The Retail Investor Has Left The Building
As a close monitor of the stock market, I've noticed that one of the persistent topics of debate in financial circles these days (actually, for the past year) has been the exceedingly low volume of shares traded.
Every time there's a brief rise in the indices ("indexes" has apparently become an acceptable alternative) the talking heads of financial TV speculate that "the risk trade is back on" and that the "trillions sitting on the sidelines" will start pouring back into equities. Alas, it is not so I'm afraid. The retail investor has left the building and will not be back for a long, long time. In fact, the exchanges in NYC may never see those investors again.
You see, the retail investor's retirement portfolio (not to mention his or her house) has been destroyed by the greed and avarice of Wall Street. While Main Street saw their life savings, property values and even jobs go up in smoke, the young hotshots who invented derivatives of derivatives of ether - and then flogged them around the world - took home their obscene bonuses and laughed at us. Well, the goose that laid the golden egg is dead. We're gone and we're not coming back anytime soon.
Reinforcing the retail investor's boycott state-of-mind are little nuances of the game now exposed called flash trading and the ever-present computerized trading. And as if all these methods of cheating Mom and Pop out of their hard-earned shekels weren't enough, the "flash crash" of May 6th provided the proverbial icing on the cake. All the retail investor got was more crumbs.
The fact that officialdom seems to be unable to figure out what caused the "flash crash" is interesting, but the phrase "lack of liquidity" keeps being bandied about. Could that be the answer? That's right, too few shares being traded on too many (14 is the current number, I believe) exchanges? In other words, the flight of the retail investor's trading volume may be having an effect on how the "smart money" tricks of the trade - and the exchanges themselves - function. Without volume how well does a trading algorithm work?
Until serious reforms are enacted, and Wall Street creates a level playing field for all investors, we're outta here!