Talk about rocking the boat - what happened this morning?

[calmloki]

I mean, VTI, total stock market, down 4.44% this morning at 8:15 pacific? OTOH, physical gold topped $1820/oz.

 

[TN_INVEST]

NEW YORK (CNNMoney) -- Turmoil returned to the stock markets on Thursday, as renewed concerns about the U.S. and global economies sent major indexes plunging and pushed gold to a new record high.
Investors rushed to move their money into safe U.S. government bonds -- and yields on the benchmark 10-year Treasury fell to a record low below 2%.
Investors were walloped by bad news on multiple fronts: Morgan Stanley put out a dismal forecast for global economic growth. A key reading on housing came in worse than expected. And a report showed a significant slowdown in manufacturing.

 

[calmloki]

Pardon me for not buying that explanation. Bill and Jane on Main woke up this morning and said "hey - yesterday we felt great, but today we have renewed concerns"? My conspiracy gauge says day trading computer algorithms. and I'm not even clear what an algorithm is.

 

[Alan]

.... I'm not even clear what an algorithm is.

The internet rhythm method of contraception was invented by Al Gore over 20 years ago

 

[My Dream]

And to think....here in Canada, our housing market etc is doing well and the TSX is dropping like flies. Go figure......


Howdy Neighbours.

 

[REWahoo]

... I'm not even clear what an algorithm is.

An algorithm is a song written by this guy:

 

[Gone4Good]

(im)Patiently waiting with a pocket full of cash and an itchy trigger finger.

Trying to get a bead on how bad the European banking system is. They've been drawing heavy on their Reserves at the Fed recently - which means the interbank lending market isn't working again. Bad news. The Fed looking into the U.S. ops of Europe's banks is one of the things that has the market spooked.

 

[calmloki]

The internet rhythm method of contraception was invented by Al Gore over 20 years ago

Thank you. There is a certain circular perfection to your explanation. So in this age of internet trading we are all f**ked, but nothing is liable to come of it?

 

[eytonxav]

I can't help but feel the game is rigged and the house always wins. I think wallstreet (and the computers) is on the verge of killing the goose that laid the golden egg, with many older/mainstreet investors bailing and apt to never return to the market any time soon, if ever.

 

[tryan]

I wonder if 20% drop from the high triggers selling like the drop below the 200 day moving average.

Point being sell orders might to automatic.

 

[FIREd]

I followed G4G's foot steps and sold some TIPS this morning. It gives me fresh liquidities for future bargain shopping.

 

[Gone4Good]

I followed G4G's foot steps and sold some TIPS this morning. It gives me fresh liquidities for future bargain shopping.

Yup. Those freaking things are back up around where I sold them. Craziness.

Just minutes ago I used about a quarter of the proceeds to buy back some of the equities I sold in April. Itchy trigger finger was too much for me.

 

[W2R]

I have to admit this seemed sudden, even after last week's volatility.

I am SO GLAD that my asset allocation is as originally planned (after trying 5% more stocks earlier this summer and confirming that I am not at all comfortable with that AA). Anyway, I am back at my good ol' 45:55 and all set for another round of rollercoaster rides.

 

[chinaco]

No no.... its all on the up and up... level playing field for you and them!

Don’t blame Washington or Europe for the recent steep declines in global equities, blame the high frequency traders. Two legendary fund managers, Marvin Schwartz of Neuberger Berman and Leon Cooperman of Omega Advisors both told CNBC on Thursday that the high frequency trading programs are the cause of the crazy volatility.
“High frequency trading is the biggest drag on the market. They add nothing to the market and do nothing for the economy,” Schwartz said on CNBC.

Legendary Investors Blame High Frequency Traders For Steep Mkt Declines - Forbes

High-frequency trading is a technique that relies on the rapid and automated placement of orders, many of which are immediately updated or canceled, as part of strategies such as market making and statistical arbitrage and tactics based on momentum. It accounted for about 53 percent of trading earlier this year, down from 61 percent in 2009, according to Tabb Group LLC, a New York-based financial industry research firm. In 2006 it was 26 percent of the market, Tabb said.

U.S. prosecutors have joined a regulatory investigation into whether some high-speed traders are manipulating markets by posting and immediately canceling waves of rapid-fire orders, two officials said in April. Justice Department investigators are working with the SEC to review practices “that are potentially manipulative,” according to Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney’s Office for the Southern District of New York.

High-Frequency Firms Tripled Trades Amid Rout, Wedbush Says - Bloomberg

 

[Lisa99]

Thanks for sharing the info on high frequency trading.

Computers do a lot of good things, but this isn't one of them

I realize this is a VERY simple view, but aren't we supposed to buy or sell a stock based on the merits of the company?

Shorting, high frequency trading, etc is at its most benign legalized gambling and at its worst market manipulation....I am getting FED UP with the market in its current form (way too computerized) but there are no other real options for an investor.

 

[eytonxav]

I really wish that new rules were implemented to cut out this baloney (eg stock/ETF buys must be held for minimum 5 trading days)

 

[fritz]

I can't help but feel the game is rigged and the house always wins. I think wallstreet (and the computers) is on the verge of killing the goose that laid the golden egg, with many older/mainstreet investors bailing and apt to never return to the market any time soon, if ever.

