Perry Glasser

Archive for May, 2010|Monthly archive page

Open Market? What a Bunch of Maroons!

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on May 20, 2010 at 10:17 am

Last week’s alleged flash crash and not quite full recovery underscored how and why the markets have evolved to screw Citizens. I say “evolved,” because if anyone thought it was by design, angry mobs, led by financiers’ mothers, would be carrying pitchforks, torches, and rope toward Wall Street.

The Wizards are trying the tired rhetorical campaign to persuade us that closed means open. As my friend Bugs Bunny says, “What a bunch of maroons.”

The idea bears no scrutiny:

Open market.

In an open  market, all players play by the same rules. But 70 percent of all stock market dollar volume is now performed machine to machine. Computers never sleep, and the electronic market where those transactions take place exists only in cyberspace. The NYSE abandoned trading pits, callouts, and specialists a few years ago, overcome by the lust for profit and envy of the NASDAQ where Buccaneers and Wizards conspired to make so much coin so fast the old farts at the NYSE felt like tortoises. You think it’s an accident that NASDAQ is dominated by high tech companies?

So while you are stupidly asleep, bad news about a country, industry, or individual company radically affects the markets in Asia and Europe. As you roll out of bed and grope for coffee, it’s likely that the opening price of your holdings is markedly different from the closing price the day before. See, “closing” means “closing” only for the individual investor. Big Money never sleeps; Big Money is global.

The situation is no better if you follow the conventional wisdom. Citizens are advised by Wizards to diversify their holdings in vehicles like mutual funds where professional management, for outrageous fees, will place their money in a variety of stocks and bonds. Seems sensible.

But you may have noticed that your money locked into your 401k, 403b, and 529 cannot be moved around until the close of business.  Oh, you can put in an order to sell 1,000 shares at 2 pm to pay junior’s tuition, but you get the price at 4 pm, and tough shit if there is a flash correction at 3:30. Good-bye Harvard; Hello community college.

No such inhibitions limit the Big Money hedge funds, trading all the underlying stocks in your mutual funds all day long and far into the night. In fact, when they leverage Big Money, the fulcrum is Citizen dollars, guaranteed to be inert for a few hours.

Ask me where to put your money. Ask me. Go ahead. I dare you.

Still Screwing With Us

In Business, Economics, Finance, Wall Street on May 11, 2010 at 9:21 am

Today’s Wall Street Journal insists on running “news” of  theories as to why and how last Thursday’s market plunge of 1,000 Dow points, and the 700 pt correction in 28  minutes can be explained. It seems the “fat finger” narrative is in disrepute, but now we are getting tales that again about “sentiment,” a perfect confluence of anxiety about Greece (an economy smaller than California), oil in the Gulf of Mexico, anxiety about the real estate market in Shanghai…the usual suspects.

The same article notes that 66 percent of all trading is conducted by hedge funds, machine to machine. No doubt, these giant Cray computers are taking digital Zoloft to get through their worst moments.

If you have a higher IQ than a carrot, you might wonder why these algorithms for profit are allowed to mess with your kid’s college savings, your retirement, and your hopes to buy a house.

I’ll explain.

The rest of us play by different rules. Your 401k, your 529, your Roth IRA, your IRA, and all the rest are probably in broadly diversified mutual funds.  That sounds stratgeically sound–until you remember that if you put in a buy  sell order at 9:01 am Eastern time, it is not executed by the Buccaneers who run your fund until 4:01 pm that same day.

Hedge funds run at light speed; you and I are breathless turtles.

During those long days, the hedge funds leverage assets against…our money. Since our assets are  locked up and immobile, they can be relied on for 24 hours–from close of business on one day, to close of business the next.  Even if you stared at your computer the entire trading day and wore a headpiece phone plugged into your private broker–you are screwed. You can’t buy cheap or sell dear during a 28 minute plunge and recovery, and if you awaken one morning to find your future has been liquidated while you slept..gee, that’s too bad.

They call this an open market. They are proud of the transparency. The ads are in USA Today, Forbes, Business Week, and come in the mail. “Give us your money. It’s the right thing to do. We will take care of it!”

Boy, do they ever.  Now you know why they  pay themselves bonuses that look like international telephone numbers.

Market Drops: Buccaneers Retake the Helm

In Business, Economics, Economy, Finance, Personal Finance, Wall Street on May 7, 2010 at 10:13 pm

It’s been more than a year since I’ve been here, Internet, but I am back, if not by popular demand than by compulsion of circumstances.
Yesterday, May 6, the Dow dropped 1,000 points in seconds—literally— and rebounded 70 percent of that drop in a few minutes. Mr. Toad’s Wild Ride, powered by derivatives, was on!
Today’s financial press is filled with the usual crap explanations prepared by nitwits who ought to know better, but they can’t get viewers or advertisers if they try anything like truth, so they delude themselves and try to delude us. Call them the Handmaidens.
My favorite Handmaid’s Tale is that some fool made a fat-fingered typo that precipitated the drop. Gee, you think the world economy will collapse because of a typo?
The pabulum Handmaid Tales “stories” is mostly about sentiment—fear of default in Greece, worries about terrorists in Times Square, panic, woe. They are soothing, nice little myths designed to make children believe the world is rational and the bad, nasty things will go back under the bed.
The idea is for us to visualize thousands of sellers lunging for their telephones shouting “Sell!” This makes us believe the markets respond to people, and since we all know people can be wrong, there is nothing to worry about.
Puhleaze.
In 1929 and 1932, human sentiment moved markets, but the Handmaidens should by now have noticed that markets now are made and operated by mathematical algorithms being run on networks of computers that at the speed of light buy and sell—mostly derivatives. Why screw with stocks and bonds when you can mess with serious leverage at 100:1. If ten cents can buy you $10,00 worth of anything, why would you screw around with the thing itself?
What does a million dollars worth of derivatives buy?
Control of Haiti, Guatemala, and maybe Greece, too.
When the action between machines is so rapid and so huge that a difference of .0001% on a few billion dollars is a very comfortable day’s pay (a half day if you work for Goldman Sachs), then the machines are going to deal. Buy a billion in New York, sell two billion in Tokyo, settle in Berlin. And all in less time than it takes to read the italics.
If you are in the market—and everyone is, unless their kid’s education money or their 401k is buried in a pillowcase in the backyard—then remember:

SENTIMENT HAS NOTHING TO DO WITH IT!
COMPUTERS DO NOT EXPERIENCE PANIC!
ALGORITHMS DO NOT GIVE A RAT’S ASS ABOUT GREECE!

Reread and memorize.
And know this:  No individual can play or time the markets when the “traders” are soulless machines. You can read analysis and blogs until your eyes bleed–ain’t gonna do you a bit of good. You can’t react that fast. And if you are a day-trader–why not bet on horses? At least you get two whole minutes of action.