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Flash Boys

For an Investor, the best Outcome is Income!

As a contrarian I should not have been surprised that today's market acted opposite from what I thought after 60 Minutes excellent coverage of Michael Lewis's "Flash Buys" interview (and book) on the "rigging" of the stock market by HFTs (High Frequency Traders)! It is even being echoed by headlines and segments on CNBC and the WSJournal. Lewis tells people to avoid the stock market, but does not discern the difference between day trading and investing, which is only affected minimally.

Although many people are addressing this problem, it doesn't really affect long term investors very much, or even swing/position traders; but hopefully, as with the Bitcoin time lag, regulators can fix this inequity. Despite Lewis's warning to "avoid" stocks, a recent followup in Barron's of Jeremy Siegel's study of 142 years of stocks show that the 8.8% annual return of stocks beats every other asset class - real estate, bonds, gold, by a long shot, over time.

For this reason, it seems prudent for a Passive investor (one with interests elsewhere) to just buy an low-fee Index Fund (Vanguard, Schwab), or even an Index ETF - Exchange Traded Fund, such as the SPY, and not try to outsmart the big guys in the room picking stocks and sectors.

Although it is a fool's errand to try and predict the stock market, especially short term, history does rhyme, if not repeat. In the above 140-year study, both the 5- and 10- year cycle following a Bear 10-year (2000-2010) are marginally up; and years following a huge year such as 2013 are also positive - that said, my favorite Presidential (4-year) cycle has for over 50 years shown a minimum 9% decline during the mid-election (this one) year. Hedges make good neighbors and investors.

So far, with all the Volatility we've seen, the market is basically FLAT for the YTD - SPX up less than 1%, other indices down slightly. BTW, the long term Bond - TLT is the ETF- is up 8% YTD!!

With no meetups this coming week, here is the Sentiment report from the previous week:

From the Commitment of Traders, both large and small traders are now long; but shorting remains high on Gold; money flows were flat, but the monthly ETF inflows all increased - equity, Int'l, and Bonds.