A comment on the plague of program trading. Brett Steenbarger says “Half of what you see on the screen isn’t real“. He call the program trading “non-directional”. In one sense, that’s true, the traders don’t care about direction. But because of the exchange rules on short-selling, programs have an inherent bullish bias for the indexes (you can only short the ETFs on a downtick and they are not in the indexes). This means that the general price level is (almost) always increased by program trading, leading to distorted markets and overpriced stocks. But rich program traders, at the expense of everyone else. This is one of the ways Goldman Sachs gets the money to pay its employees an average of $500,000.

Unfortunately, it is perfectly legal. But we all pay the price, it is a tax for the benefit of Wall Street. Another example of the boyz’ ethics is here, the municipal bond scam. It even makes the plaintiff’s bar look relatively ethical.