Stock MArket Melt Up Puts Fear Into Investors

JimBowie1958

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U.S. stocks' massive "melt-up" fans investor fears - Yahoo! News

NEW YORK (Reuters) - In less than one hour on Tuesday, the U.S. stock market surged by 4 percent -- for no apparent reason.

The last hour of trading was the most volatile final hour in two months -- and it occurred at a speed that frightens many, from experienced hedge-fund managers to mom-and-pop investors.

The late-day "melt-up" that pushed the S&P 500 index <.SPX> out of bear-market territory might be construed as good news. But it brings back echoes of the "flash crash" that saw markets dive by several hundred points in a matter of minutes, and it's a big reason many are staying away from the market.

"Everyone is scared in both ways -- the shorts are scared, the longs are scared, everyone is scared. The high-net-worth investor is very, very scared," said Stephen Solaka, managing partner at Belmont Capital Group in Los Angeles, which manages money for independent wealth advisers and family offices.

Tuesday's move was the latest example of an erratic, high-octane stock market increasingly driven by levered exchange traded funds and complicated hedging and options strategies that unwind with dizzying speed.

It's a far cry from when the U.S. stock market was viewed as a place for capital-raising by businesses seeking to expand and a place for investors looking to put their savings to work.

Wow, thats right; people used to do long term investments as a way of raising capital for their businesses.

Man, flash from the past!
 
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JimBowie1958

JimBowie1958

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This is the sort of action that precedes a crash.
It would seem so.

Its like the market particpants dont have any idea on what the market should be doing, but want so bad to jump in and ride any move up that they just cant miss it.

So theya re being pulled in two opposite directions simultaneously as their analytical mind says 'get out' but their fear of missing out tells them 'Dontmist the move up'.

So the market's speculators totally outnumber long term investers, destabilize the markets and make these wild triple digit swings from buy to sell then back to buy.

I no longer have any money in the market now. I get the impression that within the next three to six months we are going to see the DOW go back down through 10,000 and maybe 9,000 or lower.
 

editec

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Was talking to a fiancial advisor from the Mainline Philly area last week.

For most of his clients the goal now is nothing more than capital preservation in a market gone mad.

The fiancial community no longer rationally sees to it that capital finds its way to where it is needed.

It's becoming little more than a casino based on automatic trading by computer algorithms.

The little investors just can't keep up.

I know a lot of you will raise your eyebrows and dismiss this complaint as nothing but class envy, but this insane market is another example of what happens to society when it embraces the philosophy that GREED IS GOOD.

I think this system needs to seriously and irrevicably crash before we find our way back to sanity.
 
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JimBowie1958

JimBowie1958

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Was talking to a fiancial advisor from the Mainline Philly area last week.

For most of his clients the goal now is nothing more than capital preservation in a market gone mad.

The fiancial community no longer rationally sees to it that capital finds its way to where it is needed.

It's becoming little more than a casino based on automatic trading by computer algorithms.

The little investors just can't keep up.

I know a lot of you will raise your eyebrows and dismiss this complaint as nothing but class envy, but this insane market is another example of what happens to society when it embraces the philosophy that GREED IS GOOD.

I think this system needs to seriously and irrevicably crash before we find our way back to sanity.
Well we could reform it before it crashes, but then that would require foresight, not an item in high demand on Wall Street these days.
 

editec

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Well we could reform it before it crashes, but then that would require foresight, not an item in high demand on Wall Street these days.
What reforms do you advise?

It is my understanding that automatic trading by major investment firms is so vast that the market can turn around in seconds.

And with most people's algorthms using essantially the same benchmarks to initiate trades, then flurry of last minute activity is the root of this problem.
 

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