Thursday, July 8, 2010

Crisis Redux Road To Perdition - Jim Willie

VERY Interesting excerpt:

A queer statistic has emerged that underscores the perversion that is Wall Street and the stock market. High Frequency Trading has not gone away. A couple months ago, when it was exposed during a single day swoon event, such trading was responsible for 83% of the entire New York Stock Exchange trade volume. Somehow the word 'CircleJerk' comes to mind as the Oligarch Banks compete toward a liquidity climax with fewer players of potency remaining each year. A liquidity analysis by Abel-Noser indicates that the US stock market has morphed into a sickly concentrated pool where the top 99 stocks account for 50.1% of total domestic trading volume. In June, the top 20 stocks accounted for 28.9% of all domestic volume, an increase to record level logged each month. The HFT algorithms are forced methodically in a reduced number of only the most liquid stocks. The game actually results in gradual removal of players from the market. The US stock market will eventually develop into a tomb without volume. At that time, large pension and mutual funds will be forced to consider that their vast portfolios might be worth something on par with the volume-less mortgage bonds tucked away in the acid cellars. Their large investment stakes in stocks simply will not be redeemable. The SPX stock index chart should conjure up images of Wiley Coyote legless over the canyon.

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