The Stock Market … What Has Become of it?

James Howard Kunstler put out a particularly good essay this week. Honestly, I sit and watch the global financial markets with utter fascination these days. It is just one giant casino. There is nothing real about any of it anymore. It’s so horrific to watch, I just have to laugh. Does everyone else see this, or do they just want to believe in the recovery?  Thanks goodness I sold all my stocks some time ago. I wouldn’t be in the market these days if you paid me.

As if life in the USA wasn’t surreal enough last week. Once upon a time, the stock market was a place where people with capital went to look for productive activity to invest in — say, a company devoted to making soap flakes, an underpants factory. Now the market is a robot combat arena where algorithms battle for supremacy of the feedback loops.  Thursday’s still-baffling fifteen-minute “crash” was an excellent demonstration of the diminishing returns of technology. People too-clever-by-half, aided greatly by computers, have now gamed the investment indexes so successfully that these markets no longer have anything to do with investment — they’re just about shaving micro-points of profit at high volumes by micro-milliseconds off mere differentials in… math! This is truly quant heaven, a place where only numbers matter and there is no correspondence to anything in the real world. …

These algo-robots may be elegantly complex, but they are really no more than triggering mechanisms, and Thursday’s — whatever it was — glitch, let’s say, ought to be regarded as a mere preview of coming attractions … in which the putative contents of these stock markets get sucked into a black hole so vast that the trading desks will have to find a way to arbitrage infinity to ever again catch a glimpse of America’s receding wealth. And it could all happen in a finger-snap.

Why would anybody not heavily medicated stay invested in the stock markets?

Photo by: rednuht

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2 comments

  1. Sam and I had a good laugh over Kunstler’s post this week. I think that he is spot on. Your comparison to a casino seems apt.

    I remember my – then – employer sacking one third of their head office staff in 1999 just because they weren’t going to make their expected yearly profit, just to keep the stock market analysts happy.

    I think you call that “the tail wagging the dog”. Just one more symptom of our rapidly failing system.

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