Comment

Wave of Volatile Trading Unsettles U.S. Markets

4
Bob Levin8/02/2012 5:35:38 am PDT
“The machines have taken over, right?” said Patrick Healy, the chief executive of the Issuer Advisory Group, a capital markets consulting firm. “When events like this happen they just reaffirm that these aren’t investors, these are traders.”

Once again, let me preface this by saying it’s actually a question, or half of a dialogue, thesis or anti-thesis or whatever.

This situation may not be a bad thing, or a totally bad thing. Historically, one of the ways in which investments and real wealth grew is through the acceleration of the pace of which capital moves. The faster capital can move, the greater the growth in wealth. This factor has been more beneficial than innovation—which is now accelerating rapidly, but still not fast enough to decrease unemployment.

But the other side of the equation, the speed of capital—that has topped out. It can’t go any faster than the speed of light. And this means that this equation, a moving equation describing society, is stuck for the time being. In the interim, we have trading which is directing the movement of speed of light capital. And as I mentioned the other day, trading by itself creates value, which could render the predictions of economic collapse to become as meaningful as preseason sports predictions.