Took a week off blogging as we were travelling. I take an iPad, but the Safari browser and WordPress are not good friends so it is more trouble than it is worth. Anyway, there’s a backlog of stuff to comment on.

First of all, the SEC finally conceded that it would look at the “quote stuffing” and “sub-pennying” practices of the HFT boyz. Ms. Schapiro, however, was insistent that she would not “turn back the clock.” In other words, the fix is in. Doesn’t matter, the retail participants have finally had enough and are leaving.

We have pointed out that there are now 17 weekly sequential outflows from domestic mutual funds, in the longest dry spell for Wall Street on record, which is causing outright panic among the asset manager community. And contrary to misguided reports elsewhere in the media, ETF outflows have followed suit, with total outflows from the ETF/ETN sector hitting $11 billion in the month of August.

NSX.com reports:

August 2010 net cash outflows from all ETFs/ETNs totaled approximately $1.9 billion, with year-to-date net cash inflows totaling $47.6 billion. Total Global/Int’l Equities led all product categories with over $4.5 billion in net cash inflows. Total U.S. Equities had net cash outflows of over $10.9 billion for the month of August 2010.

The biggest loser with $6.6 billion in outflows: the SPY. Whether this is an outright redemption driven move, or merely more usage of the ETF as a natural pair-trade hedge utilized by hedge funds, as we have pointed out previously is unknown, and very much irrelevant: what is certain is that outflows are outflows, and absent a pick up in actual underlying stock values, set the stage for ongoing toxic spirals as more unwinds breed yet more unwinds.

The SEC still insists that it does not know what caused the May 6 mini-crash. Please. As I’ve mentioned before, the interacting computer systems will form an emergent system – unpredictable, by definition. Turning the market over to autonomous computer trading systems is what caused the flash crash, and will cause other unknown symptoms in the future. The clock needs to be turned back, this has gone too far. Way too far. But stupid and corrupt bureaucrats have only their own short-sighted personal interests in mind. HFT traders have effectively destroyed the equity market. They need to be eliminated, not just regulated.

I’ve also mentioned the college tuition bubble before. The availability of student loans has allowed colleges to increase their prices at an appalling rate, leaving many students shackled with debt that cannot be discharged, but that they cannot possible repay.

Government subsidies for consumption of cars and housing continue to damage the economy by sending false signals. This piece on the (unintended) consequences of the ignoble “Cash for Clunkers” highlights the problem.

When all is said and done, Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy. Other than that, it was a screaming success.