ams-- I share your skepticism concerning the value of fundamental analysis-- most of f.a. anyway, and the several points you made on that are well taken. What I find interesting is that you believe that while fundamental analysis doesn't work, technical analysis (charting ) does. I should think that the same (competitive) forces that drive stock prices to their equilibrium ,or intrinsic, values, so that fund. analy. doesn't work, would likewise eliminate easy profit opportunities from charting. We're back to the question of whether stock prices follow patterns that can be recognized ex ante. O.K., I suppose you wouldn't believe it unless you were successful at it. Given the costs of short term trading, I wonder if you have a friendly brother in law to provide you free brokerage services, not to mention a very good tax account. For my money I 'll take long term buy and hold.
Concerning SOES trading, you explained that matters are more complicated than the aspects you covered in your earlier comment. I appreciate that. The burning question for me, after reading your acount, is whether SOES traders generally are acting on the same info as MM (i.e.the SOES and Selectnet systems), and therefore profit only to the extent that they assilimate that info more quickly than the MM's. I don't personally know any MM's but would assume that as a rule they are quick witted, fast thinking, and that a process of natural selection operates to drive out anyone who isn't. Out quicking them presumably is anything but easy. Do SOES traders profit only when new info. arrives and they happen to catch a MM napping, that is the question.
Switching subjects, Richard Ney used to argue that NYSE specialists would use "crisis" events in the news as a excuse to manipulate the drop in the price of stocks, as well as to exaggerate the drop. I thought about this yestersay when Greenspan spoke, following which the market quickly tanked 100+ points. The advantage to the specialists apparently is that they fill buy orders while reducing their invetories, then drop the price in order to sweep the stop loss orders and market sell orders from their books before letting the price rebound. On the whole I found Ney pretty far out, but on the issue I think he made some sense.
Geoff |
