what to do Steve. Personally, I bought tools and a shop to work in, some land a little bit away from the city, and I’m mostly staying in cash. SHTF, at least I can burn wood and grow food, fix my own gear and maybe other people’s.
Having a couple bags of seed couldn’t hurt, you know?
I don’t expect this though. I expect the people of the USA have woken up from this swift kick in the wallet Barry’s given them, and are taking steps to fix it.
“I’m surprised there have been so few comments about this.”
Everybody is too busy trying to figure out what ‘the best September for US stocks in 71 years’ is all about!
Ron: truly … stocks rise like corks while money floods “out” of the market.
Stocks rise like “corks”? Go to stockcharts.com, and enter “$SPX” (SP500). Notice the little bars on the bottom – those are daily volume. Back in the spring, SP500 volume was about 5 billion shares/day; these days, it’s about half that. It’s way easier for values to change one way or another in thinner markets. A little marginal injection of liquidity through the Fed’s POMO, and voila – stocks go up because there are few sellers.
However, stocks are still lower now than they were six months ago. As they’re fond of saying over at ZeroH – “Gold, bitchez!” (and, these days, silver too!)
Could it be? …
Summer 2008; starting to look like Obama is overtaking Clinton. Investors scared. Market goes down.
Fall 2010; starting to look like Obama will loose control of the House and maybe Senate. Investors not as scared. Market goes up.
Markets hate uncertainty.
KevinB: … exactly. Even the overnight NY Fed auction seems to effect stocks about a week out. At these low volumes, any marginal liquidity flows can pump up stocks … it makes it that much easier for the fed to inject flows of cash.
But even at that, year to date things are not too good.
I’m also wondering if there isn’t a massive Wall Street strike on … like Ron suggests; it’s the Obama walk out.