Opinion: To beat this rigged stock market, stop what you’re doing – MarketWatch 07-16-15

Salient to Investors:

Jeff Reeves of InvestorPlace.com writes:

  • Manipulating the markets with high-frequency trading is extremely complicated, hard to track, and even harder to determine violations of laws or regulations.
  • Half of all trading volume in US equity markets supposedly involves high-frequency trading (HFT), which is now a global concern. HFT represented 39% of the total European stock market according to 2012 data. The destabilizing force of HFT will only increase as the technology evolves.
  • The Congressional Research Service says HFT provides “phantom liquidity”. Michael Lewis says HFT divides the market into predator and prey. Help for small investors is not on the way any time soon. Even when caught, HFT bad actors just pay a relatively small fine and continue.
  • Retail investors are disadvantaged with unfair prices or fees, and are at risk should a HFT robot crash the market. Small markups take a serious toll on small-time investors. E.g. $100,000 invested in the market earning a 7% annual return grows to $543,000 after 25 years, but only $518,000 if incurring only 0.2% annually in extra fees or expenses.

Read the full article at http://www.marketwatch.com/story/to-beat-this-rigged-stock-market-stop-what-youre-doing-2015-06-18?page=1

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‘The market is rigged’ – Michael Lewis – BBC News 04-10-15

Salient to Investors:

Michael Lewis said:

  • Charles Munger says high-frequency trading is the functional equivalent of letting a lot of rats into a granary.
  • Electronic trading has rigged the market against ordinary investors, particularly in America, by allowing high-frequency traders to front run institutional investors and skim billions of dollars from the market.
  • Screwed up behavior is normal, even praised because it increases profits, while new regulation is uncertain because of the revolving door between Wall Street banks and HFTs and the regulators.
  • Perverse incentives means that culture change in financial services is glacial at best.
  • The IEX seeks to eliminate predatory opportunities created by speed and counts its biggest source of orders is from Goldman Sachs.

Rebecca Healey at Tabb Group said many market participants have already adapted trading strategies to deal with HFT constructively and automation delivers choice and fosters lower commissions for investors.

High-frequency trading accounts for 30% of business on the UK equity market.

Read the full article at http://www.bbc.com/news/business-32246655

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Fareed Zakaria GPS – CNN 03-22-15

Fareed Zakaria said:

  • The greatest vulnerability for Israel is its legal jurisdiction over 4.5 million Arabs who have neither a state nor a vote – a situation that cannot last in a democratic society.
  • The Stockholm IPRI says Israel’s defense budget is larger than that of Egypt, Jordan, Syria and Lebanon combined.
  • The UN says the US has taken in the equivalent of only .08% of its population in refugees, versus 1% for Sweden and 9% for Jordan.
  • IHS Global Defense Trade Report says the worldwide defense market rose more than 13% to a record $64 billion in 2014; Saudi Arabia overtook India as the world’s top importer and China was third.

Martin Indyk said Netanyahu has alienated just about every world leader including Israel’s closest friends Merkel and Sarkozy, by doing many things which contradict the promises that he has made them.

Elliot Abrams said the situation with Israel is the worst in a very long time because of Obama’s terrible personal attitude toward Netanyahu.

Michael Lewis said:

  • The technology is almost getting rid of Wall Street, but the resulting complexity and opacity still needs gatekeepers.
  • In the 1980s, the kind of young person who went to Wall Street changed from being one who was in the bottom of their class at Yale to one who was at the top and who can cause a lot more trouble – very bright people without a particular ambition except to be a success type.
  • Wall Street women are kept largely separate from the risk taking decisions. However, after the financial crisis, women rose to positions that were sufficiently senior that they could be plausibly blamed when things went wrong and were.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1503/22/fzgps.01.html