Stock Market Increasingly More Casino Capitalism than Investment


Wall Street trading debacles raises fears | McClatchy

Rep. Maxine Waters, D-Los Angeles, the top Democrat on the panel’s subcommittee that oversees capital markets, said she was very concerned about the volatility triggered by Knight. She supports hearings on the broader effects of the incident and other recent trading troubles.

“Like the problems with the Facebook initial public offering, events like this only further serve to undermine investor confidence in the markets,” Waters said. “Though we don’t yet know exactly what caused the problem with Knight Capital, with a drumbeat of financial market snafus continuing, it’s clear that the industry, with guidance from regulators, needs to strengthen their internal controls.”

Indeed, investors have stuck mostly to the sidelines after suffering crippling stock losses during the financial crisis. Many people have steered clear of sinking money into stocks, worried that big institutional investors and their high-speed tools can manipulate the market.

Knight’s losses reaffirmed Los Angeles retiree Robert Altman’s decision to pull nearly all of his investments out of stocks. Altman said his distaste for the market’s wild swings and technical glitches may confirm industry fears that recent Wall Street technical mishaps could scare off retail investors.

“I’m out of it,” said Altman, 73, who has plowed his savings into municipal bonds. “The little guy has no business in the market anymore.”

Wall Street trading debacle raises fears | McClatchy

Business ethics would seem to dictate that investors’ money should be handled with care. After all, the human beings  who invest have interests like long term returns to enable them to live a decent life. But as we can see from the headlines, stock market investment is more a matter of being sheared like a sheep than a fair deal . We’ve had enough scandals to call on the government to act. However, the interests that make money by these methods are well placed, very influential. If you want a safe investment, there are better places to go.

James Pilant

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The Average Stock Is Held For 22 Seconds! – The Logical Result of Computer Trading


Michael Hudson

From Michael Hudson

<em>Take any stock in the United States. The average time in which you hold a stock is–it’s gone up from 20 seconds to 22 seconds in the last year. Most trades are computerized. Most trades are short-term. The average foreign currency investment lasts–it’s up now to 30 seconds, up from 28 seconds last month.

What does that mean for you? If you are an actual human being you are competing, when you make a stock purchase, with a supercomputer, like the ones they use to analyze the weather. That is why the amount of time a stock is held is so low – computer trading.

It’s not a level playing field. A more apt comparison might be a gambling house where the table is rigged to favor the owner almost but not quite always every time. You have to have the occasional lucky winner whose stories will keep the others coming in.

An exaggeration?

Okay, how about this from 2009 –

With all of the scrutiny that high-frequency trading is now under in the media and in Congress, the New York Stock Exchange is probably none too thrilled that the Wall Street Journal has uncovered fresh details of NYSE’s giant new datacenter, which the exchange is building in a former New Jersey quarry. The new datacenter will significantly advance the amount of computer-automated trading that already dominates global markets, housing as it will “several football fields of cutting-edge computing equipment for hedge funds and other firms that engage in high-frequency trading,” according to the WSJ. So if you were recently shocked to learn that an estimated 70 percent of stock trading is just computers trading against one another, get ready for that number to go even higher.

Or this –

Fewer and fewer Wall Street traders are human beings. Instead, they’re computersthat execute trades in milliseconds (a millisecond is one thousandth of a second). A forerunner of today’s robotic trading, computerized program trading, was largely responsible for the stock market crash of October 19, 1987, when the Dow Jones industrial average plunged 22.6%.

 

This kind of computer trading or should I say, Algorithmic trading, isn’t going away. So if you are a mere mortal, you might find your ability to make money on stock a little constricted by non-human competitors.

James Pilant

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The Average Stock Is Held For 22 Seconds!


Michael Hudson
From Michael Hudson

<em>Take any stock in the United States. The average time in which you hold a stock is–it’s gone up from 20 seconds to 22 seconds in the last year. Most trades are computerized. Most trades are short-term. The average foreign currency investment lasts–it’s up now to 30 seconds, up from 28 seconds last month.

Robot Trading – Money Maker Or Formula For Disaster?


I went to You Tube and ran the search, “robot trading.” I was looking for a journalistic take on the dangers of this kind of trading. I didn’t get it. There are innumerable sales pitches for just such trading mechanisms. I watched one and they are “exuberant.” They appear absolutely convinced that these things will make you rich. Apparently this is similar in the trading world to the “second coming.”

I found an actual news story by getting a link from a blog. I just couldn’t get one off You Tube. I have virtually never had difficulty finding an appropriate video for an economic comment. The sales pitches simply dominate the results of the search. I haven’t seen that before.

The CBS news program, Sixty Minutes, has a report on the subject. It is a daunting report on the implications of robot trading. It can be very dangerous to whole system. If one robot goes in one direction. It is possible that they will all go in that direction. You should hope that they are all buying because selling could be painful. I recommend you watch the program.

I warn you, there are commercials. However, the report is elegantly done and will maintain your interest.

Let me ask a question –

Is it ethical to use super computers to get a fraction of a second (sometimes, hundreds of a second or less) advantage over your competition?

I want you to understand that only a very few people can afford a “super” computer. Generally speaking, that is probably not you. If you, as a human, attempt to compete with one of these machines (and you’re not, you’re competing with dozens or hundreds of them), are you on a level playing field.

As a society, we might find the costs of this trading to be higher than the benefits, if one is willing to think of the interests of the nation as a whole, something currently not in fashion.

But it should be.

James Pilant

Chinese Slaves, Robot Shareholders And Bankers Who Gamble With Taxpayer Money


A quote from Dylan Ratigan

“For me, there was a radical break in September 2008. You couldn’t look at the system,–both its collapse and why it was collapsing– as anything that lived up to what I thought it should. It’s all predators. The economy is built around Chinese slaves, robot shareholders and bankers who gamble with taxpayer money. That doesn’t work.”

This quote is from an article on Alternet.

And this is the concluding quote from the article concerning his opinion on the continuing New Depression.

“There are no jobs, my man! Where are the jobs? People won’t stand for this forever.”