Fri, 12 Aug 2011

7 reasons the stock market is so volatile

Well, seven reasons are listed, but in the humble opinion of this observer, all but number 6 miss the mark completely: Computer trades are destabilzing.

Well, yes, they are. But why? There's only one reason and that's speed. When you have algorithms firing on the millisecond and trading millions of shares, you will have volatility, no way to avoid it. If the market really wants to stop this insane roller coaster, it needs to set rules to slow stuff down. No doubt they would be derided as "old fashioned" and inconvenient, but that's the point. Faster is not always better, and sometimes speed kills. Let's hope it doesn't get going fast enough to do in the whole economy.

Plunge! Rebound! Crash! Rally! Plunge again! That's been the depressing story line of the stock market the past five trading days, a gut-wrenching, confidence-testing, wealth-destroying bout of volatility that has put investors on edge

(link) [USA Today]

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