Every so often I get thinking about The Manipulated Market. When markets defy logic to such an extreme degree only one of two explanations is possible. 1) Either your understanding of the forces that move markets is so fundamentally flawed that migrant farm work might be more rewarding; or 2) forces are at work which neither the press, bloggers, twitterers, or even Ben Bernanke have the courage to ‘expose’, question, criticize, regulate, or remotely ‘deal with’.
To Big To Fail = Big Enough To Manipulate.
We’re living through a sort of post 9/11 self-reflection while at the same time struggling with the contradictions of rising ‘wealth’ and shrinking disposable income. Capitalism is taking a hit, privacy is taking a hit, and the free market altar seems to be experiencing Alzheimers under stimulus ad infinitum. Some traders make every effort to avoid any and all ‘macro’ inputs to their trading strategy and focus only on: charts, price action, measurable ratios, divergences, volatility, etc. etc. etc. Those traders, presumably investment bank equity desks, and your friendly neighborhood algo are doing well… Very well.
Most of you read the same news that I do, many of you have greater or lesser degrees of information at your disposal: a nice exclusive Bloomberg terminal or inside information, more experience or access to NASA strength trading technology. Yet even with all this, surprises are within the genetic makeup of free markets, at least that’s my understanding. Still over time the better mousetrap should ‘win’ and illegal manipulation
fraud should ‘loose’. The cycles of panic, complacency, and euphoria are expected and should be tradeable. Today, after a huge MSFT and GOOG miss and a Bankrupt Detroit, the market decided to go parabolic, or nearly. I’ll take that as a surprise. Another one.
Yet, I’m sitting here in a rather cynical mood thanks to three other pieces of information. The first being Ben Bernankes dog-and-pony show and his off-handed responses to “the gold question” and to the “I’m not a financial advisor, mortgage refinancing question”. The second is Grant William’s recent deconstruction of falling gold prices. (Ben should get on his mailing list) And the third being the colossal profits generated by Goldman, Morgan, Citi and others.
Can someone tell me what’s going on? Or if you might have an opening as a migrant farm worker…