2Fast 2Early 2Slow 2Late - Program Trading In The Age Of Obama

The wild gyrations of the stock market Thursday - at one point down 1000 points - should remind us all to follow the money when things like this happen. OffHisMeds has been of the opinion that the Stock Market has been consistently rigged since at least 1999, although the first large-scale fiscal piracy of the modern era took place as early as 1987.

You will recall that the problem with the market on Black Monday in 1987 was so-called "Program Trading", a computerized trigger that dumps stocks automatically when they lose a certain percentage of their value within a certain time-span. The whole concept is idiocy, of course. Since when can inert computer programs substitute for expert judgment and the ability of human beings to analyze information and events? That is why it is all the more ironic that the market was yet again plundered through this glitch - allegedly by a trader who hit the wrong key on his computer - some 23 years later.

Meanwhile, computers have advanced orders of magnitude in their power, as have the programs that drive them, but Program Trading is just as problematic as ever.

Which brings us to OHM's First Law of Economics: Instability benefits Predators.

At one point, the Dow Jones average lost 1,000 points, or 9% of its total value. NASDAQ and other markets suffered similar losses. If you assume these losses were perpetuated throughout all publicly traded stocks in America, the momentary loss was approximately $1.25 Trillion. This is yet another classic example of the "milking" that occurs routinely in our Stock Markets, where the wealth contained in the conservatively managed Mutual Funds of folks invested in IRAs and 401Ks is siphoned into the accounts of fast-acting and predatory traders the world over.

You have but to look at the performance of Mutual Funds since 1999 versus the overall market to see what I'm talking about. Looking strictly at large-scale swings in market performance (at least 5% in any given fiscal quarter), you find that when the Market fell, Mutual Fund losses as a percentage were nearly twice as high as that of the Stock Market overall. Likewise, when the Market experienced a significant uptick, Mutual Funds would experience roughly half of that increase.

So, assuming that the defensive posture of Mutual Fund Program Trading simultaneously causes them to sell too fast too early, and then buy too slow too late, it's reasonable to assume that this was one of the largest single day thefts in world history. After all the wild gyrations, if only half of that wealth was transferred from ordinary investors to Traders, and only half of that money belonged to Mutual Funds that supported retirement accounts, that would still be almost $300 Billion picked from the pockets of Savers nationwide.

Who benefits? For sure it was the Day Traders and other carrion pickers who swept in and bought up Procter & Gamble, for one example, when its price plunged from $60 to $33. The other beneficiaries were the Usual Suspects: George Soros, Warren Buffett, Chinese Communist Overlords, Arab Dictators, Russian Mafias and anybody else flush with US dollars at the moment the market plunged.

So, what does all of this have to do with Barack Obama? Simple: for all his anti-Wall Street rhetoric, Obama's SEC is not going to find that anything like the scenario I describe above ever happened, small investors are not going to be recompensed, and nobody will be punished. As the largest recipient of political contributions from Wall Street, Obama is not going to bite the hand that feeds him, or holds his leash.