The average share stock is held for a total of 11 seconds.
Don’t worry, I’ll wait while you read that again. For me I had to reread it several times before I could even let it sink in. When it did, I felt my soul crack asunder. Not, sadly, because I did not expect it. In fact far worse I did expect it, I just had no idea how bad the numbers really were. Now I am the first one to argue that data always lies, but these numbers are pretty simple and their truth is so crystal clear that it doesn’t take a data scientist to interpret them. (luckily for me)
And the parasitic sucking is getting ever more hyper efficient. Way back in 2012 the average share of stock in these United States of America was held for a grand total of 22 seconds. (Apparently they had a LOT more time to waste four years ago when they only had 85% of the global wealth)
Michael Hudson, a former Wall Street economist at Chase Manhattan Bank who also helped establish the world’s first sovereign debt fund recently said: “Take any stock in the United States. The average time in which you hold a stock is – it’s gone up from 20 seconds to 22 seconds in the last year.
“Most trades are computerised. Most trades are short-term. The average foreign currency investment lasts – it’s up now to 30 seconds, up from 28 seconds last month. The financial sector is short-term, yet they talk as if they’re long-term. Computerized high-frequency trading represents more than 70% of all trades globally.”
So it takes a mind benignly short time for a high frequency Wall St trader to latch onto the economy and suck a little bit of life out of it. And they are getting hellishly better and better at it. Approximately 70 percent of the volume of trading on stock exchanges is from so called flash traders, basically computers that buy and sell stocks and hold them for about 11 seconds on average. So all of the discussions that we have the economy, politics, regulations, company earnings — all that fundamental capitalism stuff — there’s just no way that a computer holding and selling a stock in 11 seconds is going to be able to do all of that analysis. Read more here!
When my libertarian or financial conservative amigos rant about how the “free market” and “capitalism saves all” I know they are thinking of what I used to think of when I said the same things. I thought of fast-moving, intelligent, scrappy, under financed entrepreneurs creating something out of nothing and saving the world while making a tidy profit. I basically think of John Galt and go all Ayn Randian on things. I remain convinced that back in the good old days, that was pretty much how it was more often than not.
But that’s NOT how it is any longer.
Two forces have conspired to completely usurp and corrupt the free market and capitalism in general. Both, surrounded with truisms and wiseacre “horse sense” platitudes. Both have that sheen of truthiness that pundits love to use to placate us. The two ideas that are in unholy alliance set to destroy everything we hold dear in the United States (economically anyway).
The two hellish forces are:
- The relentless pursuit of shareholder value
- The relentless pursuit of market efficiency
Taken separately these are powerful forces that corrupt our economy and capitalism from the inside out. Both can produce positive results. But taken together they produce a gargantuan parasitic sucking sound as they literally suck the very life out of all of us. I could likely write an entire treaties on how these two conspire against us. But for the sake of a nod towards brevity and focus I will only talk about how these two ideas have worked together to completely destroy the very fabric of the stock market and even of the free market.
If the prime directive of the market is to return maximum value to shareholders, then the best return of shareholder value is to extract maximum value with the least expense. With flash trading done hundreds of times an hour the risk to capitalism extremely limited and the return nearly guaranteed. It takes the very idea of capitalism (the idea that goods, equipment and the means of making a product or service were formerly considered capital) and turned it into the practice that capital is the tool used to make capital and that the purpose of capitalism to solely to siphon off more capital.
And nothing in a free market can be MORE efficient than using an advanced AI computer program to trade stocks in a whirlwind of trades based on absolutely zero fundamentals and simply trading on the “market efficiency gap” to suck minuscule profits out of every trade on the market. Multiply that times tens of millions of trees a day and you have TRILLIONS of dollars of pure profit with little to no risk. That is super efficient.
So next time you think about the Free Market and how the top 1% of the population have more wealth than the bottom 90% then look to your friends Shareholder Value and Market Efficiency. They are thanking you for your blind acceptance several Trillion times a year.