Always seems to bring up comments similar to "transferring of wealth from the inexperienced to the wise".

Some are afraid (of losses) and some are excited (sale prices) - as long as the back and forth of the market continues, I don't see it dying anytime soon (just an increase in market money flows - some winners, some losers).

 

[Jay_Gatsby]

Thanks for sharing the info on high frequency trading.

Computers do a lot of good things, but this isn't one of them

I realize this is a VERY simple view, but aren't we supposed to buy or sell a stock based on the merits of the company?

Shorting, high frequency trading, etc is at its most benign legalized gambling and at its worst market manipulation....I am getting FED UP with the market in its current form (way too computerized) but there are no other real options for an investor.

High frequency trading has been around for many years. The old adage of looking at the merits of a company still holds true. In today's volitile market, there are some good companies with solid balance sheets that are "on sale" compared to their current price. Unfortunately, most people are too lazy to do their homework, and as a result, are scared of volatility that might cause swings in the prices of such stocks by 10-20% based solely on market momentum.

A rising tide may lift all boats, but it's only when the tide goes out that you can see which ones are leaking.

 

[Gone4Good]

I really wish that new rules were implemented to cut out this baloney (eg stock/ETF buys must be held for minimum 5 trading days)

Another way to do that is through a financial transaction tax, as recently proposed in Europe. That would eliminate the profitability of the razor thin margins captured by high-frequency traders.

I don't have a strong view on the merits of this particular idea, but I'm generally favorable to the notion of taxing things we want less of. If we want less speculative trading, it makes sense to tax that instead of taxing things we want more of . . . like saving, investing and working (and no, high-frequency trading isn't saving or investing).

 

[eytonxav]

Always seems to bring up comments similar to "transferring of wealth from the inexperienced to the wise".

Some are afraid (of losses) and some are excited (sale prices) - as long as the back and forth of the market continues, I don't see it dying anytime soon (just an increase in market money flows - some winners, some losers).

Right, the inexperienced do not have a staff of 100 PhD's developing quantitative algorithms that are executed via computers/high speed data lines positioned in close proximity to wall street.

 

[HatePayingTaxes]

Don't think anything wrong with high speed trading. In fact, I support it. Company's fundamental hasn't changed but market's perception of that company wildy fluctuates up and down b/c of high speed trading. As a value investor, I love that b/c I'll buy when the market has negative perception and sell when it's up. It's easier said than done but I do think you can use to your advantage on a small part of your portfolio.

 

[george76]

Another way to do that is through a financial transaction tax, as recently proposed in Europe. That would eliminate the profitability of the razor thin margins captured by high-frequency traders.

I don't have a strong view on the merits of this particular idea, but I'm generally favorable to the notion of taxing things we want less of. If we want less speculative trading, it makes sense to tax that instead of taxing things we want more of . . . like saving, investing and working (and no, high-frequency trading isn't saving or investing).

We had a transaction tax in 1929. Our market still crashed.

In addition, a transaction tax will drastically reduce volume in the market. As a result the bid/ask spread will increase. Who knows by how much. But it is safe to say that a transaction tax will mean that the cost for everybody will go up, irregardless if you have a regular equity account, an IRA, a 401k etc.

There are better ways of going after high-frequency traders than a transaction tax.

 

[Gone4Good]

As a result the bid/ask spread will increase. Who knows by how much. But it is safe to say that a transaction tax will mean that the cost for everybody will go up, irregardless if you have a regular equity account, an IRA, a 401k etc.

So?

If the revenues are used to offset income taxes then the cost of everything impacted by those goes down. The question isn't whether a 'Tobin Tax' produces a net good in and of itself, but whether it is preferable to the other ways we raise revenues. That's a much harder question to answer, but I suspect the answer is . . . it is preferable.

 

[M Paquette]

Don't think anything wrong with high speed trading. In fact, I support it. Company's fundamental hasn't changed but market's perception of that company wildy fluctuates up and down b/c of high speed trading. As a value investor, I love that b/c I'll buy when the market has negative perception and sell when it's up. It's easier said than done but I do think you can use to your advantage on a small part of your portfolio.

About the only impact it has for most of us is to encourage the use of limit orders (where you specify an exact price to buy or sell at) rather than market orders (sell or buy at whatever the 'current' price is), which high frequency trading makes a bit dangerous with wiggling the current price around hundreds of times a second, often violently.

 

[george76]

So?

If the revenues are used to offset income taxes then the cost of everything impacted by those goes down. The question isn't whether a 'Tobin Tax' produces a net good in and of itself, but whether it is preferable to the other ways we raise revenues. That's a much harder question to answer, but I suspect the answer is . . . it is preferable.

I guess we have to agree to disagree. Unless all countries agree to a world-wide transaction tax, it will fail as investors will simply move their funds to markets that do not have this tax. Ask the country of Sweden how their transaction tax worked. Not only did they fail to raise revenue, most of their prior volume left for London which had a much less onerous transaction tax than Sweden.

I find it interesting that people like to criticize speculators and high frequency traders the second the market starts going down. Why was there no criticism of speculators and high frequency traders in late March 2009 through the rest of 2009 when the market took off?