Green Sharts On The NYSE!

"Oh yes, we have a tremendously positive stock market here.  The tenor and tone is good, the volume support is ok, all looks excellent for continued rallying on an improving outlook for the global economy."

You mean like this?

That’s a clever little search in which I asked for the highest-volume stocks with prices over ten cents (to exclude the little penny pumper stocks on the OTC market.)

Well gee, let’s add this up!

That would be about 2.126 billion shares in total for these four stocks, two of which (Fannie and Freddie) are so far underwater in their equity value (to the government no less!) that there is no chance they’re worth anything, yet they remain listed, and the other two are zombie banks with Citibank existing only because of $300 billion in asset guarantees by The Fed and Treasury (which, incidentally, is under investigation, and that assumes that the $300 billion is all there is.  There is persistent chatter that the real amount of "back door support" that Citibank has is closer to a cool trillion dollars, although I’ve never been able to get anyone to speak on the record in that regard.)

But I digress.

Here is the NYSE Volume for today – for all shares, right off NYSE Euronext’s page:

NYSE LISTED VOLUME: 5,768,739

So let me see if I get this right.  2.126 billion shares traded in four stocks, two of which that accounted for some 900 million of those shares are in companies that by any measure of accounting have absolutely zero common equity value whatsoever (and never will under any rational view of the future), yet NYSE Euronext continues to list them.

These four stocks represented thirty seven percent of all shares traded today.

Today 3,162 different stocks traded on the NYSE.  These four represent 0.13% of the total, yet they comprised 37% of the volume.  That’s an over-representation of nearly 300 times the average.

Now folks, let’s be straight here.  Do you believe for one second that this is "great liquidity" added by the "high-frequency trading" computers that are almost certainly behind the vast majority of this volume?

This isn’t the first day with this sort of abnormal trading and volume pattern either.  In fact it has been going on for the last week, with AIG making a frequent appearance on the list as well.

If there was ever an argument to be made for the NYSE having turned into a gigantic "hot potato" parlor game, this is it – in your face in an impossible-to-explain-away fashion.

NYSE Euronext, of course, derives a fee from each share traded, so they have to love this sort of thing.  The ordinary investor who has a brain sees it as an amusing sideshow, but the unfortunate fool who gets sucked into the maelstrom is going to get destroyed when the computers move on to some other issue and the price collapses as there is no authentic bid out there for any of this crap.

Beware.  This is the sort of cheap parlor game that our capital markets have turned into as a direct and proximate result of our so-called "regulators" turning a willful blind eye while supposed "improvements" in liquidity and "customer access" are put in place by those who have one singular purpose in mind – find a way to steal a fraction of a penny at a time by playing "hot potato" with a handful of issues (sometimes starting a nice juicy rumor to go with it, aka the one last week about BAC allegedly being taken out by Goldman just to prime the pump a bit!) hoping that you will be the bagholder upon whom they can unload.

The wise trader and investor who does not possess a colocated server sitting three feet from the backbone network that runs up and down the NYSE would be well-advised to stay away from this modern version of Three-Card Monte.

Finally, let me remind everyone that the tape does have both red and green arrows in the printing mechanism, and that which can be run up by these games can also be run down with equally-frightful speed.  Speaking of which, doesn’t anyone remember last fall and this spring during the crashes with all those nasty rumors about various firms that turned out to be not true? 

Hmmm….