High-tech Arms-race Causing Stock Market 'tsunamis' - Cnn.com

Light can travel approximately one foot in a nanosecond (a billionth of a second) in free space, meaning that current processers, routers and switching devices have plenty of room for improvement. And just as faster predators in the animal kingdom catch more prey and will be less vulnerable to other predators, faster trading companies will emerge at the expense of slower ones. In parallel, a new form of ultrafast options market may emerge with second-scale contract times in order to hedge high frequency risk. However, there are two problems that make the future of high frequency trading of unique global concern, irrespective of how popular it becomes. The first is a scientific one: Financial markets represent the largest-ever sociotechnical system in existence, with a mix of state-of-the-art communications and computational power operating at speeds approaching the natural speed limit of light. Yet nobody, including Einstein, has ever produced a theory that predicts what might go wrong in an ultrafast global network of interconnected machines that carry out millions of operations in the blink of an eye -- or what can be done to prevent or manage it. These sub-second tsunamis escalated in the lead up to the 2008 financial meltdown. Neil Johnson, complex systems research group, University of Miami This leads to the second problem. How can regulators and governments possibly decide how to manage this emerging ultrafast financial jungle if nobody yet fully understands it? My fellow researchers and I recently uncovered glimpses of what is already going wrong in the form of escalating patterns of "sub-second tsunamis." These tsunamis are huge spikes and dips in the price of an individual stock. http://www.cnn.com/2014/08/13/opinion/stock-market-tsunamis/index.html

George Soros Lifts Wager on Bet S&P 500 Will Plunge to $2 Billion

Soros also lifted positions in Apple and Facebook in a portfolio loaded up with stocks, "so he cant possibly be all that gloomy," MarketWatch reported. Soros nearly doubled his ownership in a U.S. gold-mining companies ETF and initiated new stakes in other gold producers, suggesting the big names in hedge funds continued to have confidence in the yellow metal, Reuters reports. Soros Fund Management increased its stake in Market Vectors Gold Miners ETF to 2.05 million shares valued at $54 million at the end of the second quarter, compared with 1.16 million shares in the first quarter. "Gold-mining stocks are considered relatively cheap. It also suggests that Soros may be thinking gold prices are near the bottom of the range," Bill O'Neill, partner at commodities investment firm LOGIC Advisors in New Jersey, told Reuters. Soros also initiated new gold investments including 1.33 million shares in call options of the Gold Miners ETF valued at $35 million, and 1 million equity shares in Allied Nevada Gold Corp. Meanwhile, Soros slashed his stake in Barrick Gold Corp. http://www.newsmax.com/Finance/george-soros-stock-market-S-P-500-bet/2014/08/16/id/589153/

Under What Circumstances Should You Worry That the Stock Market Is "too High"?: The Honest Broker for the Week of August 16, 2014 - Washington Center for Equitable Growth

Capital Goods index jumped over 2 percent while auto and banks supported the rally. Only IT and FMCG indices are in red. Even midcap and smallcaps are flexing muscles with oever 1 percent gains each. Both Infosys and Maruti are up 5 percent each Since July 25 high while HUL and M&M gain over 8 percent. HUL and M&M lead the Nifty back to record high. L&T and Tata Power are down over 10 percent from the earlier record high period. For regular updates visit www.capitalheight.com Posted by http://capitalheight-stocktips.blogspot.in/2014/08/live-stock-tips-with-latest-market.html

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The S&P has never done this. But it came very close in the ten years starting in 1920. An extremely naive take would be to assume the efficient market hypothesis: that the marginal trader and the marginal firm know what they are doing, and that the margin the earnings of the companies in the index are equally http://www.hispanicbusiness.com/2014/8/14/bristow_and_patel_to_go_the.htm valuable if paid out or if reinvested. In that case we would expect the real returnthe dividend yield plus capital gainsto be simply equal to the earnings yield. The warranted ten-year return would then be simply 10 times the permanent earning power. And if we take the moving average of earnings underlying the CAPE to be our estimate of the permanent earning power, the warranted return is simply 100 divided by the CAPE, like so: Given the naivete of the framework, that turns out to be not at all a bad guide to the central tendency of the distribution of future ten-year returns conditional on the CAPE. If you are going to project an expected value for an investment in the S&P over the next ten years, simply inverting the CAPE and multiplying by 10 is a very good place to start. But even at the ten-year return horizon the variability is enormous: earnings 10 years hence may be well above their current value compounded forward at the current earnings yield; but they may be well below as well; the earnings valuation multiple 10 years hence may have jumped up; or it may have crashed. http://equitablegrowth.org/2014/08/17/circumstances-worry-stock-market-high-honest-broker-week-august-16-2014/