Tagged: stock market

Machine trading, the ultimate day trade, the madness of Wall Street

Daylife/Reuters Pictures used by permission
No, that’s not Cooperman and Schwartz


Click on photo for Leon Cooperman, Marvin Schwartz on topic
[The real conversation starts at 2 minutes into the video]

The best thing to be said of the recent stomach-churning turmoil on Wall Street is that it’s taking place in August, a time of year when many people are lounging at the beach or camping in the woods and not paying attention to stocks…

“Everyone felt this was idiotic,” says Susan Kaplan, president of Kaplan Financial Services, referring to last week’s volatility. “Most clients didn’t want to deal with the markets anymore and went back to their summer vacations,” said Kaplan, whose firm manages about $1.3 billion in customer money…

Thursday brought another August storm. The S&P500 plunged 4.46 percent and the benchmark 10-year Treasury note yield fell below 2 percent for the first time in 70 years. And the trouble is this turmoil may not be some temporary anomaly.

Experts say investors should expect even more volatility in stocks, as herd trading by hedge funds, knee-jerk trader reaction to news and lightning fast computer programs combine to make for a new and uncomfortable normal on Wall Street.

This new trading frontier even has its own signature milepost, something called “a liquidity black hole.” It’s a trading phenomenon in which there’s so much intense selling pressure in big-cap stocks that it sucks all the oxygen out of the market and stocks plunge precipitously – as on August 8 when every single stock in the S&P500 ended the day in the red…

There’s a concern that frenzied trading could drive people further away from stocks at a time when, other than gold, there are few assets generating any kind of substantial return.

And that’s something that could have long-term ramifications for the ability of investors to build retirement nest-eggs, especially given the historic poor ability of retail investors to time market swoons and surges…

Also if investors flee stocks it could make it harder for small, niche companies, such as ones in the biotech or clean energy sectors, to tap the public markets for capital. Or more of those companies might take their capital-raising business overseas to places like Hong Kong, which would be another blow to Wall Street.

I’m fed up for the same reasons Messrs Cooperman and Schwartz declare. High frequency trading adds nothing to the stock market except no sense of direction and qualitatively dangerous volatility. It’s the ultimate in day trading with no one investing in the companies traded and adding value.

The Securities and Exchange Commission, the regulatory body for these shenanigans is doing what they did to prevent the subprime meltdown that gave us the Great Recession. Nothing, nada, nuttin’ honey! They’d rather not risk offending the moneyboys invested in platforms profiting profit for the trading corporations – not investors. But, that’s not what a stock market is for.

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U.S. stocks plunge in biggest retreat since recession bottom

A global rout in equities drove the Standard & Poor’s 500 Index to its worst slump since February 2009, while two-year Treasury yields plunged to a record low amid concern the economy is weakening…The S&P 500 tumbled 4.8 percent to 1,200.07 at 4 p.m. in New York, a 12 percent drop from its April 29 peak and weakest level since November 2010…

Concern the global economy may relapse into a recession has driven investors out of stocks and into the relative safety of Treasuries, the Swiss franc and yen and is spurring speculation the Federal Reserve will start another stimulus program. Japan’s moves to sell the yen, which this week neared a post-World War II record, and expand an asset-purchase fund follows efforts by the Swiss central bank to curb the franc’s gains. The European Central Bank resumed bond purchases and offered banks more cash to stem the spread of the debt crisis.

The mood right now is gloomy,” Mike Ryan, the New York- based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $774 billion. “The burden of proof is for better data that show the economy is not falling into recession. Tomorrow’s payroll report is crucial. If we see another disappointment, the stock market will have significant downside from here…”

Gap Inc., the largest U.S. apparel chain, sank 12 percent after sales missed analysts’ estimates. DirecTV, the largest U.S. satellite-television provider, tumbled 5.7 percent after adding fewer U.S. customers than analysts estimated.

“It’s not a flash crash,” Michael Shaoul, chairman of Marketfield Asset Management in New York, said in a telephone interview. His firm oversees $1 billion. “It’s much more orderly and I don’t see any weird prints like we saw that day in individual issues. I still couldn’t tell where this market will bottom. I also don’t think this is 2008 when you saw a genuine failure of global finance to be able to fund asset process. You don’t see money markets going crazy. It’s a plain and simple liquidation of equities and commodities.”

There is little reason for confidence in the US economy – and even less in the European economy taken as a whole. RTFA for details – if you dare.

