Kass: Kill The Quants

Doug Kass looks at the recent volatility in the market (via the Big Picture):

Here we go again.

Those quantitative, high-frequency traders that utilize computer programs to focus on price-momentum-based trading "strategies" and the uber leveraged ETFs have retaken control of the wheel.

Neither strategies nor vehicles have any redeeming social and/or economic value. Indeed, one can argue that their influence on the market's volatility is contributing to the negative feedback loop that is threatening our domestic economy's growth trajectory.

They were back in force on Tuesday afternoon, when the DJIA advanced sharply from being up by about 150 points at midafternoon to closing with a gain of over 300 points by day's-end.

Computers don't sleep, don't get tired, don't care about politics or fundamentals and don't vacation in late August in the Hamptons or on the Jersey Shore -- they just wreak havoc on our marketplace by amplifying moves on the downside and on the upside (as they did in the last hour of trading yesterday).

Over the last two hours of trading yesterday, I polled numerous sell-side institutional desks and a number of sizeable high-net-worth brokers, and none of them had any meaningful individual buy orders during the late afternoon that could account for the sharp market advance. By contrast, my contacts in the high-frequency-trading community were on trading overload after 2:00 p.m. EDT, as the quants dominated the market's trading activity (almost all on the "buy side").

I think that each of these massive moves on the markets in the late afternoon is program trading.  Kass estimates that 3/4 of trading currently is high-frequency traders.  It isn't investing, it's playing in a rigged game.  These mathematicians should get some real jobs that contribute positively to society, not find ways to steal from normal folks.