Skip to comments.The New Stock Market
Posted on 11/28/2008 12:55:36 PM PST by Vince Ferrer
First, as my trader friends point out, there no longer really is a stock market. Liquidity is so bad that prices do not really reflect new information. Rather is reflects volatility due to buying and selling by fewer and fewer participants as either people neither have the money or desire to trade. The stock indexes have moved more in the last 50 days than they have for the last 50 years.
(Excerpt) Read more at biz.yahoo.com ...
One day the futures are up 200. Next day, they are down 150.
That’s not the way futures are supposed to act. They are supposed to have a more smooth, stabilizing effect on the market.
The fact that they’re jumping all over the place means one thing:
Nobody knows what the hell is going on anymore!
Ve vill tell you vat to buy, and how much to pay for et!
... the next day, a weeklong rally started, proving once again that I can ALWAYS find the bottom of the market.
I don’t think we’re out of the woods yet. late 2009 at the earliest, or who knows when at the latest.
I don’t know if I agree with the lack of liquidity. There are, of course, days, if not hours, where there have been “no buyers” for stocks. But these things run hot and cold.
But I agree that we are in a new stock market era. (IMO we have been in such an era since about 2003) Here we have a government that has essentially capitulated as far as freeing up credit markets and has now fully admitted to printing gargantuan sums of money. $7.5, $7.7 trillion, these are astounding numbers, half a years’ GDP, and flooding financial markets with it. And yet, we have a 10 year bond at 30+ year lows, totally unfathomable.
At some point, it will become clear that the US Tsy is printing money and using it to buy its own bonds. Essentially the world’s greatest counterfeiting operation to keep rates low. Who else would be lending to the US Govt at a sub-3% 10 year yield?? Additionally, traders are used to seeing money come OUT of bonds when the market rallies, and we are seeing exactly the opposite. This kind of forced liquidity injection is leaking into stocks. It does not seem natural at all, it’s a giant “huh?”. THIS effect, I WOULD call the “new kind of market”. Tsy monetary base has nearly quadrupled over the past 45 days.
My concern is that this effect will snap the other direction at some point, and US rates will sky. Bond holders have never, ever lost, any time in the last 25 years. It has been a one way, bull market all that time.
As long as markets are free they will maintain through the peaks and the valleys.
Oh, wait a minute...there is that little concern called the federal reserve isn't there.
You too? :(
I’m usually that way too. However, I am very pessimistic on the future with regards to the stock market, jobs, etc. (Aw heck - pretty pessimistic about everything).
Sometimes I get confused and start to think positive. Usually after some good news from someone it takes me awhile to come back to my senses.
One example: “Well, the bailout package will take some time to work its way through the markets to improve liquidy and then stocks will go back up”. Sounds good, except that the entire concept of the gov’t giving money to cover private losses is wrong in my belief.
The other is “the worst is over, the Stock Market is forward looking you know...” (What about when the DOW was at 14,000 and a year later it is almost half. Was DOW 14,000 “forward looking”?)
Or perhaps it's known now that for years no one new what the hell has been going on and now most are pi$$ed and frustrated with what it has wrought?
Putting a stop to naked short sales would be a help.
I wish everyone would get over this new this or that new that. It’s a rehash of history with lessons not learned.
the markets are now overrun by electronic trades - not Etrade, Scottrade, etc, but electronic trades triggered by software being run by hedgefunds and the Big Trading Houses.
Prior to Bush, we used to have trading curbs so the market wouldn’t dive, crash, spike, explode and go on these crazy runs which don’t reflect any actual information based trades. The curbs helped keep actual investors from getting killed or stopped out constantly by the movement traders and institution investment mgrs.
Software now triggers more trades than individuals or fund managers. When a stock (or an index) goes up ‘x’ percent within ‘x’ period of time, the software can be programmed to dump that stock to avoid losing money for the big institutional clients. And the same thing on the way up. These hedge funds are making money on the swings and not on the actual investments.
And it is a nightmare for the rest of us. Bush doesn’t seem to give a crap. Chris Cox is not a responsible pick for the SEC job and there is apparently nobody working at the CFTC based on what has happened to commodity prices in the last 18 months.
Individual investors have been thrown to the wolves. And I don’t see any moves being considered to put ‘investing’ back into the stock market. So we will be left at the hands of traders, gamblers and momentum junkies and the ‘channel trading’ infomercial congames.
it’s incredibly sad that a President with an MBA from Harvard has absolutely no clue how our economy or our markets work. It’s hard to argue against just electing another in a string of lawyers when a business school graduate is so oblivious.
No I am not wrong.
Question: When was the last time the stock market had such massive volatility and huge swings?
Answer: 1929, 1930, 1931...
You do the math.
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