Wednesday, November 18, 2009

This is why the market will eventually crash

OK, the headline is a bit sensational but the article cited below proves to me that investing as we know it is over. Remember, I blogged that stock trading jumped the shark a few months ago when football coach Jimmy Johnson was pushing a trading system. http://quicktakespro.blogspot.com/2009/08/stocks-have-jumped-shark.html. Now I know the world has ended because of this article about the launch of 100x leveraged ETFs on the Nasdaq. http://www.etfexpress.com/2009/11/17/kelly-capital-launches-100x-leveraged-etfs

Of course, it was not a real article but a bit of satire. http://www.istockanalyst.com/article/viewarticle/articleid/3646069. Author Jason Kelly points out that the trend towards leverage is still with us and I say it means we have not learned our lesson.

Kelly goes on to report about the mail he got over the piece, as follows:

"A full 65% of people expressed an interest in owning products that would "go bankrupt within the course of most trading days." A stunning 5% thought they already owned them. Only 30% of respondents got the humor."

PT Barnum was right. There really is a sucker born every minute. Lord help capitalism.

2 comments:

Jim said...

Michael,...

Trader-Tax is back on the table in Jobs Bill:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1mC.vDFKsw4

Wondering if you had an opinion on how this will impact the market.

Regards, Jim P

Quick Takes Pro said...

Forget the market. Wall Street will find a way to make money no matter what they throw at it. We should worry more about Main Street is this goes through as the capital markets will not be so generous to corporate money needs. Lower trading volumes = lower liquidity = higher costs to access capital.