Just last week I wrote that the market was “off balance” and my sense was correct. I just wish that I was short all the stocks that I proposed shorting a few weeks ago–but had to get out of the way of the former forever-higher grinding market.
Sure, we’ve got problems with Europe and China and currencies and deficits and politics and anything else you can think of. But what caused the crash today was a lack of liquidity. Just like the market grinding higher on lower and lower volume. We just couldn’t figure out where the sellers were. It was a lack of liquidity.
With the abolition of the Specialist and the advent of computerized high frequency trading, the markets have completely lost liquidity. And nobody can argue with me, just look at the post-mortem of todays action. No fake fat finger.
Apple dropped from $235 to 200 in a 2 minute span, from 2:45-46. Then rallied from 200 to 240 from 2:46-51. A 75 point swing in 5 minutes. $70 billion dollars of market value. Make sense to you?
The economy has been broken and the stock market has been dispatched to rescue it. Now the stock market is broken and there are no good circuit breakers that can deal with HFT and the lack of real liquidity.
Who will fix it?
If you enjoy the content at iBankCoin, please follow us on Twitter
Thanks Scott. In all seriousness, I am wondering if GS is sitting on the sidelines, refusing to play, unless they get the settlement they want….or maybe I should just go get my tinfoil beanie out.
Make no mistake. Much of our market turmoil is related to the game of hardball being played between the government and finance. Auditing the FED, the charges against GS, they are all tools to get massive financial reform.
The culmination of MBS buying made this time dangerous in and of itself. The Euro thing is a problem too, there is no doubt.
But also, the NYSE has sold its soul to a PC and the framework is broken. We should not have crashed today after crashing just last year. This is a historic aberration and if not tended to will kill the markets.