Show Us the Money

The bright spot in this limp recovery has been the unemployment rate, which has fallen to 5.1%.  But don’t look too closely, or you’ll notice that the spot is not so bright.  In fact, the job market is no better than the rate of productivity, growth in gross domestic product (GDP) or numerous other depressingly underwhelming economic factors.

We’ve frequently pointed out that the oft-cited U-3 unemployment rate is meaningless, as the more people give up looking for work, the lower the rate goes.  Can anyone but a government economist think it’s a good thing when the unemployment rate goes down because millions of Americans have stopped looking for work?

A growing number of people – including, we hope, some presidential candidates – seem to be noticing that the labor force participation rate hasn’t been this low since Jimmy Carter was president.  It’s now dropped to 62.7%, a level not seen since February 1978.

But there’s another factor that demonstrates the weakness of the unemployment stats – personal income.Money

A Wall Street Journal commentary by Bob Funk, CEO of Express Employment Professionals, notes that, “There is something that the numbers are missing.  Economics — and logic — tells us that if unemployment was truly that low … wages would be rising.  Instead, wages grew at 0.2% during the second quarter, the slowest rate in 33 years.  The median family income in America is approximately $53,000, below where it was before the 2008 economic meltdown.”

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How Ben Bernanke Saved the World

“It became necessary to destroy the town to save it.”

                    U.S. major talking about Bến Tre, Vietnam

The Wall Street Journal doesn’t have a humor section, so “How the Fed Saved the Economy” appeared on the op-ed pages under the byline of Ben Bernanke, former chair of the Federal Reserve Board.

In his commentary, Bernanke takes credit for saving the economy – rather than responsibility for the most dismal recovery in history.Bernanke

Anyone who has read even one of our blog posts knows that we would disagree with any claim about the Fed saving the world, especially given that the economy continues its slow-motion deterioration after nearly eight years and several trillion dollars’ worth of “saving” by the Fed.

However, Mr. Bernanke has a book to sell.  And while it will likely appear in the non-fiction section, we’re guessing by its title that it is even more self-congratulatory and less fact-filled (if that’s possible) than his op-ed piece.

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High-Frequency Trading Losing Frequency

The publication of Michael Lewis’ book Flash Boys early in 2014 brought high-frequency trading (HFT) to the attention of many investors for the first time.

Lewis was quoted on “60 Minutes” saying that HFT rigs the stock market against the small investor. Media made it known that the FBI – the folks who investigate drug dealers and organized crime – was investigating HFT.

Wenning Advice had posted frequently about the practice as early as 2011, warning about the distortion that high-frequency trading causes to market fundamentals, the predatory nature of high-frequency trading, the inequity of high-frequency trading, and the risk that high-frequency trading creates for all of us.  We even pointed out that “Satan is a high-frequency trader.”

But what’s happened to HFT since 2014?  And what happened to the FBI’s investigation of the practice?

HFT has not gone away. But it’s not what it used to be.

We noted in 2011 that HFT accounted for 73% of all equity trading in the U.S., up from 30% four years earlier, based on research from TABB Group.

Rosenblatt Securities estimated that HFT trading volume fell from about 3.25 billion shares a day in 2009 to 1.6 billion shares in 2012. And TABB Group estimated that HFT revenues from U.S. equity trading declined from about $7.2 billion in 2009 to $1.3 billion in 2014. 

HFT Today

So what happened?  Was Lewis’ book outdated even before it was published?  Did the FBI catch the bad guys?  Are new regulations keeping traders honest?

First, it’s important to note that HFT is still alive and well.  Even if it has a smaller share of the U.S. equities market, there are other countries and other securities to trade in. While HFT in U.S. equities may have dropped off, Read more