Tuesday, February 7, 2012

Another ZeroHedge bugaboo - "lack of volume"

ZeroHedge insists the broad market rally is an illusion. See, they say, volume has been lowest since 1927 or something, and any trader knows that a rally on decreasing volume is dooooooomed.

I was thinking about this in conjunction with the New York Magazine story on the death of Wall Street, and I thought... maybe the reason volume has (long-term) decreased is because of the end of prop trading, and the slow collapse of the hedge fund industry?

After all, most of these guys can't turn a profit... it's often been pointed out by the smart traders I've been reading that prop desks are usually money-losers (unless you're Goldman Sachs and can get insider info from your former executives now running the various governments around the world). So if they don't contribute to advances, maybe all they do is contribute churn? And same with hedge funds - now that they're going through a major cull, does that also reduce the churn in the market?

Maybe ETFs do the same thing... I dunno if the "NYSE volume" reported includes ETF trading. Then again, I also don't know if it includes secondary/electronic exchange volume.

And also, when (say) I buy 5000 CAT thru TD, and the shares come from some other TD customer selling his CAT instead of being bought on the NYSE (as can easily happen nowadays), does that count towards "NYSE volume"? Because I reckon if more people are trading on discount brokerage platforms, more and more of this infrabank volume will be happening.

In any case, this is little more than another attempt to justify not listening to the whining coming out of the US One-Percenter Patriot Movement.

I don't have the answers and wish someone more clever like Ritholtz or Reformed Borker could provide answers to the above. But they don't read me cos I'm not cool. Oh well.


  1. At the same time I don't think ZH is referring to the pinks or OTC when complaining about lack of volume.

  2. Bork Bork Bork! (perhaps my fave in-joke on the blerg)

    You're cooler than those dudes will ever be and you'll remain that way until the day you realize you're cooler than them, at which point you suddenly won't be.

  3. Yeah Otto? The Hegelian synthesis of the above would mean that I thereupon transcend cool and move to a higher plane of being. So nyah. Fucking philosophy degree finally paid off.

  4. In olden days a hint of stocking really was something shocking,
    Now Heaven knows, anything goes.

    (best line later on, as anyone who rhymes "Gary Cooper" with "Super Duper" needs applause).