HFT, Flash Crash, ETFs, etc.

We've been saying it for some time now and regulators are finally turning on the lights. This market has gotten away from us. In a rush to make as much money as possible, we've further corrupted our markets.

The report on the flash crash shed some light on some of dubious practices of Wall St., but offered no comfort to those of us with our 401ks at risk. One lesson that should be learned from this if nothing else, don't trade (invest instead) and leave ETFs alone. We've been saying for months now that most, if not many ETFs aren't as advertised. You doubt this, look what happened to them during the flash crash. Most tried to go to zero.

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Finally, some life at the SEC

I read today that the SEC is planning to actually do something about the rampant high speed speculation that has almost destroyed our market. The top dog there agrees with most of the rest of us, that "Dark Pools", "High Frequency", "Quote Stuffing", etc. does very little to increase market efficiency or transparency.

Just the opposite, it helps destroy wealth. More 401(k)s, IRAs, and the like have suffered because of this crooked business.

Thank you Mary Schapiro. It's time we took our markets back.

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Privatize Social Security?

I can't think of a worse idea. I'm sure the Wall St. hooligans would love that. Could you imagine if Social Security had been privatized during the stock market meltdown years? Enough said.

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Goldman spinning off prop trading business

So the golden boys are giving up the proprietary trading business. I'm shocked. I also hear that banks can't have more than some small percentage of their tier 1 capital placed with hedge funds and the like. All this is about the most common sense I've heard in a while.

We've been saying for a while that hedge funds only became as big as they did because they were doing the bank's bidding. All was good with that relationship until they turned on their masters in 2008. Now they're monsters free to do as they please. Should have never given them all that money. Now these guys run around buying majority stakes in actual companies and think they can run them just because they have a lot of money.

In case you weren't paying attention, banks have always been at least somewhat regulated, so a while back some of these bankers left and started hedge funds (unregulated) and took money from banks promising to do follow the will of their masters (speculation on my part). They paid themselves fortunes and later turned their noses up at the same entities that handed over all that doe. In the end they almost took us all down.

By the way, now their back.

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Still waiting for something meaningful

Now we have FinReg in the pipeline and a lot more talk about how things are so much better now, but we're still waiting. So far almost nothing market regulators have done have addressed the structural problems that exist in the financial markets.

Do they not remember May 6, 2010. That circuit breaker they put in is a band-aid on a gaping wound. They need to do something about the underlying problem that leads to corrupt prices and insane volatility.

Wake me when 'they' do something that matters.

By the way, did you happen to catch the admission by BofA that they actual hid more than $10 billion in debt as part of window dressing. I thought people were suppose to go to jail over this type of thing after Sarbanes Oxley.

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The new circuit breaker

This new circuit breaker put in by the SEC is just another joke. Who are these people? I still don't know why more consumer investor groups don't say more. I thought the idea was to slow down the machines. Whether you know it or not, that's exactly what they are trying to do, but this does nothing.

A 10% move is huge and it has to happen in 5 minutes to trigger the circuit breaker and it's only for certain stocks!

I can't say anything more. Read the rule. By the way, they say they still don't know what happened on May 6. That's because the markets were working they way they're set to work. There are structural issues that need changing. We don't see that changing until the regulators and exchanges stop catering to traders.

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The worst May in 40 years for the stock market

The headline says it all. I should just stop there, but I'll go on a bit. Many of you were probably shaken out of the market and might be thinking it's hopeless, but remember these things are temporary. Look at the chart and the steep decline, we'll head back up soon.

What really troubles me is the average investor usually loses because he/she sells into the decline near the bottom and those 401(k)s and IRAs take the hit. To think, a few years back 'they' wanted to put Social Security in your hands.

Make sure you have the right allocation and diversification plan, ignore the talking heads, leave options alone, and don't borrow to invest. Do these things and you'll breeze through months like May 2010.

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That Was Way Too Easy

One thing people aren't talking about is apparently how easy it is to manipulate US financial markets. What if instead of sending the Dow down 1000 points I wanted to shave 300 points off the Dow. Easy enough and I'd draw no scrutiny.

This is why our markets are as volatile as they are. The rules in place make it way too easy to manipulate the markets and of course, regulators don't seem to mind. Instead of worry so much about circuit breakers, worry about the structure.

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