by
Adam Taggart
HFT
by
Adam Taggart
by
Adam Taggart
by
Adam Taggart
by
Chris Martenson
Executive Summary
- Why a crash is likely
- Why the machines have won, and regular investors should flee these markets
- Why the coming oil company bankruptcies will trigger a deflationary rout
- Why we've passed Peak Easy
If you have not yet read Markets Are Correcting Hard, available free to all readers, please click here to read it first.
The Larger Lesson (Why A Crash Is Likely)
Look, the financial markets are broken — the US, in China, and largely everywhere else around the globe. The sad fact is that the regulators have utterly failed to impose any meaningful limits on the rise of the computers and their high frequency hi-jinks.
Now those computers dominate the entire market landscape for better and, eventually, worse.
The reason I say ‘worse’ is because the computers deliver the appearance, but not the reality, of market liquidity.
As long as they detect that everything is operating normally, or at least within their accepted bands or limits, then they indeed provide plenty of liquidity. But when events exceed those limits?
The computers just shut down, revealing the true lack of market depth. The key story of all markets, bonds, commodities, futures and equities, is that each has experienced a vast diminishment of liquidity.
Share volumes are down on the equity exchanges as fewer and fewer participants are willing play a rigged game. That’s not just…
Why A Crash Is Likely
PREVIEW by Chris MartensonExecutive Summary
- Why a crash is likely
- Why the machines have won, and regular investors should flee these markets
- Why the coming oil company bankruptcies will trigger a deflationary rout
- Why we've passed Peak Easy
If you have not yet read Markets Are Correcting Hard, available free to all readers, please click here to read it first.
The Larger Lesson (Why A Crash Is Likely)
Look, the financial markets are broken — the US, in China, and largely everywhere else around the globe. The sad fact is that the regulators have utterly failed to impose any meaningful limits on the rise of the computers and their high frequency hi-jinks.
Now those computers dominate the entire market landscape for better and, eventually, worse.
The reason I say ‘worse’ is because the computers deliver the appearance, but not the reality, of market liquidity.
As long as they detect that everything is operating normally, or at least within their accepted bands or limits, then they indeed provide plenty of liquidity. But when events exceed those limits?
The computers just shut down, revealing the true lack of market depth. The key story of all markets, bonds, commodities, futures and equities, is that each has experienced a vast diminishment of liquidity.
Share volumes are down on the equity exchanges as fewer and fewer participants are willing play a rigged game. That’s not just…
by
Adam Taggart
by
Chris Martenson
Executive Summary
- Liquidity is drying up
- Volatility is returning
- HFT has dramatically increased crash risk
- The key takeaways for investors
If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.
Financial assets are worth what someone will pay for them. A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid. Thin markets provide bad prices at best, and no bids or offers at worst.
Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster.
There are numerous warning signs coming from all asset markets, but especially from the bond markets.
Low Liquidity
The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).
Japan bond market liquidity dries up as BoJ holding crosses ¥200tn
Arp 15, 2015
The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.
The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.
Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.
(Source)
Thus comes the law of unintended consequences. The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.
While that may have happened to some (slight) extent what also happened was that …
The Warning Indicators To Watch For Trouble In The Bond Market
PREVIEW by Chris MartensonExecutive Summary
- Liquidity is drying up
- Volatility is returning
- HFT has dramatically increased crash risk
- The key takeaways for investors
If you have not yet read Part 1: Credit Market Warning available free to all readers, please click here to read it first.
Financial assets are worth what someone will pay for them. A corollary of this is that you’d much rather be trying to buy or sell in markets that are deep and liquid. Thin markets provide bad prices at best, and no bids or offers at worst.
Low trading volumes are worrisome because they are usually accompanied by higher volatility. And those two can easily become dance partners that whirl each other ever faster.
There are numerous warning signs coming from all asset markets, but especially from the bond markets.
Low Liquidity
The issue of low liquidity really jumped out at me roughly a year ago with the news that the utterly broken Japanese government bond (JGB) market had gone an entire 36 hours without a single trade(!!).
Japan bond market liquidity dries up as BoJ holding crosses ¥200tn
Arp 15, 2015
The Bank of Japan’s massive purchases of government debt hit a milestone this week, sucking liquidity out of the market to such an extent that the benchmark 10-year bond went untraded for more than a day, the first time in 13 years.
The current 10-year cash bonds saw its first trade of the week yesterday afternoon, having gone untraded for more than a day and a half.
Trade volume in the benchmark cash bonds so far this month dropped to less than one trillion yen, down about 70% from the same period last year.
(Source)
Thus comes the law of unintended consequences. The main reason for buying JGB’s by the Bank of Japan (BoJ) was to inject a lot of liquidity into ‘the system’ in hopes that the Japanese economy would take off.
While that may have happened to some (slight) extent what also happened was that …
by
Adam Taggart
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