Saturday, 8 May 2010

A House Of Cards Swaying In The Breeze

The Financial Times: "The day after $1,000bn was briefly wiped off the market value of US equities, traders were still trying to work out what caused share prices to plunge and then rebound so dramatically in a matter of minutes."

$1,000 billion was wiped off the markets in 6 minutes - that is a rate of $2.8 billion per second.
Per second!?

Contagion has been the word of the week in both the markets and in Greece and at the Peripheries of the Euro.

There are two public stories on this financial tsunami - the 'incorrectly typed sell order' pretence or the gobsmacked and bewildered "What The Fuck Was That?" brigade.

In the FT again, "We still don’t know what was the initiating signal for the trading activity we saw on Thursday," said Jeff Wecker, chief executive officer at Lime Brokerage. "The verdict is still out."

Well, we'll tell you what it was - the impact of Dark Pool overflow on the public markets ie private markets erupting and spewing their detritus into the financial atmosphere.

We have blogged previously and repeatedly about how Dark Pools, these entirely non-regulated private trading environments, will be utilised by insiders to escape the hit when the next phase of the W-shaped Depression kicks in properly (the increased volatility and the 8.2% fall in the value of the HyperImperium over the last four trading days of last week suggest we're back on the Big One).

Unless you are one of the privileged who are invited to trade on these underground platforms - identical in format to the underground Asian markets that dominate global football, since you ask - you are in the position of monitoring for the breakout.
Seismological Forensic Science.
As the huge blocks of institutional trading continue away from any prying or taxing eyes, the money and information flows occasionally send signals through to the main public exchanges - the lava of liquidity oozes to the surface, the magma of mammon murkily manipulates.
[Oh come on! The lava of liquidity and the magma of mammon :)]

There is a Psychology of Fear in the market.
All rational traders understood that the surge was a dead cat bouncing.
When signs flash, the slick close out their psychological trend profits.

Computer generated trading compounded this Psychology of Fear as the same individuals who were closing out their positions had orchestrated the programming of the software underpinning the algorithmic cybernetic stuff.
Sell orders cascaded as the noise reached a crescendo.

Just as the linkage of computers exacerbated the cataclysmic fall in the market, contagion reached through to the currency and bond markets with the yen gaining massively at the expense of the euro and the dollar and the demand for government debt soaring.

In a further analogous throwback to the Last Depression Era, NYSE Euronext decided to "slow down" trading to prevent market collapse - yet another form of Tickertape for the Teenie Years.

Secret Underground Markets And Manipulation Of Their Public Equivalents...
...Shouldn't Somebody Somewhere Be Doing Something About This?

As the Financial Times is the only newspaper worth reading, we'll leave the last word on the integrity of their free market system to them: "One government official said the activity reinforced worries that “the market has outpaced the ability of the infrastructure to handle it. We have detached finance from the real economy and created a monster.”"

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