If you were wondering Thursday how the NASDAQ could remain stuck at one price for a period of time (about 3-hours worth) no, that wasn’t everyone getting bored: That was a technical glitch. As the NY Times recounts it, in their report over here, the problem comes just two days after Goldman sent out a bunch of errant trades and this gets us down to asking again some very difficult questions about the market.
First: Should there even be such a thing as high-speed trading? It’s like having a craps game being played while ostensibly playing roulette: You decide to bet on the number 6, but before you can get your bet placed, a whole bevvy of side players at an in-line craps table have yelled “Coming out! Six is hot…” Would you play in a casino where the big money is not on your roulette call, but is mostly being made at the in-line craps game?
Second: For an exchange which trades so many of the big-name tech stocks, you’d think there would be redundant systems on a hot/standby basis. You know, just like a RAID array in a serious desktop but bigger.
Third: Because of inter-market arbitrage, this has just a whiff of not-quite-accidental, since people like me who try scalp some very short-term trades now and then using the 1-minute chart and since the NASDAQ tends to be higher beta than the Dow stocks, this is definitely hard on compulsive gamblers….I mean investors and more to the point it screws up cycles which work fine as long as the markets are open but they disrupt other action…hence the “whiff.”
Fourth: Where’s the accountability? This is precisely the kind of trading accident that while not-too-damaging on a slow late summer’s session could be a wealth-killer for those trying to bail out of a meltdown in late October yet to come.
I may be stating the obvious here, but Jim Kramer nailed it on Mad Money on CNBC yesterday and in case you missed it, the video and transcript are over here. My favorite part is this:
okay, nasdaq we can’t ask you to build the equivalent of a plane withinplane, but where is the backup system? why isn’t there a server where the nasdaq can flip a switch and maybe slower maybe, but at some pace that makes you feel like it’s not a farce. we know there are such things as redundant systems. we know that they’re costly. i’m sure the nasdaq doesn’t want a sedge second system ready at all times because it would be expensive and hurt the earnings per share. aps, sometimes we sacrifice everything on the altar of profitability. the traders have so much clout in washington that i bet the s.e.c. couldn’t even order them to do that. blow back would be too huge.
There’s another example of what I’ve told you before: ‘Merica is living on borrowed time because the Big-Monied Special Interests have taken over Washington in the form of lobbyists and power groups wielding campaign money and persuasion blocks. And what used to be a dead-to-nuts honest casino is struggling to maintain that appearance, so long as you remember (and don’t mind) your bet on the roulette table triggers a craps game on the side while the slow wheel spins as the front-runners slice a tiny piece off every chip you play.
Not much on the econ calendar this morning so stocks are set to open up slightly. We are cautious later in the day as the market is near critical support levels and no one knows how crazy things could get in the Middle East over the weekend, so closing out long positions today is possible.
Asia saw a 2.2% rise in the Nikkei overnight but most of Europe is on hold, though formerly Great Britain was up 0.5% when I checked earlier.
As we explained to Peoplenomics subscribers yesterday in our monthly check of US West Coast Ports, there’s evidence that a slow economic recovery of sorts is underway. That view was underscored in Thursday’s Conference Board Leading Economics Indicators report:
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.6 percent in July to 96.0 (2004 = 100), following no change in June, and a 0.3 percent increase in May.
Says Ataman Ozyildirim, Economist at The Conference Board: “Following moderate growth in the last few months, the U.S. LEI picked up in July, with widespread gains among its components. The pace of the LEI’s growth over the last six months has nearly doubled, pointing to a gradually strengthening expansion through the end of the year. In July, average workweek in manufacturing was the weakest component.”
What continues to muddy the waters (with apologies to the late blues great) is the amazing growth in the nation’s money supply. In last night’s H.6 money stocks report from the Fed which we track pretty closely, note that M1 (cash and equivalents) is up 10.2% in the past year while M2 (cash and short-term time deposits) is up 7.0%.
Still, in the weekly Association of American Railroads report, we note we’re stuck in Nowheresville:
The Association of American Railroads (AAR) reported increased weekly rail traffic for the week ending August 17, 2013, with total U.S. weekly carloads of 295,901 carloads, up 0.5 percent compared with the same week last year. Intermodal volume for the week totaled 256,458 units, up 3.7 percent compared with the same week last year. Total U.S. rail traffic for the week was 552,359 combined carloads and intermodal units, up 2 percent compared with the same week last year.
That weekly carloads figure 0.5% is very significant because why? Because the underlying US population has grown 0.7% in the past year…so a YoY of 0.5% is basically flat-line. The intermodal volume being up indicates, as I read ‘em, the continued export of American jobs to foreign producers where corporations can play the wage rate differential between ;America and lesser-developed countries without paying Obamacare (some day, they got that one put off for a year) and without contributions to income tax or Social Security by all those cheap offshore workers…
The lack of genuine economic growth is forcing retailers to ratchet up the Christmas hype (just 125-days to go) extremely early this year…Christmas deals are already showing up.
More after this…
Gangs, Not Guns the Problem
I mentioned the senseless killing of that Australian baseball player earlier this week and again, another senseless killing in the news this morning. In this case, it’s an 88-year old man being beaten to death in north Spokane, Washington.
And as if staid north Spokane isn’t enough of an assault on the heartland, you’d think that with the Air Force Academy nearby, a city like Colorado Springs wouldn’t have a gang problem…but guess what?
Even more worrisome: The “Gang presence in the US military” outlined over here…just to put some context to the problem.
As a serious worry long term (for our kids)? Worry about the potential for a slow-motion erosion of the military’s honorable history as gang members make their way up the food chain in the .mil world and move into positions of authority. Since that could conceivably include NORTHCOM (US homeland centered) it would –in turn – set the stage for a military like, oh…Mexico’s, say….That’s how we could “lose America.”
Ah and there’s this new twist on gangs being reported out of South America where hair gangs are reportedly assaulting women and cutting off their hair to sell…
Race War Hype
You might want to read the Southern Poverty Law Center’s report “DHS Employee Promotes Race War in Spare Time, Advocates Mass Murder of Whites.”:
Are now being hired by the Department of Health and Human Services to set up a massive detective bureaucracy and crack down on people who don’t follow Obamacare rules.
A Judicial Watch official calls it the Obamacare Police. Frank Nitti would be proud of this Washington gang.
Speaking of gangs in Washington: 80 Members of the House would rather see government shutdown than have Obamacare come in.
Fearless Leader’s Non Comment
Big headlines about Obama calls Syria chemical charges a big concern. No shit? This is a fine example of another non-story – story. But, as Ure’s truly noted earlier, this is the summer doldrums.
Watch the Saudis
I’ve been telling you the whole future of the Middle East is in play with the Saudis backing the military government in Egypt, hoping to stem the tide of the MuBros and the election of democracies which might interfere with things as they are in Saudi Arabia.
As we go into the weekend, we note that the Saudis are funding hospital operations in Cairo now, no doubt to lessen some of the criticism coming their way from the MuBros.
And our concerns about the Saudi’s are heightened by developing reports of a stormy meeting last month between Russian president and ex-KGB boss Vlad Putin and the Saudi intelligence chief Bandar bin Sultan.
The small cards are in play in Egypt but the Kings Queens and Jacks in the real game are the oilfields to the northeast of Egypt.