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A market gone mad in a bad way. Or, What Wall Street pros really think about the market

By Dian Vujovich

Word is, Wall Street market pros aren’t jumping up and down when it comes to their feelings about investing these days. Especially, since the Knight Capital trading mess happened.


In case you’ve forgotten, a few weeks ago Knight Capital experienced a software glitch that resulted in major price swings on a number of stocks on the New York Stock Exchange. The glitch was estimated to have cost the company $440 million in pre-tax profits and almost their future.


A recent survey from the Tabb Group, a capital market consulting firm, asked 260 market participants questions about their feelings regarding the market.  Those market participants included broker-deals, asset managers, hedge fund managers, etc., In other words, market professionals.


A few of the survey’s findings showed:


-Only 2 percent rated their confidence in the market as “very high”. It 2010, the confidence level was 12 percent and that was after the May “flash crash”.


-“Weak confidence” responses leaped from 5 percent two years ago to 26 percent today.


– A” very confident” response in the market’s structure has fallen to 2 percent from 12 percent in May 2010.


In a Financial Times story published this week  (8/21/12) titled “Knight glitches hit confidence in US market” Adam Sussman, the research analyst who compiled the report thought that the “steady erosion in confidence had been partly caused by tough market conditions but also by a steady stream of adverse news stories…”


And he’s quite right.


Not only have Knight Capital’s problems been of concern for market pros —and investors—but so has all of the other crapola that’s happened on Wall Street in the past five, and even 10, years.


Between the bubbles and the scandals, investors losing their shirts, homes and retirement savings while Wall Street big wigs walk away with huge bonuses and pay checks, only someone with blinders on could miss the breach of market confidence that prevails.


Combine  Bernie Madoff’s Ponzi scandal, the mortgage and real estate bubbles, Facebook’s ridiculously priced IPO, etc., etc., etc., with the unwillingness of the those with the power in Congress  or the SEC  to impose new regulations to prevent investors from future fraud, or, send anyone within financial services industry to jail for their part in swindling the public, it’s no wonder that investment pros– and investors—aren’t jumping up and down in recognition of what a wonderful capital market system we have in place.


Making money in the markets is a great thing. And there is and always has been money to be made in good times and in bad. But when the bad times include too much corruption and no accountability for that corruption, our capital markets have  directly or indirectly failed  everyone who participates in them.

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