We have broken our stock markets. It has not happened overnight, but it has accelerated since 2000.
They can be fixed for sure, but it will not be easy. One thing that could immediately help would be to slow down ETF’s. The leveraged index ETF’s need to be taken out immediately.
I had a long conversation with my blogging pal Brian Shannon in Denver last night. The good traders don’t need the extra products to trade. They always win and the ETF’s that the pro’s like Brian are winning on today just do more damage to the losers. Brian today wrote about the 3x leverage products coming on the exchanges:
I find it amazing that they are now offering an ETF with 3X LEVERAGE These funds are not trading yet but will be soon. So now the trader with at least 25K in his account can get 12:1 intraday leverage on the markets (4:1 daytrade buying power times 3x funds) It seems like a dangerous recipe for the average trader. How do these products get approved? Didn’t the leverage problems of all the failed financial institutions raise any red flags during the review process? Greed continues to spur “innovation” with more and more derivative products.
The people in charge are not looking after the markets. I don’t know who is in charge, so please chime in, but they need to be fired and jailed. At the most basic level of protecting the integrity of the stock markets, they have FAILED.
You can’t blame the professionals for trading what is given to them. If these products are removed tomorrow, the professionals will go back to trading stocks.
The ‘professionals (ya right)’ do not now how to manage risk, so why would our leaders or the people in charge think that ‘Joe the Plumber’ could.
The markets will work, just take away the f!$#@$%#$king ‘Super Size, 7-Eleven’ tricked up securities as a start.