Market Democratization and Summer’s End

HamptonsSince returning home with my mother after birth, I have been hospitalized twice.  I had my tonsils taken out at age five and I contracted meningitis about 25 years ago. When I suffered from the meningitis (thankfully the viral kind rather than the much more dangerous bacterial sort), I was admitted on the worst possible day of the year.  I went into the hospital on July 4.  Since newly minted physicians start their internship years on July 1 each year, since July 4 is (obviously) a major holiday and since that particular July 4 was a Friday and thus the start of a long week-end, pretty much the only doctors around that day had roughly 4 days of experience.  Total.

It wasn’t a good day to get so sick.

Traditionally, since nearly all trades can wait — unlike the treatment of disease — almost nothing happened in the markets on summer Fridays and during the last two weeks of August.  Nearly all Wall Street decision-makers were in the Hamptons then so trading desks at the major firms were manned by junior traders who wanted nothing more than to remain flat and avoid screwing up, the operative word being avoid. The key buy-side people were away too.  Those who weren’t senior enough to escape the city caught up on their reading, took long lunches, and talked on the phone with their friends and relatives in a half-hearted effort to look busy (not that anybody really checked). Liquidity was practically non-existent.

Not so this year.  Whether the expressed reason is fears of Syrian intervention, concerns about a new debt ceiling impasse, or something else, stocks have traded decidedly lower while bonds, oil and gold have been sharply higher this week. The markets have actually moved.  Thin volumes due to vacations have likely added to the volatility.

But I suspect that something else is at work too. Volumes may well stay thin, but the general democratization of markets and their much broader and deeper accessibility overall means that the Wall Street “big boys” can no longer effectively close up shop and compel compliance on the markets for all but the most outrageous news.  Trades can and will get done. So if you want to trade this week, you can do so with a reasonable expectation of some liquidity.  And that’s good news, even for those camped out in Montauk.

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