Previous

Contents

Next

It Does Not Look Like a Trading Error
by Jim Davidson
[email protected]

Special to The Libertarian Enterprise

It looks like a huge profit taking. They sell high, buy low, and make billions.

Procter and Gamble (NYSE: PG) was at $61.72 on 6 May 2010 at 14:42 hours. Volume traded was 87,110 shares or so.

Procter and Gamble went to $39.37 at 14:48 hours. Volume traded 165,560 shares.

PG went to $61.46 at 14:52. Volume 138,490 shares.

Now, there were hundreds of thousands of shares traded in this one stock on the way down and hundreds of thousands traded on the way back up. Go to a good chart engine like finance dot google or finance dot yahoo for details.

But, roughly, let's say 100,000 shares changed hands every minute for those ten minutes. It isn't clear to me that I can know how many shares actually moved without access to the actual trades on the actual machines.

Keep in mind that for at least 90 seconds of the deepest part of that drop, NYSE had frozen the stock. On their system, I think the lowest recorded price was $53.99. Trading from their point of view ceased. But it continued on the computers of the big investment banks.

So, on the order of a million shares change hands. Figure the programmed trading activity accounted for only half of that volume. The rest was people tagging along and suddenly calling in orders. Really, that's very unlikely because hardly anyone was in a position to see the drop and act. My guess is more like 95% of the activity was programmed.

Those who got the good side of the trading sold at $61.72 and bought at $39.37. They made $22.35 on those shares traded—call it 160,000 shares for $3.6 million. They sold at $61.46 and bought at, say, $44 on average. Call it $17.46 on a further 340,000 shares for $5.9 million. Call it $9.5 million with a very conservative 500,000 shares of the total in trade.

If you could make ten million dollars in ten minutes time, you'd do it, right? Well, if you had no ethics like an investment banker, say. Okay.

Then run the numbers on the whole Dow Jones Industrial Average. On 6 May 2010 at 14:40 the Dow stands at $10,458.20. At 14:48 it stands at $9,977.39. At 14:58 it goes back to $10,479.74. It looks like about 460 million shares changed hands during the day's trading of Dow stocks. Let's be conservative and figure that only about 100 million shares changed hands during the critical eight minutes. Now you have something like $460 or so on average between buying low and selling high, or selling high and buying low depending on which end you ran. Not all trades could get executed so I'm not using the whole $480.81. Even so $46 billion was made on these trades in these scant few minutes, not to mention order volume executed because of trailing stops and other attempts to protect themselves by traders and individual investors all over the world.

If you could make $46 billion in 18 minutes, would you? Would investment banking gangsters? Okay then.

And those are only PG as an example stock and the Dow Jones average as a fairly narrow (30 stock) market. There were about twelve billion shares traded on the whole NYSE on Thursday. The NYSE composite fell $208 in a critical 12 minute period. Figure 2 billion shares traded by the banking gangsters in that window. That's $416 billion.

About 4.6 billion shares traded on NASDAQ. A whole lot of stocks show that same blip. On the NASDAQ the composite went from $2290 to $2203 and back to 2305 in 12 minutes (14:42 to 14:54). Figure 800 million shares moved during that period (just a guess, I don't have hour by hour volume numbers for the whole exchange so I'm just dividing daily volume by about 6—but we can predict that a lot of trading volume was focused on those minutes). So $87 profit selling high and buying low, or the other way around. There's another $69.6 billion.

Do you think these people would be unhappy tripping a whole lot of customer sell orders (automatic trailing stops, for example—an investor sees he is in profit territory so he programs a trailing stop about 5% below the recent price so he gets out if the market plunges; but the fun part for the investment banking gangsters is they don't guarantee to sell at the stop loss price—they may sell minutes later and screw you for everything you had in the stock) and earning commissions on all those trades, while at the same time making $70 billion, just on the NASDAQ? Or $416 billion just on the NYSE?

Of course they would be delighted to do exactly that. And what if they are caught at it? What if the SEC stops watching Internet porn for a few hours and fines each of the investment banking firms, say, $100 million? It wouldn't be a bad deal, $70 billion in 12 minutes trading minus $100 million. Laugh all the way to the office, which is the bank.

If you are in the markets for any reason, you are being played. I suggest you not trust any of these people more than you must. Buy gold and silver coins and keep them at home. Upgrade your locks, buy more guns and ammo, keep guard dogs, and consider cheap video cameras tied to a server grade computer for monitoring what's going on.

The fortune you preserve may continue to be your own.

I think the banking gangsters made about $500 billion in roughly 20 minutes of trading. Figure six or eight banking giants were in on the kill. Call it $62 billion each? Who knows?

You might think very seriously about pulling your money out of their brokerage firms and banks and "safety deposit" boxes. (It is not your safety they have in mind when they offer to rent you such a box. It is theirs.)

LIBOR overnight went up again, now to 0.32%. A normal pre-crisis (2007 say) level would be 0.11%. So we're looking at roughly 3 times that level. There is a great deal of volatility and risk in finance right now.

The news analysts are trying to spin April unemployment which went up to 9.9% from March at 9.7%. Those are, of course, the "official" numbers. And just as officially, the gov't informs us that 280,000 more people went to work in April. So... employment was up! And unemployment was up!

You know they've mung'd those numbers for a long time. (Messed until no good) A more realistic perspective uses the 1980 algorith and current data, which gives us 22% unemployment. Those figures from shadowstats.com today. I don't know if they are updated from this morning's announcement from the feral gummint.

But you can see where the woods are all around and it might be getting dark out soon. One more pretty picture for you.

See Greece? Tip of a very big iceberg. Their debt is nothing compared to Italy and Spain combined.

Seriously, if you believe that the recovery is in full swing, the worst is behind us, the dollar is strong, the fundamentals are fine, the debt crisis is minor, please sell me all your gold and silver coins. If you don't believe those things, then what business do you have trusting banking gangsters, the government, or stock brokers with your wealth?

Jim Davidson is an author, entrepreneur, and anti-war activist. His 1990 venture to offer a sweepstakes trip into space was destroyed by government action as was his free port and prospective space port in Somalia in 2001. His 2002-2007 venture in free market money and private stock exchange was destroyed by government action in 2007. He's going to Mars if he has to walk. His second book, Being Sovereign is now availble from Lulu and Amazon. His third book Sovereign Self-Defense will be released for Kindle soon. His fourth book Being Libertarian will be available for free download as a .pdf, being a compilation of all his essays and letters in The Libertarian Enterprise since 1995. Contact him at indomitus.net or indsovu.com

Help Support TLE by patronizing our advertisers and affiliates.
We cheerfully accept donations!