Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: MIKE REDDERT who wrote (20945)	4/16/2000 11:35:00 AM
From: ahhaha	Read Replies (1) \| Respond to of 29970

The surprising fact is that there are plenty of orders on both sides from the public reflecting different intents in investment or trading. The markets are so vast now that just about all NAZ issues are extremely liquid and so there isn't a problem about paucity of orders. Also surprising is that in illiquid stocks where there is more MM activity, the net position per day or week is astonishingly flat. You find that you don't make all that much effort to square your own book or zero out inventory. There is more book squaring on Friday and that would have been the case last Friday had there been more MM activity, but there wasn't much. The MM has been forced to buy a lot of stock at higher levels. They don't want to sell that inventory here. They need it in case the market gets illiquid on the upside. Just remember all of this is synthetic. It's settled in cash not in stock. The market, meaning mostly the public, has forced the MM to become long even though an MM could see the market would drop like a rock. You hate it when you're holding over-priced inventory, but experience teaches that what goes down also goes up and so the inventory can be sold when the market becomes illiquid above. For an example of the above dynamics, on Friday there was a buyers strike. Very few market orders to buy, but the MMs didn't have to get involved much since they have agency bids from institutions to work. What you saw was long rows of price on a zero minus tick with order sizes between 200 and 2000. This is public capitulation selling into institutional accumulation. The MMs take so much stock, lower the price 1/8, and the another long row of selling begins. Why would institutions provide this liquidity when they know it's going down? They're averaging down. That's ok for them when prices get into extreme regimes. It's ok because if you have $1 billion to put into a stock, this is a unique opportunity to do so without running up the price and realizing disappointing execution. Also, they don't know its going down. It might reverse and suddenly go up for no reason just as it went down for no reason, or better put, for the equitable reason of keeping the game clean. The market isn't illiquid above now. There's plenty of booked supply above which prevents the MM from selling prematurely and realizing an inferior profit. So I hope you can see that it is in the MMs interest to only do their job. The market makes you a winner if you don't interfere with it with your own pretense to knowledge. If you've read my FED comments, you'll notice that that claim is true for them too, but they interfere. They don't trust the market and so they don't act efficiently. The result is like the beginning MM. Returns on effort are not maximized. Since the FED is we the people, we pay for the fear driven interference errors of FED officials.