We're not alone in our thinking of the irrationality of markets.
This guy pretty much echoes my thinking on this HFT stuff.
My boldings.
thestreet.com
Rage Against the Machine; Stocks Are for People
NEW YORK (TheStreet) --The market collapse yesterday raises some interesting questions about who the markets serve.
Are these stock gyrations really reflecting the informed outlooks of smart investors who doubt the fundamentals and future earnings potential of stocks of all stripes, including Caterpillar(CAT_), Boeing(BA_), and Pfizer (PFE_)?
Or are we seeing the consequences of the rapid expansion of computerized algorithmic trading, which by some estimates account for more than half of all equity trades.
Over on RealMoney Silver, Doug Kass observes that "high-frequency-trading funds are very active and have taken the role as the dominant investor in the U.S. stock market. The market's spastic action reflects, in part, the disproportionate role of high-frequency-trading funds on the market over the past few weeks."
So we can blame the machines.
Machines don't understand the responsibilities of ownership. They obviously don't care about the fundamentals behind the numbers or understand the power of responsible and responsive corporate leadership.
Beyond that, what's wrong with high-tech trading? In my opinion, it's too fast and too stupid. I like to think humans are smart enough to avoid a massive selloff like we had yesterday, when there was no particular news or event that merited such a drop.
Jim McTague, the Washington editor over at Barron's, has even harsher words for computerized, high-frequency trading that are clearly expressed in the title of his new book: Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market into a Casino.
McTague says a single day of high-frequency trading is like 30 years in human trading terms, and he notes that as a result of these computer trading systems 2% of market participants generate 70% of equities volume.
Life's too short to move that fast.
Besides, equity markets are not supposed to be computerized gambling parlors where the best programmers win. They are supposed to be a place for investors to take an ownership interest in a company and share in the risks and rewards of corporate activity.
Do investors really think Caterpillar is a losing proposition deserving an 8% decline over the past five days? Or is that just the machines doing all the thinking for us? |
