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“Is There Anybody In There or Out There?”

Posted by Larry Doyle on September 19, 2010 7:08 AM |

In light of the ongoing decline in equity volumes, I found a short piece in this weekend’s Wall Street Journal to be of special interest. Jonathan Cheng writes, Hello, Is There Anybody In There?

Are trading volumes ever coming back? With options expirations and index rebalancing on the agenda, today could be a decent one for trading volumes, which Peter Boockvar of Miller Tabak notes haven’t hit the 5 billion shares mark in  NYSE Composite volume since July 16. Mr. Boockvar cites “confusion” as the culprit, given all the economic uncertainties facing investors.

Rick Bensignor, chief market strategist at Execution Noble, however, chalks it up to something perhaps more fundamental: there aren’t many investors out there to begin with, which he says are likely to keep volumes anemic for the foreseeable future. Here’s his tally:

1. Retail investors, hurt by deep losses in the past few years, just aren’t interested, plowing their money instead into bond funds.
2. Wall Street is shutting down their proprietary trading desks, or reining in their activities sharply.
3. Hedge funds are disappearing — by Mr. Bensignor’s estimate, there are 1/3 fewer than there were two years ago.
4. Anyone else still interested in the market got a nice spook with the May 6 flash crash.

No wonder it’s quiet out there.

What does it all mean?

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Rick

    Just as volumes ratcheted higher during the “leveraging up” process, we should expect that volumes will continue to decline during the ongoing “deleveraging” process.

    Fund fees and expenses have to come down as managers fight to maintain market share.

  • Zane

    Why put any of my hard earned savings in something so obviously manipulated and corrupt?

    Heck, it would probably make more sense to drive to Las Vegas and attempt to increase my holdings at the gaming tables.

    Seriously, between High Frequency Trading, The Fed giving it’s cronies easy money (and I suspect Liberty 33 is also doing it’s own manipulations), the SEC being this Wallstreet doorstep by looking the other way… way would I put money into US Stocks.

    Anyway, everyone knows the US Stock Exchange is about as realistic as an aging starlets face. Sooner or later reality will come a calling. I don’t want to be there when that happens.

    Perhaps much later… only first the NYSE will need to clean up its act in a huge way. Unfortunately that seems about as likely as the U.S. running a balanced budget.

  • divvytrader

    we saw a $3 billion E-mini buy order early today and stockes went to moon …… same mysterious huge E-mini orders been popping into markets the last 3-4 months ….. never a clue who is placing them . Meanwhile all major broker dealers report plunging trading volumes in equities both retail and institutional . ICI has reported we saw lltime record 19th straight outflow from USA stock funds last week . Thats $65 billion yanked out this year yet as that happens , and as hedge funds all underperform and trade less , somehow/someway , stocks arc higher on ever declining volume .

    The case for government buying of stocks has never looked clearer to me .

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