IT'S WEALTH EXTRACTION, NOT WEALTH CREATION

One of the reasons I enjoy reading Money Morning is that they consistently provide some of the best insight into market developments, before they happen. For instance, for all the talk about computers run amok and "fat fingers" (punching the "b" instead of the "m" in front of "illion"), the real key for understanding last Thursday's market collapse can be found in this article ... from August of last year. Here's the money quote:

High-frequency trading uses the speed of supercomputers to trade faster than a human trader ever could. Human owners of the supercomputers program them to take advantage of information milliseconds faster than other computers, and whole seconds faster than ordinary human traders. This is not a minor development; HFTs now represent about 70% of the trading volume in the U.S. equity market.

In a few words what's happened is that computers have turned our markets - as I point out in my book - into a gambling den focused on wealth extraction rather than wealth creation (this Money Morning article brings us up to date, while this one provides some common sense ideas for dealing with the problem). 

Between the idiots betting on toxic debt instruments, and the leeches trying to suck wealth from the stock market, what we now have is a marketplace dominated by unbridled greed and stupidity, and a get-rich-quick mentality that is not healthy for the American economy.

It's really that simple.

- Mark