Perry Glasser

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.

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