Using Veritas to Construct the "Per…

29-04-2017 Hits:88461 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:82169 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:82056 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:86555 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:82994 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:85119 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:56221 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:84440 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:84155 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:84018 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:90493 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

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The Transformation of Television in Amer…

21-03-2017 Hits:88068 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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In continuing with my explanation of why the US equity markets have been flying so high in the face of horrible and still deteriorating fundamentals, I bring you the continued search for the Plunge Protection Team... See "Market Manipulation from the Big Boys: Is there really a PPT (Plunge Protection Team)?" and "More on market manipulation, guess who..." for background info on this post. 

Money flows

While it is well established that the share of program trading in NYSE exchange has shown a trend of significant upward movement over the past few months, we have made an attempt to look into the flow of money in and through program trading. A granular look at events witnessed in the recent set of trends makes us come to the following findings:

  • 1. Dark pools, an increasingly popular off-exchange electronic trading venues where buyers and sellers can fill large orders anonymously, have grown to account for a significant amount of total equity trading. Their share in the total average daily volume in the US is expected to be around 10% currently. The impact of these transactions in terms of price distortion is expected to have increased significantly with increase in program trading. See Institutional Investor's final issue for an expose on Dark Pools - "Gaming takes many forms, including what participants commonly refer to as "fishing." In this tactic the gamer pings a pool with small sell orders for a stock in an effort to discover if a large buy order is resting there. If these orders keep getting filled, the next step is to move the stock price up by buying it on the public market. The gamer then dispatches a big sell order to the dark pool — and unloads the shares for more than the original purchase price.".

The share of program trading in total NYSE volumes has increased to as high as 40% for the week ended June 19, 2009 with total NYSE market volumes in 2009 being lower than the last year. As a result, program trading volumes (including dark pools) are estimated to have turned more influential in determining market movement than ever before.

 image001_copy.png  

image002.png 

image003.png 

In the charts above we have plotted S&P Index (June 2006 to date) with (1) total NYSE volumes (2) total program trading volumes share (in total NYSE volumes) and (3) GS program trading volumes share (in total NYSE volumes). Between February 2009 and June 2009, the markets have rallied around 25% but the rally has not been backed by what would be a bull's desired volume increases. Total NYSE volumes have spiraled down while program trading volumes have moved up. Average daily NYSE volumes have declined 18% over corresponding period last year and 23.5% over average volume for 2008, while program trading volumes have increased 1.8% over corresponding period last year. With a decrease in overall volumes and marginal increase in program trading volumes, the share of program trading in the overall market volumes has increased significantly - rising to 30.7% for the period February 2009 to June 2009 versus 24.6% a year ago. This has given program traders more control and the ability to manipulate the markets. Goldman Sachs, in particular, has substantially increased its program trading volumes. While overall market volume was and is declining, Goldman Sachs' average weekly volume has been creeping higher. For the period February 2009 to June 2009, Goldman Sachs' average weekly volumes more than doubled to 1,173 mn and formed 7.1% of total NYSE volumes, up from 556 mn, or 2.8% of NYSE total volumes a year ago.

  • 2. Even more worrying and a material cause of concern is the increase in principal trading which is gaining significant strength to the extent that it is re-defining market movements, particularly by Goldman Sachs. For the week ending June 19, 2009, principal trading by program trading firms accounted for 45.0% of the total program trading volumes and 18.2% of the total NYSE volumes compared with 32% of the total program trading volumes and 8.6% of the total NYSE volumes last year. GS's share in the total principal trading rose to 37.6% for the week ending June 19, 2009 against 21.0%, a year ago. GS's total program trading accounted for 8.3% of the total NYSE volumes with about 82% being the GS's own principal transactions. In the same week last year, GS's program trading accounted for just 2.9% of the total NYSE volumes and 62% of these were GS principal transactions.
      Feb 27, 09 -June 19, 09 Feb 29, 08 -June 20, 08 % change
y-o-y
CY 2008 % change
over 08'
Change in S&P index  

25.3%

 

 

 

 

 

 

 

 

 

 

 

 

Avg NYSE volumes (daily)

 3,304

  4,042

-18.3%

 4,318

-23.5%

 

 

 

 

 

 

 

 

Avg porgram trading volumes

 1,014

  996

1.8%

 1,037

-2.2%

PT / Total NYSE volumes

30.7%

24.6%

 

24.0%

 

 

 

 

 

 

 

 

 

GS volumes (weekly)

 

 1,173

 556

110.9%

 670

75.2%

GS / Total NYSE volumes

7.1%

2.8%

 

3.1%

 

 

 

 

 

 

 

 

 

MS volumes (weekly)

 

573

  571

0.3%

 560

2.3%

MS / Total NYSE volumes

3.5%

2.8%

 

2.6%

 
  • 3. Increased program trading seem to have dented the market's traditional price-setting mechanism, with S&P's volume weighted average price (VWAP) getting registered lower than the S&P close for most of April and May indicating that fewer and fewer high priced deals backed the market movement. This confirms my suspicions that it is a small amount of high frequency traders (primarily Goldman Sachs, et. al, but Goldman in particular) that are dominating the market's troop upwards, more so than any real volume of real buyers actually seeking to purchase stocks at higher prices.

image008.png

image007_copy.png

  • 4. We have bifurcated volumes of program trading in up-trending and down-trending markets to determine impact of trending markets on volumes of program trading.

