WASHINGTON, October 31, 2014 – Wall Street enjoyed another up day Thursday. Currently, the bulls are trying to stretch the Halloween fun right through to the closing bell today. Meanwhile, the Obama Administration has been huddling in secret, putting the finishing touches on their plan to destroy job prospects for millions of American citizens next week. Shhh! We’re not supposed to tell you.
They’re almost ready to launch an amnesty program for all the illegal aliens they’ve been importing for over a year. Our Dear Leader, King Barack I, plans to accomplish all this by bypassing Harry Reid’s intentionally inert Senate, issuing an unconstitutional Executive Order proclaiming that all illegals—including drug lords—can get all the goodies that they want as a reward for ignoring our laws. But not until all those low-information voters mindlessly pull the “D” lever this coming Tuesday, and not until close elections against strong Republican candidates have been properly stolen. Obama once promised us the “most transparent” administration in history. We have to admit, for once, they weren’t kidding. From Day One, this crew of Stalinists has been transparently anti-American, anti-working class, anti-middle class, and anti-jobs. But who cares, right? Because, the Koch Brothers. Meanwhile, in what’s left of the wonderful rigged world of the markets, stocks were up sharply early Friday afternoon on the major averages, seeming to have recovered from Thursday’s wild but positive ride. Insane, unpredictable price quotations erupted when electronic trading systems went completely out of control for a good part of yesterday afternoon. Something known to Wall Street’s computer weenies as the “NYSE SIP” went plumb loco just after 1 p.m. Yet trades continued before the NYSE made a decision to move trading entirely to its backup system in Chicago. Wikipedia tries to give us a handle on that SIP thing:
The Session Initiation Protocol (SIP) is a signaling communications protocol, widely used for controlling multimedia communication sessions such as voice and video calls over Internet Protocol (IP) networks. [SIP] defines the messages that are sent between endpoints, which govern establishment, termination and other essential elements of a call. SIP can be used for creating, modifying and terminating sessions consisting of one or several media streams.
In other words, to grossly oversimplify, the system went into a snit and garbled messages and trades were the result, with the problem spreading into other exchanges as well, since they’re ultimately connected together. But, conspiracy fans, here’s the kicker, straight from ZeroHedge:
For at least 27 minutes, the SIP which processes Tape A and Tape B stocks was not working properly. This means that any dark pool, stock exchange or retail broker which relies on the SIP for public quotes was pricing off of incorrect quotes. Of course, any firm which pays for exchange direct feeds was still pricing off of accurate information. Therefore, for at least 27 minutes, an “information asymmetry” existed.
In other words, HFTs, hedgies, and other rich corporations and traders who can afford high-priced direct and almost instantaneous information feeds from the exchanges still got the true prices of stocks. But retail traders, ah, well, who cares if they got phony quotes when they submitted their orders? Stocks were up yesterday, right? Problem is, after the SIP issue was noticed and grappled with, the market got hit with a huge batch of orders, probably from HFT computers that had detected the anomalies and decided to have fun with them, quote-stuffing the system all the way, the better to game the little guys. The upshot of the whole mess is that there were probably a lot of bad retail trades based on bad prices. It remains to be seen whether these will be walked back. We tend to doubt it. Like we say, you can trade this market.
But if you’re not an HFT, Warren Buffett or George Soros, you pays your money, you takes your chances. Today is the last day when mutual funds can get stocks on or off their books for their 4th quarter and annual reports, so likely a lot of this week’s action is part of the post-SIP, so we’re wondering whether November will start off with red ink after all the buying has stopped. But maybe not. Word is that the Japanese, who are going crazy after nearly 25 years of economic stagnation, are now trying to juice things by effectively authorizing the government to do more QE by buying stocks, including U.S. companies. This has added an unpredictable, unexpectedly bullish bias to the trading action as well.
No one, however, knows where this will be going except maybe for another big crash somewhere down the road when the Japanese decide they’re out of devalued yen. If this whole column today sounds like a lot of arcane gobbledygook, join the crowd. The Maven does his best to explain the chicanery that passes for today’s savings and investment environment. But even the Maven’s unquestioned brilliance is severely challenged by the kind of murky nonsense that goes on in today’s markets. With regulatory agencies and the Administration itself mired in institutional incompetence, we have to conclude that no one is really minding the store, which is why nonsense like what we’ve tried to discuss here persists. ZeroHedge cites an “Exchange Leaders Panel” that was getting underway yesterday just as trading systems went haywire. The description of the panel’s discussion topic was as follows:
This session will explore the competitive, structural and regulatory landscape that Exchanges operate in today, and the challenges and opportunities facing the industry in the year to come.
This obtuse, noncommittal description sounds like it could have been written around 1993. That, apparently, is where all these overpaid bozos’ heads seem to be even as the sky is falling around them. They’re brainless and clueless. But somehow they make a whole lot more money than you or the Maven. Today’s trading tips: Again, zero sum. Markets are extraordinarily overbought, at least short term. Any day now, we’re likely to have a sharp correction, and that’s likely going to be our best opportunity for getting better prices. Unless, of course, the Japanese government continues to buy stocks like there’s no tomorrow—something that could eventually happen if they keep this up. * Cartoon by Branco, via LegalInsurrection. Reprinted by permission, which requires this link.