There is no reason to expect action on the part of Congress – especially the worms who think markets, commerce and finance are something that hasn’t changed since the end of the Civi War. And they would have been on the losing side there, as well.

Halfway measures from the Obama Administration never developed into infrastructure revival which would have produced jobs and employment for some of the “unemployables” stuck into double-digit unemployment. The Tea Party and Republican flunkies on the Right wouldn’t act, today, if called upon to enact the measures jointly agreed upon as bipartisan measures at the end of the Bush administration. I doubt if anyone expects them to join with Obama and the progressive Democrats who were elected while Blue Dogs were made redundant.

Chickens are coming home to roost, folks. If you voted for teabaggers, you’re witnessing the results of that foolishness. If you voted to reelect slugs like Boehner and McConnell, the Coburns and Ryans of Congress – prepare to start shoveling chickenshit, right now. It will be the only job you can get.

ADDENDUM: A few folks have asked “what should I buy on the way down?” I don’t give stock advice at my personal blog. Yeah, with just a little cash at hand, I bought a little bit today – and anyone who knows me really well knows there’s just one more equity I’m waiting to get low enough to grab a little more.

Do I think we’re heading into another recession? Damned if I know. I’ll be happy when my social security check arrives this month. :)

Buy a book about flies for $23,698,655.93 — plus shipping?

Lots of normal people would pay $23 for a book. But $23.7 million (plus $3.99 shipping) for a scientific book about flies!?

This unthinkable sticker price for “The Making of a Fly” on Amazon.com was spotted on April 18 by Michael Eisen, an evolutionary biologist and blogger.

The market-blind book listing was not the result of uncontrollable demand for Peter Lawrence’s “classic work in developmental biology,” Eisen writes. Instead, it appears it was sparked by a robot price war…

Eisen watched the robot price war from April 8 to 18 and calculated that two booksellers were automatically adjusting their prices against each other.

One equation kept setting the price of the first book at 1.27059 times the price of the second book, according to Eisen’s analysis, which is posted in detail on his blog.

The other equation automatically set its price at 0.9983 times the price of the other book. So the prices of the two books escalated in tandem into the millions, with the second book always selling for slightly less than the first.

The incident highlights a little-known fact about e-commerce sites such as Amazon: Often, people don’t create and update prices; computer algorithms do.

Individual booksellers on Amazon and other sites pay third-party companies for algorithm services that automatically update prices. Some of these computer programs purportedly work very well, getting sellers up to 60% more sales because they underbid the competition automatically and repeatedly…

It’s pretty much like the stock exchange. What you see there is the prices changing all the time — but they never change drastically. Sometimes it’s a dollar here a dollar there — maybe $10. For a book, it probably would be pennies.”

Often producing as much useless “value” as many of the computer trades made for hedge funds and mutual funds. All you can hope for as a retail investor is to focus on what you calculate is the real value of equity over time – and let the rest of the market spin wheels in artificial endless loops.

Our stock markets will not do anything about it. I doubt Amazon will do anything about the same absurdity in their own mosh pit.

India’s 100 richest are worth 25% of GDP


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The Billionaires Club of India almost doubled from last year to 54 members up from 27, aided by are bounding stock market that gained two-thirds in the past year and an economy growing at six percent, says the Forbes Asia magazine.

The country’s 100 richest people have a combined net worth of 276 billion U.S. dollars, which was almost a quarter of the country’s Gross Domestic Product (GDP)…

Mukesh Ambani, heading Reliance Industries Limited, is once again the wealthiest person in India with his net worth increasing by 54 percent to 32 billion U.S. dollars from nearly 21 billion last year.

Trailing behind him are Lakshmi Mittal with a net worth of 30 billion U.S. dollars, up 46 percent from 20.5 billion, and Mukesh’s estranged brother, Anil, whose net worth of 17.5 billion U.S. dollars, 40 percent higher than before, put him in the third place.

India Editor of Forbes Asia Naazneen Karmali said in a statement, “Happy days are definitely back again for India’s richest. This year’s list shows yet again that when conditions in the financial markets and the economy are right, India has the scale and resources to produce billionaires faster than most of the countries on earth.”

Anyone wondering if the politics of India are offering the same growth in income to the remainder of the population? That’s nothing hard-nosed – just a reminder from a distant friend. When you’re rocking and rolling down the Yellow Brick Road, sometimes you forget about the streetcleaners.