Themis Thoughts 10/26/10; Charlie Tuna and Doc Brown

From yesterday’s Reuters article: CFTC Takes Aim at Runaway Robotic Trades : Chilton Read the article here

What could be more appropriate than his speaking in Vegas!


Bart Chilton, a commissioner with the futures regulator, said “mini-flash crashes occur all too often” following a surge in high frequency trading. The CFTC on Tuesday will unveil new draft rules to clamp down on disruptive trading practices. “They don’t cause as much of a disruption as that of May 6, but more than once this year, runaway algos have disrupted markets. By that I mean, cost people money,” Chilton said in prepared remarks for an energy conference in Las Vegas. “We should explore ways to hold those who set off runaway robotic trades accountable,” he said.

Hundreds of firms are lobbying the CFTC for exemptions from regulations or for favorable interpretations of the new law. “Others think we should ignore the deadlines Congress gave us and phase this stuff in over years and years. Well, sorry Charlie,” said Chilton. “That’s not going to happen.” Starkist doesn’t want tuna with good taste; Starkist wants good-tasting tuna! Or perhaps just a functioning market structure.

This is great news. It means that perhaps the culture is changing in DC, and that leadership from Chairman Schapiro and Commissioner Chilton are creating a climate in which it is actually ok to regulate with the interests of the Greater People and Investment Community, and not just those of a select few market participants. Before you know it, the CFTC and SEC will be hiring professionals from Chicago, and not the other way around! Before you know it, firms funding the Principal Traders Group HFT Lobby will demand their money back. Well done, Mr. Chilton.

An aside: Senator Ted Kaufman visited Cramer’s Mad Money one last time yesterday evening. You can see the video here. He states how we need a “black box” for the markets, as we have in airplanes. He states how the two things that have made this country great are democracy and our capital markets; he feels it crucial to correct the market’s structure before we kill the “goose that lays the golden eggs.” And he expresses his frustration with how panels seeking to fix the problems are never balanced (we know that feeling). We hope the Senator continues to be vocal and an advocate for investors, after he leaves office this year; it is a shame that more senators don’t have his courage and leadership. He serves the public, and always has. Compare that with the politicians taking big lobbying handshakes from PTG, and then writing asinine letters to the SEC; they should be ashamed, and they should be held accountable for not being on the side of The People.

Where we left off 4:00pm EST:

DJIA                                             11,164.05                                       +31.49

S&P500                                          1,185.62                                      +2.54

NASDAQ Composite                     2,490.85                                      +11.46

Futures now at 7:30am EST:

DJIA:                                       -2

S&P500:                                  -0.60

NASDAQ 100:                        +0.25

Key Data out today:


09:00:                                      Case Shiller

10:00:                                      Richmond Fed

10:00:                                      Consumer Confidence



Since the prior close, some key stories:


–       Ford posts record profits, prompting our government to crow about how their saving the automaker was needed, and the only way… Wait. Scratch that. Wrong car maker.

–       UBS posts surprising loss due to lack of trading volume. Well. Lack of their customer’s trading volume anyway.

–       Brokers Flee Brokerages as Declining Assets Show Broken Model. Ayuh. The exchanges too.

–       US Corruption Ranking Slides as Confidence Wanes. Ayuh. PTG and other lobbyists.

–       Doc Brown does not show up yesterday, 10/25/10, in his flux-capacitor-charged DeLorean, to save Marty McFly from the future. Apparently the flux capacitor malfunctioned due to a faulty ill-designed circuit breaker of some sort, and he flash crashed in Libya.

–       Fannie Mae halts foreclosure work.

–       TIPS auction from Mon getting a lot of attention this morning; NYT, FT, and WSJ all note that the negative yields at the 5yr auction are a “positive sign” as it signals the market is anticipating inflation down the road; the fact the yields were negative signals that investors are giving the Fed the benefit of the doubt in its ability to manufacture inflation.

–       US stock returns haven’t been so strong from the perspective of foreigners – international investors in US equities are doing less well than the raw S&P rise suggests. Indeed, in euros the S&P is barely up at all.

–       Earnings were mixed last night and this morning in the industrials/materials space. MAS was a notable disappointment, missing on the top and bottom line. BEAV and HRS both reported small beats in the aero/def space. In materials, MT reported a small beat, but followed the rest of the steels and said 4Q would see slowing demand and declining prices. DD reported a nice beat and raise, although ASH opened with a small miss.



  •  After Market Close: AFL, BRCM, CBG, CBI, CHRW, CNI, MCK, NBR, STM, WU