Two weeks ago, the K-Call assessed one of Wall Street's biggest problems in 2010. Light volume is a symptomof a poor economy, as well as a dearth of investor confidence.
E Trade
I discussed how liquidity directly impacts portfolio manager behavior. When it is hard to unload stocks, the desire to buy wanes.
Unfortunately, the numbers I saw today coupled with Tuesday's special guest's revelations and reactions on The Strategy Session do not instill confidence.
First, the figures. I gauge Charles Schwab and E*Trade as two of the most telling retail brokers in evaluating trader mood. Well, the numbers are downright gloomy.
Yesterday, Charles Schwab, whose clients hold over $150 billion in money funds, reported that daily average trading in this past August was down 16 percent from the prior year's summer month.
E*Trade? Try doubling that decrease and then reduce the numbers some more. E*Trade's August saw a decline of 36 percent from the previous year's.
I don't know if we can recover from these numbers before 2010 comes to a close, and after listening to Goldman Sachs' Steve Barry on our show Tuesday, I am almost certain of it.
As CIO of Golden Sachs' Asset Management, Barry is on top of the volume issue and he remarked that going away from the traditional exchanges is becoming more common than ever. My question is, if trading goes into the dark (as in pools of liquidity), what shows as lit and how much can portfolio managers trust the movement of their positions?
Barry did not give any indication that we will see an upswing these fall months, especially when we pointed out that only 112 securities accounted for over half the August volume. The proliferation of ETF (exchange-traded funds) usage is clearly hurting the daily flow of a multitude of names.
Bottom line: if we don't see volume pick up, industry job losses will be the direct result as less volume equals less back office demand to clear the respective trades. Financial service industry jobs will be in severe jeopardy.
These August numbers cannot be explained by the normal summer-related excuse. The same month generated such a substantial amount more in 2009. I fear what the comparison numbers might be for September, October, and November.
It could make for a not-so-jolly holiday season.
DISCLOSURE:
Gary Kaminsky does not hold any equity positions.
DISCLAIMER:
The content of this blog is published in the United States of America and persons who access it agree to do so in accordance with applicable U.S. law.
All opinions expressed in this blog are solely the opinions of Gary Kaminsky and do not reflect the opinions of CNBC, NBC UNIVERSAL or their parent company or affiliates, and may have been previously disseminated on television, radio, internet or another medium. You should not treat any opinion expressed by Mr. Kaminsky as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Mr. Kaminsky’s opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Kaminsky, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Mr. Kaminsky’s statements and opinions are subject to change without notice. No part of Mr. Kaminsky’s compensation from CNBC is related to the specific opinions he expresses.
Past performance is not indicative of future results. Neither Mr. Kaminsky nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.