Two things. The first involves the stock market melt-down yesterday. Whether it was caused by the officially sanctioned explanation of a “fat finger” mistyping on a computer terminal to trigger “High Frequency Trading” computer algorithms, or by either more nefarious or more fundamental causes that pulled the HFT trigger; the market went full bore Chiroptera feces, and was out of control.
I am not an investor. Two reasons for that. One, I am too poor and two, I acknowledge that everybody else in the game knows a lot more than I do about complexities I cannot comprehend. That would make me what is technically termed “the mark” in this game. For anything more complex than buying a share at a set price and hoping it goes up; I understand Stephen Hawkings’ popularized explanations of Quantum Theory a lot better than I do ‘long’, ‘short’, ‘put’, ‘calls’, and derivatives of all sorts.
Admitting my ignorance, I still watch the markets broadly because they influence and sometimes control policy and politics. We have already mentioned the Plunge Protection Team [which incidentally goes back to the first Bush, I believe]. The game is partially rigged already with that. Right now, until it reaches the point where it cannot be forestalled; politically it is inconvenient for the administration to allow the market to go down. Which explains how the market has kept edging up in the face of reality. Wall Street traders were not the only ones taking delivery of cases of Depends yesterday.
One of several sites I watch is called Zerohedge. It has the normal range of writers in the business; albeit it has more on the bearish side than most, and I find that they are generally the ones who can bring real world facts and not jargon into the discussion.
One item that has come up repeatedly today is that individuals, smaller investors, and brokerage houses outside the big 5 firms that have made up most of the trading volume for the last several months were blocked out from trades during the fiasco. Computer and financial channel feeds of the market were also disrupted to a great extent, blocking non-connected investors from access to the market.
It may be that the system just could not take the strain, or it may be that it is a feature and not a bug. I don’t know. But it seems that even assuming the best case scenario, if you ain’t connected to the right people; if the market goes stupid y’all are scrod. You are not going to be able to make trades until after you are wiped out. One interesting thing. In at least some cases, margin calls were running up to date during the meltdown. I seem to remember inability to pay off margin calls having something to do with a problem in 1929.
One of the writers there also did a piece on the nature of HFT algorithms, asserting that even in the best of times they are rigged to cheat the small investor. I offer it here for your consideration.
http://tinyurl.com/2ahc7ck
Make of it what you will. Personally, if I could afford to invest right now, I would not be buying anything I could not hold in my hand and protect with 7.62 mm NATO. But then again, I operate under the presumption that even paranoids [like me] have enemies.
Second, the Brit election. While I agree with Wretchard about the leaders of the Brit parties fighting for command of the TITANIC after it stopped to take on ice; there is another factor that aggravates it.
I have been watching the Brit press pretty closely for the election, and there are severe problems.
1) their equivalent of absentee ballots for Brits overseas have been screwed up badly. They are blaming the Icelandic volcano for the inability to get ballots in by the deadline to be counted.
2) their military absentee ballots have somehow not made it back home in time to be counted. Given that most of HM Forces [especially the SAS and Royal Marines] would crawl over ground glass to vote against Brown, this has an impact even with the miniscule size of their military.
3) the process of voting in Britain was a cross between Monty Python and the Three Stooges. The turnout was so high that people stood in line for hours, literally tens of thousands had the doors shut in their faces before they could vote. It happened all over Britain. The police had to be summoned to control irate crowds. It seems that “swing” constituencies which would determine which party would control Parliament are most affected.
That means that either the Brit courts [which end with the Labour controlled Parliament, or Brit bureaucrats appointed by Labour will have to finally determine the winners of those seats. You think "hanging chads" were bad, how about refusing to allow people to enter the polls and vote? Brit papers are openly calling it a "Banana Republic" election.
When the scone with clotted cream hits the Pukka fan; not only will Britain have an incompetent and unstable government [regardless of how they put a coalition government together], it will quite possibly not be regarded by a large segment of the population as having been legitimately elected and of being in power without consent of the governed.
Mr. Cromwell, Mr. Oliver Cromwell. Please pick up the white courtesy phone at Westminister.
Subotai Bahadur
