Traders, Not Investors, Fueling This Stock Rally: NYSE Chief

[KoKo]

Source: CNBC/Yahoo News



* Friday April 17, 2009, 10:55 am EDT

Wall Street's stunning six-week rally has been fed more by traders looking to take advantage of quick swings in the market than investors with a long-term view, NYSE Euronext (NYSE:NYX - News) CEO Duncan Niederauer told CNBC.

Because of that, the rally likely is to run out of steam as low volume eventually comes back to the bite the market, he said.

"It feels to me we're in a trader's market and not an investor's market," Niederauer said in a live interview from the exchange floor.

Markets are likely to near their March lows after an upswing that has sent the major indexes more than 20 percent higher, he said.

"The volume in March hasn't convinced me that it's the kind of volume that you need to see to believe it was the real beginning of a turnaround," he said. "Instincts tell me we're going to retrace one more time and the rally I believe is the summer rally."

Long-term retail investors--with a three- to five-year time line--remain concerned that the rally is merely a bear-market bounce, and uncertainties in corporate health and the economy still pose dangers, he added.

"I think the real-money investors are still watching because I don't think the fundamentals are in place yet where the people feel like they can do good fundamental homework," Niederauer said. "So the feeling I've got talking to a lot of investors is they're still watching and waiting."

Niederauer called the current rally "too much, too soon," and said investor confidence remains fragile.

"There's no doubt that a lot of the ... equity investing attitudes have been damaged and I think it remains to be seen whether that damage is irreparable," he said. "They're certainly not just going to come running back."
http://finance.yahoo.com/news/Traders-Not-Investors-Fueling-cnbc-14957098.html/print


Read more: http://finance.yahoo.com/news/Traders-Not-Investors-Fueling-cnbc-14957098.html/print

[Baby Snooks]

1. This surprises anyone?

The crooks got their bonuses which are not really very much compared to what they're used to so of course they are going to turn the $1 million into $5 million by hitting the roulette table. And rigging the roulette wheel. As they always do.

Change. Ain't it grand?

[pfitz59]

2. Jiggering the numbers...

like salting the mine with diamonds!

[Kolesar]

3. Equities need higher earnings to go up in value

And to get earnings, the companies need increased sales. We are experiencing decreased sales. We are experiencing a collapse in sales.

[truedelphi]

4. Yet think about happy the Powers that Be must be! Bush's

Economic policies are follwoed almost to a "tee" by a Democratic President. Automatically 32% of the American public becomes silent on those policies, for after all, why should a Democrat criticize a Democratic Administration?

[Dr.Phool]

5. Thank Gawd it passed!

The head of the NYSE is just another one of those doom and gloomers!

Don't worry, be happy!

[xchrom]

6. recommend

[depakid]

7. And they damn well ought to be paying a financial transfer tax

Should have been enacted yesterday:

Robert Pollin and I <Dean Baker> calculated that a scaled set of FTT on stock, futures, options and other financial instruments could raise approximately $150 billion a year. This would go far towards bringing the long-term budget deficit down to a manageable level.

A FTT would be hugely progressive. While many middle income families own stock, their holdings are dwarfed by the holdings of the wealthy. Furthermore, few middle income families are active traders. Their intention is to hold their stock to support their retirement or their kids' education, not to shuffle it around on a daily or hourly basis. Some mutual funds do engage in frequent trading. An FTT would encourage investors to move their money to funds that are less active traders, thereby allowing them to escape most of the impact of the FTT.

Most of the burden of the FTT will fall on wealthy individuals who are active traders and also on the financial industry itself. Either way, the tax will be overwhelmingly borne by the wealthy. By raising the cost of trading, the tax will discourage the trading that provides the revenue for the financial industry. A well-designed tax should also discourage the creation of exotic assets that may serve little useful purpose, since it could lead to the tax being paid multiple times. For example, the holder of an option on a stock would both pay the tax on the purchase and sale of the option and also on the purchase and sale of the stock itself, if the option was ever exercised.

While most taxes impose some economic cost in addition to the revenue raised, a FTT may actually increase economic efficiency. By discouraging financial transactions that are entirely rent-seeking in nature, a FTT will reduce the resources used up by the financial sector, without affecting at all its ability to serve the productive economy. The reduction in trading volume will of course reduce liquidity to some extent, but American financial markets will still be quite liquid. Even with a 0.25% tax on a stock sale or purchase, transaction costs will still only be raised back to their mid-80s levels. And, the United States had a large and very liquid stock market in the 80s.

There also is a powerful element of justice in imposing a FTT in the current situation. The main reason that the budget situation has deteriorated so much in the last two years has been the damage caused by the irresponsibility and greed of the financial industry. In this way, a FTT can be seen as sort of a user tax, where the industry is effectively forced to pay for some of the damage caused by its practices, just as we might like to tax the output of industries that pollute our air or water.

more: http://www.commondreams.org/view/2009/04/16-10

[w4rma]

8. good post (nt)

[KoKo]

10. This sounds like an excellent idea. There are always

unintended consequences ...but it sounds like it would protect ordinary Americans in their 401-K's and who are long term savers from speculation of traders and fund managers with our money.

Thanks for the post!

[depakid]

11. Britain's been doing this for years with no illl effects

This sort of deal (along with a Tobin tax on currency trading) hits the hedge funds, investment bans and the speculators- the people who caused disaster in the first place-

[girl gone mad]

9. Yes, and it's getting a bit dangerous.

From following quant charts, it's evident that HF managers have been piling in one after the other. What's going to happen when the music stops?

[Tiberius]

12. I myself put my shorts back on...

Ha, not the gym shorts. But the short positions. This "rally" is nearly over, I give it another week at most.

[girl gone mad]

13. You're braver than I am.

I'm too afraid of ending up on the wrong side of the crazy momo quant herd.

If your call (put?) is right, though, I think you could do very well.