I can't help but ask myself this question. The market now slowly rises on a daily basis as the "bearded one" continues to print Monopoly money and give it to the banks who then turn around and pump it into stocks.
Now that we know how the "QE" game is played, I can't help but wonder why stocks aren't rising at a faster rate. During the tech and housing booms the stock market would rise hundreds of points on any given day.
We have seen nothing of the sort during our current boom. It's becoming increasingly obvious that the average investor wants no part of this market when you look at the pathetic trading volumes. If they did, we would be soaring to new highs because the Fed is literally pumping billions into the markets via the TBTF banks.
The rallies of the past never had the opportunity to enjoy a tailwind like this! As a result, one must hesitate and ask why so many people don't want to join the party.
In fact, you must dig deeper and ask yourself: Why is no one other than the HFT's participating in this glorious rally?
It's becoming pretty clear that no one outside of Wall St is interested in touching stocks. The HFT's are loving this of course because it makes the market easier to game. Just look at the price action on a daily basis. The tape just wonders around aimlessly as it reacts to various algo trades.
Rallies are almost immediately sold into and sell offs are almost immediately bought. I have to admit, it's boring as hell to watch. There is no conviction at all right now when I look at the markets.
Have Investors Lost Interest?
I can't help but wonder if the average investor just doesn't understand stocks anymore and refuses to buy them as a result.
Can you blame them? It seems like nobody makes money these days unless they own a sophisticated trading robot.
The trend for stocks might be higher but individual stocks are increasingly trading with higher volatility. It seems like we see a mini flash crash in a any given stock at least once a month these days.
The Bottom Line
Wall St better be careful because I think they risk losing the average investor as they play their "computer war games".
Americans are scared, frustrated, and confused when it comes to how they should be handling their investments. Nothing looks safe to them and so many sit paralyzed in cash as a result. A few brave souls are out there chasing yield but that game seems like it's nearing as end as they watch various munis begin to blow up.
The only people that have confidence in how stocks are trading these days are the computer nerds from Harvard and Yale that created all of this computer BS.
When QE ends(or should I say "if"), the markets are in for one hell of a ride. Without the "magic" of QE the trading robots may decide that selling and taking profits is their best option.
If this is what happens when the end of QE occurs then you must ask yourself this question: Who is going to be left to buy the stocks?
Answer: "crickets chirping".
If you are in equities please be careful. You are one of a brave "few" who have decided to swim with the HFT sharks in the shark tank that we like to call the stock market.