Cramer on HFT

Video is cut off — see the full Transcript below

Fri 08 Jul 11 | 06:45 PM ET

all night i’ve been teaching you how to survive rough, even broken markets. i’ve told you about the mistakes you need to avoid making yourself. and i’ve warned you about the powerful forces that big money managers use to push stocks around, like the futures and the ultra etfs of mass destruction. things that can cause the performance of stocks to become rally disconnected from the performance of the underlying companies that theoretically they’re supposed to track. but there’s one more risk you need to know about if you’re going to invest in a dangerous, choppy market. it’s that the life guard is off duty. and when you go swimming in this market, you had better remember that there’s nobody out there making sure the water is safe. the s.e.c., the securities and exchange commission, which should be working to level the playing field in order to protect you, in order to protect the little guy isn’t doing the job. the regulators seem to favor high-frequency traders who turn the portfolio over 11 times in ten seconds over ordinary home gamers like you. they make up about 80% of all trades. this is the market you’re dealing with. what we need is an s.e.c. that protects the unsophisticated from these capitalists. but instead we — well, we got one that’s been captured by the exchanges by the high-frequency traders and at best the most sophisticated nonsense that you and i can’t stand. this is no longer the s.e.c. that chaired the commission. leavitt was one of the greatest chairman because of his mantra, which was to give the little guy a break to level the playing field, to make the market safe for the individual investor because the guy knew how important this market was to your savings. leavitt favored regular retail investor home gamers like you over these big institutions. he knew the big boys didn’t need protection. they’re rich, they’re sophisticated. but under the anything goes bush s.e.c., that all changed. and strangely the obama administration has hardly done anything to roll back the damage. the s.e.c. has approved all kind of innovations that make the market less legitimate, less safe for you, the home gamers, all the changes have made the market faster that allow these machines to ping each other for quick, tiny gains. the etfs of mass destruction allow money managers to evade the rules on the books for 70 years, bring double or triple buying or selling power. how about the repeal of the original uptick rule that we think was a mistake. that was a great regulation, which it protected us from endless short selling, mauling, mauling stocks over. the s.e.c. approved or enacted all of these things to make the market more dangerous and more difficult. more difficult for you to save money for your kids, for you, if you expect the s.e.c. to have your back, think again. if you think the exchanges have any interest in maintaining legitimacy of the stock markets for your purposes, think again. you have to understand, the exchanges aren’t on your side because they want the institutional hedge funds to make lots of money. they’re profitable institutions, that’s what they’re for. they’re fulfilling their mantra to their shareholders. in the old days, they were non-profit. they could police themselves. now they’re for profit public companies and the goal is to make money. nothing wrong with that. but we’re living in a very different investing world than we were a decade ago and the s.e.c. doesn’t seem to have noticed that. until we get someone on the s.e.c. saying all right, that’s it, okay. let’s look at this through the prism of your i.r.a. or 401(k) or 529 plan instead of the prism of giving market manipulators to have double or triple etfs or the right to be able to trade billions of times a second because somebody makes a tenth of a cent. don’t be surprised by any kind of outrage, flash crash, it can happen again. this also means you have to protect yourself from the madoffs of the world who offer too-good-to-be-true performance. maybe examining the minor players instead of the major ones. be sure that you can directly deal with the money managers accountant to get results. that’s what i used to do at my old hedge fund. don’t give money to a money manager where he puts it to work in something without an easily

Print Friendly, PDF & Email

Read this next.

Posted Under