It’s More Than The Program Trades, Sue — And We Know That!

Yesterday, on CNBC’s Power Lunch, Sue Herera and Bob Pisani had a conversation with a guest speaker (I tuned-in too late to get his name) about individual investors’ distaste for, and disgust with, the stock market. At one point during the conversation, Sue Herera said that a number of individual investors believed that program trading caused the 2007-2009 market crash; and though algorithmic trading programs certainly served to complicate matters by furthering the losses brought about by the housing market collapse and the ensuing financial crisis, I believe that many individual investors realize that the problem(s) leading up to the crisis extended much further than high-speed computer trading systems.

To a certain degree, much of the problem for individual investors lies at the very feet of those who were reporting the financial news prior to the crash. As I recall, several reporters referred to the stock market during that time as the “Goldilocks Market;” and, shortly after the crash occurred, I recall John Stewart taking Jim Cramer to task [a must see for those who haven’t seen it — Link1, Link2, Link3, Link4, Link5, Link6] for the financial news and commentary that was provided by financial reporters to individual investors (like Stewart’s own mother) in the weeks leading up to the crash.

We can’t blame the pundits for our losses, however, because they (like us) seem to be at the bottom of the food chain when it comes to receiving timely, accurate and “actionable” information. By the time they are able to pass the news along to us (the lowly, individual investors that is) forces are already at work seeking to ensure our demise. The wizard behind the curtain, working with his high speed Black Box trading program, which places thousands of trades per second in its Dark Pools, for fractions of a penny per trade, leaves us little room for error, with our rather slow and unsophisticated online Web-based trading programs, where we go to make our trades for as little as $7.95 per trade. To the Wizards of Wall Street, trading against us serfs is akin to shooting turkeys in a barrel, so why do they bother? In a word — greed! They are the masters of the universe, the gods unto which we are born to serve until our dying days. They are the 1 percent, and we are only there to service their needs, to feed their insatiable appetites for our money.

For so long, we bore witness to the S&P 500 trading up and down, up and down, sideways, round and round, in a pattern that resembles clothing being tumbled in a dryer. The pros so eloquently call it a “Sideways Trading Pattern.” I call it the ‘Stuck Market.’ Stuck, because it is a pattern we have been watching for the past seventeen years! So long a time now that, for many of us, it actually would have been more fun (and rewarding) to sit in front of a dryer to watch our clothes dry. But, no, every day we logon to our broker accounts and we tune-in to CNBC, hoping and praying that this time it will be different, only to find that it is the same old game — maybe worse. 🙁

We go to our computers, and to our television sets, and we do our due diligence. We read and listen and then read some more, hoping that the information we gather is true and accurate — and timely. We want to invest for our children’s futures, for our retirements — for our so called Golden Years. We hope and pray that the experts will, eventually, be able to provide us with the information we need to become successful. We wait for them to give us the straight scoop, only to later find them simply reporting on our losses and on our casualties.

But we, the uneducated, the uninitiated individual investors, are not the only ones who have been hurt by the market’s scandalous acts. Many a business has fallen prey to the markets wicked ways. So much so that many of them now want no part of the game. Think me wrong? Well, then, think again. Watch the following video before casting your judgment.

Julia Boorstin Interview with Marc Andreessen, July 11, 2013

Source: Link

Did you hear what Mr. Andreessen had to say? Well, let us recap.

We tell our entrepreneurs to build a fortress before [they] go public.

Market manipulation has become an issue for a lot of young tech companies whose stocks really get torqued around by various kinds of hedge funds, and it would be nice to get the market a little bit more back to normal. [Hear, Hear!]

Build a fortress? Wasn’t the basis of the Stock Market (sorry, the Stuck Market) built on the premise that it would be a place where business owners could go to secure funds to help them build their businesses? Wasn’t it supposed to be a place where ordinary citizens (i.e. we, the individual investors) could go to participate in The Great American Dream? Now, more a nightmare.

At this point in time, why would any business want to have anything to do with the stock market? If owners can build fortresses without the stock market, then why bother with the headaches? Why submit oneself to the analysts’ inquisitions? Why subject oneself and one’s business to the whimsical ways of market participants? Michael Dell now wants out.

No — Sue — we realize that there was so much more to it than just the program trades, but does it really matter? We’ve lost our kids’ college funds. We’ve lost our retirement monies, and the funds we were saving for our next vacation. We no longer have the ability to donate to our favorite charities or to our places of worship, and we can no longer help those who have fallen on hard times, because, now, it is we, the 99 percent, who have fallen on hard times and who need the help.

We know why we lost the money — everyone was there to tell us “why” we lost the money. The real issue isn’t that we can’t understand, or that we are incapable of fully understanding, the real reason(s) why we lost the money, the real issue is —  well —  that no one was there warning us to get out before we lost the money. Why weren’t you there to help guide us to safety? Plenty of people were there to report on the carnage after the fact, but no one was there to save us from the financial house of cards burning down all around us.

Where were the Market Police then, and why aren’t they there now? It has been over four years since the market went to pot (nearly six years if one goes back to the housing market collapse in 2007). Do you believe things have (truly) gotten better? I don’t! It’s still the same old game, with the same old type of players — and the same old type of commentary. If you believe that we are too ignorant to understand why we lost our money then — fine! What does it matter? The wizards have already taken all of it and we have nothing left with which to play the rigged game.

Disclaimer: The content on this site is provided for general educational and informational purposes only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author and do not necessarily represent the opinions of sponsors or firms affiliated with the author. Any action taken by you as a result of information, analysis, or advertisement provided on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)
This entry was posted in Articles, Fundamentals and tagged , , , . Bookmark the permalink. Trackbacks are closed, but you can post a comment.
  • StatCounter

    wordpress blog stats

Check Out What’s New at The Tenacious Trader by Going Here