High-Speed Casinos

A tweet – 12 words, 140 characters – caused a selling frenzy last week, as the stock market dumped $134 billion in stocks in a minute and a half and the Dow Jones Industrial Average dropped 1 percent of its value, or 143 points.

The market recovered quickly, as the Associated Press announced that someone had hacked into its computer system and posted a fake tweet about two explosions in the White House.

But the hoax served as a frightening fire drill.  If it had been real, the average investor would have been burned alive.

We’ve warned readers about the dangers of high-frequency trading before.  This is an example of why we’re concerned.  If the White House explosions had been real, the algorithms that make decisions for high-speed traders would have continued selling, leaving the average investor behind as stock values tumbled.

Rick Santelli, on-air editor for CNBC Business News, said high-frequency trading has turned the markets into “high-speed casinos.”

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Fingers Crossed In Economic Promise

Like most promises made before an election, the promise of an economic recovery is beginning to look like a false promise.

Last fall, the housing market was showing signs of recovery and the unemployment rate was dropping.  The stock market since then has been propelled upward by the artificial stimulus of quantitative easing.

Now, though, economic indicators are less promising.  The Conference Board reported today that, after three months of gains, its index of leading indicators dipped 0.1% to 94.7 in March.

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U.S. Without a Budget for Four Years and Counting

As of April 29, the U.S. government will have operated without a budget for four years.  Based on the budget he proposed this week, President Obama intends to keep the streak going.

Even the smallest mom-and-pop businesses develop a budget each year and stick to it.  Yet the world’s largest enterprise – the U.S. government – has operated without a budget for more than 1,400 days.  Of course, the mom-and-pop business wouldn’t spend $1.4 trillion more than it takes in every year, either, but that’s another matter.

Nitpickers would say that the government is operating with a budget; Congress just has not passed a budget resolution since 2009.  But it’s the job of Congress to pass and approve a budget – and it has not done so for four years.

As just one example of the absurdity of the Congressional budget process in recent years, consider that when President Obama proposed his budget for FY ’12, the Senate voted it down 97–0.  Every Senator in the President’s own party – even Senate Majority Leader Harry Reid — voted against the budget, even though many had praised it when it was proposed.

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90,000,000 Americans Have Stopped Working

When the unemployment rate declines, even by a little bit, it should be good news.  But when it declines because people are leaving the workforce in record numbers, it’s not.

The U.S. Bureau of Labor Statistics (BLS) reported that the unemployment rate is now 7.6%, down from 7.7%.  But this 0.1% drop is due entirely to a drop in the labor force by 663,000 in March.

Non-farm payroll was expected to increase by 190,000 in March, with the lowest forecast at 100,000.  Instead, it increased by a meager 88,000 jobs.

As Zerohedge.com reported, a record 90 million Americans are no longer even looking for work.  The labor force participation rate dropped from 63.55% to just 63.3% – its lowest level since 1979.

The BLS reports the U-6 unemployment rate for March at 13.8%, which is a more accurate number than the U-3 rate of 7.6%, as it includes those who have been unemployed long-term.

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Two Banks With a Country Attached

Cyprus?  Really?  The population of Cyprus is just north of 1 million people.

In comparison, the Boston area has a population of 4.6 million.  Greece has a population of about 10.8 million.  Central Massachusetts has a population exceeding 800,000.  Would a financial crisis involving two banks in Worcester shake the financial system the way the financial crisis in Cyprus has?

Of course not.  Then again, Worcester is not a tax haven for Russian billionaires, who use Cyprus as their Cayman Islands.  Russia has kept many Cypriots gainfully employed through the country’s two largest banks, Bank of Cyprus PCL and Laiki Bank.

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