Options update for May 20...What goes up (must come down)
What a strange day that was...New York going from down 75 points to up 75 points on the Fed's "no-action" decision. I've been a believer that inflation is coming with employment almost at the "full" stage, but I read an interesting article in Barron's about factory capacity utilisation (one of Greenspan's favourite indicators) which made me think. Try barrons.com. You will have to register, but it's free. The premise is that technology enables companies to make products better, cheaper, and faster than before, thereby off-setting wage-pressure inflation. I am always distrustful when anyone posits that 'this time it's different', but then look at the fate of the master buggy-whip makers.
But I digress. Yesterday was like a death vigil, waiting for the 2:15 announcement, then all hell broke loose, except for my stocks, which closed only fractionally changed. A very suspect short-covering rally, in my view--the bonds did nowhere near as well as equities.
I had a very disturbing conversation yesterday with someone in the exchange in the know regarding the coming automation of derivatives. He suggested that "it's worse than you can imagine" in terms of the rules and policies they are coming up with. My worst nightmare. I'll post details when I find out, but remember that the best-case scenario for automation still destroys the cornerstone of trading--the auction process. These people have no idea what they're doing and yet they steam-roll ahead without regard to any rational opposition. They will ruin the markets here. Wish I could be more sanguine.
Happy trading.
Porter
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