I've talked about the dangers posed by the scary move the U.S. Treasury bond market made back on Oct. 15.
And my cautionary tale was totally justified.
Indeed, in the December 3 Wall Street Journal, the lead article in the Global Finance portion of the Money & Investing section was "Watchdog Warns of Risk in Markets."
Apparently, the Office of Financial Research (OFR), the watchdog team created out of Dodd-Frank legislation under the "watchful" eye of the U.S. Treasury Department, observed the same move that I did – and found it just as rattling.
According to The Journal, the OFR warned that "the system is vulnerable to repeats of what occurred in October when tumult in the trading of U.S. Treasury securities spread broadly to futures, swaps and options markets."
The watchdog group's just-released third annual report soberly noted that "although the dislocation that peaked in mid-October was fleeting, we believe there is a risk of a repeat occurrence," and further warned that resulting volatility "raises a host of financial stability questions."
That's not what you want to hear. Let me tell you why…
A Disturbing Lack of Backbone
What's worrying the Office of Financial Research is its finding that "swings could be exacerbated by computerized trading and algorithms, as high volumes of transactions are executed automatically, deepening instability."
Figured that out all by yourselves, did you?
I'm not just annoyed by this…
And with good reason: It angers me to no end that everything that's been allowed to infiltrate our capital markets that's problematic – but egregiously enriches greedy banks and their trading lackeys – undermines the transparency, and safety, of those markets.
It's really touching that the new watchdog research group is worried that their research (which amounts to observing after-the-fact market swings) leads them to be worried.
Please, somebody pass me an airsick bag.
Where's the real research?
Where's the research, analysis, and truth about the May 2010 "Flash Crash?"
Where's the research on why stock options move up and down before earnings announcements are made or before mergers-and-acquisitions announcement are made public?
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.