Tuesday, 23 February 2016

Slow Turn

Same again tomorrow.
One thing I like to tell myself during bear markets:

On any given trading day, three quarters of a percent of the U.S. market turns over.

This figure varies by up to a third a year. Other markets, like Australia, report lower volumes (55%-85% p.a.). Few countries post higher.

From the sound and fury of that 0.75% comes daily stock prices, index numbers, portfolio valuations, and my sense of self-worth.

That's context to the so-called 'intelligence' and 'efficiency' of the market. My daddy always said of investing, "Don't follow the herd," but in fact rumours of its movements are greatly exaggerated.

Assuming algorithmic trading comprises 60% in market cap as well as volume, human trades would sit around 0.3% daily turnover.

Assuming separation between humans and computers, and distributions of capitalisation matching volume, 0.15% of investors are selling out.

So headlines of "Blood on the Trading Floor": 0.15%.

"Bearish Investors flee to Cash": 0.15%.

Of course, there's a buy side to every sell side, so 0.15% of investors are also buying in.

"Bulls Rally for a Piece of the Action": 0.15%.

99.25% of the herd sat perfectly still today.

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