Likely you are aware of the 1000 point decline yesterday in the DOW (DJIA). I understand that CNBC's commentators said it was due to fat fingers or some such nonsense (I don't listen to those talking heads, but that's another story). Actually I am amazed that it didn't happen years ago: one cannot watch the machination of electronic trading as it whizzes up and down at lightening speed and think there are actual orders being placed, but know rather that this is computer driven volume - algorithms - an automated computer trading system.
May 6 (Bloomberg):
Computerized trades sent to electronic networks turned an orderly stock market decline into a rout, according to Larry Leibowitz, the chief operating officer of NYSE Euronext. Nasdaq OMX Group Inc. canceled trades in 286 securities that rose or fell 60 percent or more...
The SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission) are reviewing “unusual trading” that contributed to the plunge. Do we feel better now!?!!
For further clarification you might like to read this story at Jesse's Café Américain
PLUNGE! 1987 Style Sudden Drop in US Stocks Driven by Program Trading and a Ponzi Market Structure
The entire stock market rally which we have seen this year off the February lows resembles a low volume Ponzi scheme, and formed a huge air pocket under prices.
This US equity rally was driven by technically oriented buying from the Banks and the hedge funds. There was and still is a lack of legitimate institutional buying at these price levels. This was machine driven speculation enabled by the lack of reform in a system riddled with corruption, from the bottom to the top.
This is yet another indication that the US regulatory and market oversight organizations, especially the SEC and CFTC, continue to be disconnected from and remarkably ineffective in their responsibilities in guarding the public against gross market abuse, price manipulation, and insiders playing games with cheap money supplied by the NY Fed.
And as you might expect, the anchors on financial television are trying to excuse and blame the sell off on a 'fat finger' order that caused Procter and Gamble to drop 20 points in 45 seconds. Or a typist inputting an order to sell 16 million e-mini SP futures, and typing "B" instead of "M." Oops. Crashed the free world.
Even if any of this was true, it was just the spark that caused the market to plummet because of its highly unstable and artificial technical underpinnings. There is no longer any legitimate price discovery. The US financial system is a casino, dominated by a few big Banks and hedge funds, the gangs of New York.
They'll never learn. Or is it 'we?' They may not really care.
I hope you are being careful about any investing in this stock market.
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