After last week's onslaught of economic indicators and earnings reports, the stock market today is down in morning trade.
As earnings season winds down, this week has fewer economic reports in the pipeline and the stock market today is slightly weighed.
Goldman Sachs, the Judas Penguin, and the Tip of the Iceberg
News from Wall Street this week reminded me of the penguins that inhabit the icy, turbulent waters of the Southern Ocean.
These penguins are preyed upon mercilessly by tremendous, ravenous orcas - a terrible beast to feel gnawing on your leg if you derive your daily bread from the frozen, watery wastes.
But the penguins have devised a clever, if brutal, warning system.
A flock of penguins will gather apprehensively at waters' edge... and one luckless penguin will be pushed into the sea. If the penguin is ripped to shreds by killer whales, the rest will hang back a while.
Otherwise, the rest of the flock piles into the briny deep.
Goldman Sachs Group (NYSE: GS) bond trader Fabrice Tourre is one of those luckless, doomed penguins.
The predator in this case is unlikely: a normally toothless flounder otherwise known as the Securities & Exchange Commission.
Fabrice Tourre, a bond trader of the middling ranks, was earlier this week found liable for six of seven fraud charges relating to Goldman Sachs' trading of toxic mortgage assets.
The civil trial - a rare prosecution - provided a rare victory to the SEC, who, after a loss and a draw, are desperate for a win. At issue was whether or not a full $1 billion worth of collateralized debt obligations (CDOs) were fraudulently marketed.
Why You Have to Be Investing in the Stock Market Now
Money Morning Capital Wave Strategist Shah Gilani - sometimes called "the reluctant bull" - joined FOX Business' "Varney & Co." today (Friday) to discuss why the U.S. is the "place to be."
Shah emphasizes that all reluctance aside, when it comes to investing in the stock market now, "You have to be in it to win it."
Dark Pools of Liquidity Are a Big Problem for Free Markets
by Greg Madison, Associate Editor, Money Morning
Everything runs on liquidity. Unless you know something I don't, that dollar bill in your pocket is just as likely to buy a can of Pabst Blue Ribbon today as it was yesterday, and will be tomorrow.
Or you could sell 1,000 lbs. of gold - if you have that lying around - without fear of completely scuttling the global gold market. Your bank has to have cash, liquidity, lying around somewhere in the back if it wants to stay in business.
And in many cases, it's easy to see or verify this liquidity. It helps everyone feel better about doing anything.
But there are markets where this liquidity is kept off the open exchanges, where it can be used to juice up huge deals. Or it can prevent these huge deals from having the impact that they "should" have, keeping the hands of large traders hidden.
These are the sinister-sounding dark pools of liquidity.
Dark liquidity is generated and stored in a variety of ways, most of which are possible due to the huge variety of trading venues, electronic and traditional.
With dark pools, neither the size of the order nor the entity making that order can be known until the order is completed. Rosenberg Securities Inc. estimates that fully 15% - trillions of dollars - of all trades occurring on American exchanges, every day, utilize dark pools.
Not Playing Straight Poker
And the markets, like nearly everything else, operate on the wide availability and transparency of good, reliable information. A poker game gets its lurid thrills from the partial presence of that information, or the possibility that the information could be faulty. You wouldn't want to play with all your cards face-up. You just don't know, and that's why it's fun to play poker.
But the markets, despite some inkling to the contrary, can't function with true optimum efficiency if good information isn't available to the widest possible group of participants.
It's not that a player has to have the information, but it should be available to the player if things are going to work the way they should. One is a vying, gambling game, and the other is a free market. We should be able to tell the difference.
The Shocking Story Behind "News Feed Trading"
Pssst...Want to buy a watch?
I don't have one for sale, but I know some folks that are willing to sell you... well, it's not a watch, but it's something much, much better. They'll sell you time. You want to buy some time?
Turns out, and who knew, you can buy time. You, yes you, can buy a few seconds for a whole bunch of money. High-frequency trading outfits and apparently tons of other "traders" and "investors" are buying this time. You can, too.
For a "Fistful of Dollars," what you get is a few seconds head start on knowing some very important economic data points.
It's amazing what money can buy.
Forget integrity, it's not for sale because it's out of stock. But if you want to buy the University of Michigan's highly regarded and market-moving report on consumer confidence, you can get it, right alongside the "investors" like the HFT boys and girls who pay the University to get the numbers two seconds before the rest of the world sees them.
Or you can pony up next to the same crowd that buys the Institute for Supply Management's manufacturing index numbers before the world sees them.
It's not insider trading. It's totally legal.
The Truth About "Dark Pool" Trading
Well, this ought to be interesting - not for what might be revealed, but for what will likely remain in the shadows.
One of the weakest, least effective regulatory bodies around, the Financial Industry Regulatory Authority (FINRA), is now saying they want to shed some light on "dark pools."
FINRA is the self-regulatory body, backed and stacked by the broker-dealers and brokerages that channel your trades from your desktops and through brokers, whom FINRA is responsible for registering and regulating, to various exchanges for execution.
They're going to be looking into dark pools, which are off-exchange trading venues where stocks are traded "blindly." That's supposed to mean buyers and sellers don't know who's who.
But the truth is, even dark pool customers are blind to how these shadow operators really operate.
Here's the deal...
Shah Gilani: "You've Got To Be In It To Win It"
Appearing on Fox Business, Capital Wave Strategist Shah Gilani engaged in the age old debate: Bullish or bearish?
Shah made the bullish case, saying the stock market's rising and investors may want to jump in.
"I think you got to be in it to win it," Gilani said. "You got to stay in the market as long as the trend is up."
On the other side was Dan Shaffer of Shaffer Asset Management. He had a decidedly bearish view, warning of a "deflationary depression"
Is Jamie Dimon's "Scary and Volatile" Prediction on Target?
JPMorgan CEO Jamie Dimon created a stir across the globe Thursday when he told a forum in China markets will remain volatile because of extraordinarily low interest rates.
Speaking at the Fortune Global Forum in Chengdu, China, Dimon said, "It's a different world when central banks are managing interest rates.... Until it gets back to normal, it's going to be scary and volatile."
Stuart Varney, the host of FOX Business' "Varney & Co.," asked Money Morning Chief Investment Strategist Keith Fitz-Gerald and Wall Street analyst Meredith Whitney for their take on Dimon's comments.
Is Dimon right? Check out what Fitz-Gerald and Whitney had to say in the accompanying video.
Why I'm Calling a Market Top
Party like it's 1999.
I'm not talking about celebrating the new millennium all over again. I'm talking about celebrating the markets roaring ahead, like they did in 1999.
Just remember: There will be a price to pay. There was then, and there will be again.
Look what happened on Monday morning. We got some weaker-than-expected economic numbers and the Dow cut its gains in half... for about a minute.
Then it was like, oh, wait a minute, those bad numbers are good numbers for the stock market, because the Federal Reserve won't be tapering any time soon if the economy is tapering. And the Dow roared up by about 65 points... in about a minute.
So go ahead and party like it's 1999. But if you get hammered by the coming crash, you've got no one to blame but yourself. And it is coming.
We've all been here before. This time it just looks different, but it ain't.