Two Seconds And Why High Frequency Trading Always Wins

Two seconds.  It probably took the average reader two seconds to read this.  Not much can happen in two seconds, right?

Wrong.

It turns out that two seconds can make all the difference in the world in the financial markets.  Enough to make (or lose) a fortune, as it turns out.

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Why The Stock Market Is Not In A Bubble

The big news in the financial sector these days is, of course, the stock market.  With year to date returns already over 15% (and counting), many out there are jumping in and proclaiming that the stock market is in a bubble and proclaiming that the bubble will burst.

I’m not buying it.

Or selling it, I guess would be the right term 🙂

Many of those who think we’re in a bubble use some combination of the following arguments to state their case:

  • The big run in the stock market has taken all opportunity away
  • Unemployment is not falling fast enough
  • Corporate profits are leveling off
  • Europe and Japan are in a recession
  • Our mounting national debt

Here’s my take on each of these.

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Will The Stock Market Impact The Election?

The stock market hasn’t done very well at all, and is down roughly 5% from it’s highs just in the last month with another day in the red shaping up for today (the S&P is trading around 1400, having fallen from roughly 1470 earlier this month).

I think another 4-5% before the election could be devastating to President Obama, and given how quickly we’ve shed the amount we have, a drop of that amount (or close to it) could definitely happen, especially with the way that the market has been trending down.  It only takes a few tenths of a percentage points a day to add up to a pretty big drop.

Such a large drop would be roughly a double digit drop and would signify a pretty big warning sign about the economy.  Since the stock market is forward looking (meaning the movement is largely centered upon what investors believe is going to happen down the line), this would be a very bad sign.

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