There seem to be no significant difference in volumes during up-trending or down trending market. Since 2008, average program trading volumes in an up-trending market was 1,035 mn, or average share of 26.9% of NYSE total volumes while in a down-trending market the  program trading volumes stood at 1,009 mn, or average share of 26.6% of NYSE total volumes. NYSE volumes during up trending market was higher by 1.8% than down trending market while program trading volumes were higher by 2.6% during up trending market.

 

Up trending market   Down trending market
Week Program trading volumes NYSE Volumes Share of program trading Increase in S&P   Week Program trading volumes NYSE Volumes Share of program trading Decrease  in S&P
Average                      1,035             3,987 26.9%     Average                 1,009                   3,915 26.6%  
                     
25-Jan-08                      1,548             6,135 25.2% 0.4%   04-Jan-08                 1,099                   3,525 31.2% -4.5%
01-Feb-08                      1,294             4,782 27.1% 4.9%   11-Jan-08                 1,335                   4,777 27.9% -0.8%
15-Feb-08                         995             3,908 25.5% 1.4%   18-Jan-08                 1,304                   5,034 25.9% -5.4%
22-Feb-08                      1,004             3,951 25.4% 0.2%   08-Feb-08                 1,132                   4,274 26.5% -4.6%
21-Mar-08                      1,623             5,715 28.4% 3.2%   29-Feb-08                 1,115                   4,216 26.4% -1.7%
04-Apr-08                      1,073             4,136 25.9% 4.2%   07-Mar-08                 1,118                   4,565 24.5% -2.8%
18-Apr-08                         895             3,706 24.2% 4.3%   14-Mar-08                 1,169                   4,835 24.2% -0.4%
25-Apr-08                         827             3,747 22.1% 0.5%   28-Mar-08                    980                   4,074 24.1% -1.1%
02-May-08                         926             3,790 24.4% 1.1%   11-Apr-08                    795                   3,555 22.4% -2.7%
16-May-08                         853             3,517 24.2% 2.7%   09-May-08                    821                   3,484 23.6% -1.8%
30-May-08                      1,042             3,683 28.3% 1.8%   23-May-08                    811                   3,613 22.4% -3.5%
13-Jun-08                         853             3,937 21.7% 0.0%   06-Jun-08                    915                   4,023 22.8% -2.8%
18-Jul-08                      1,256             5,479 22.9% 1.7%   20-Jun-08                 1,121                   4,127 27.2% -3.1%
01-Aug-08                         997             4,403 22.7% 0.2%   27-Jun-08                 1,715                   4,973 34.5% -3.0%
08-Aug-08                         908             4,226 21.5% 2.9%   04-Jul-08                 1,085                   4,435 24.5% -1.2%
15-Aug-08                         898             3,924 22.9% 0.1%   11-Jul-08                 1,097                   5,119 21.4% -1.9%
12-Sep-08                         966             5,433 17.8% 0.8%   25-Jul-08                 1,046                   4,845 21.6% -0.2%
19-Sep-08                      1,545             7,752 19.9% 0.3%   22-Aug-08                    714                   3,364 21.2% -0.5%
17-Oct-08                      1,084             6,222 17.4% 4.6%   29-Aug-08                    745                   2,934 25.4% -0.7%
31-Oct-08                         925             5,212 17.7% 10.5%   05-Sep-08                    889                   4,306 20.6% -3.2%
28-Nov-08                      1,010             3,182 31.7% 12.0%   26-Sep-08                    692                   3,995 17.3% -3.4%
12-Dec-08                         980             3,100 31.6% 0.4%   03-Oct-08                    907                   5,361 16.9% -9.4%
19-Dec-08                      1,384             3,407 40.6% 0.9%   10-Oct-08                 1,177                   7,262 16.2% -18.2%
02-Jan-09                         779             2,221 35.1% 6.8%   24-Oct-08                    855                   5,228 16.4% -6.8%
06-Feb-09                         924             3,000 30.8% 5.2%   07-Nov-08                    768                   3,444 22.3% -3.9%
13-Mar-09                      1,126             3,659 30.8% 10.7%   14-Nov-08                    848                   3,051 27.8% -6.2%
20-Mar-09                      1,341             4,112 32.6% 1.6%   21-Nov-08                 1,172                   3,841 30.5% -8.4%
27-Mar-09                      1,037             3,549 29.2% 6.2%   05-Dec-08                 1,120                   3,312 33.8% -2.3%
03-Apr-09                      1,089             3,344 32.6% 3.3%   26-Dec-08                    487                   1,620 30.1% -1.7%
10-Apr-09                         920             2,978 30.9% 1.7%   09-Jan-09                    871                   2,660 32.7% -4.4%
17-Apr-09                      1,017             3,418 29.8% 1.5%   16-Jan-09                 1,014                   3,034 33.4% -4.5%
01-May-09                         878             2,979 29.5% 1.3%   23-Jan-09                 1,050                   3,305 31.8% -2.1%
08-May-09                         963             3,742 25.7% 5.9%   30-Jan-09                    868                   2,849 30.4% -0.7%
22-May-09                         761             2,877 26.5% 0.5%   13-Feb-09                    885                   2,916 30.3% -4.8%
29-May-09                      1,070             3,173 33.7% 3.6%   20-Feb-09                 1,119                   3,434 32.6% -6.9%
05-Jun-09                         821             2,901 28.3% 2.3%   27-Feb-09                 1,220                   3,728 32.7% -4.5%
12-Jun-09                         686             2,233 30.7% 0.7%   06-Mar-09                 1,270                   3,853 33.0% -7.0%
            24-Apr-09                    965                   3,511 27.5% -0.4%
            15-May-09                    927                   3,265 28.4% -5.0%
            19-Jun-09                 1,155                   2,855 40.4% -2.6%