Huffpost Business

Give The Robots What They Want, And Nobody Gets Hurt: Seven And A Half Things To Know

Posted: Updated:
One of the few remaining humans on the New York Stock Exchange, which is increasingly being taken over by high-speed trading robots.
One of the few remaining humans on the New York Stock Exchange, which is increasingly being taken over by high-speed trading robots.

Thing One: Give The Robots What They Want: See, this is why nobody trusts the stock market any more.

The Securities and Exchange Commission is investigating charges that the New York Stock Exchange, Nasdaq and other major exchanges routinely give special preference to high-speed traders, letting them trade ahead of normal, slow-moving shlubs, report Scott Patterson and Jenny Strasburg of the Wall Street Journal. The report comes a week after the SEC fined NYSE for giving data to some high-speed traders before releasing it to the public. That case involved a mere $5 million fine, but it was apparently just the tip of the robot iceberg.

So what? Who cares? say proponents of high-speed trading. This is the future, and puny humans need to get the hell out of the way. The problem with just letting the robots take over all of our stock trading -- and they now control two-thirds of it, Patterson and Strasburg note -- is that it leaves us increasingly vulnerable to blowups like the Flash Crash, the botched Facebook IPO and the Knight Capital trading debacle. And it erodes public confidence in stock markets, which has fallen to a new low, according to a recent survey by the TABB Group. Meanwhile, investors are pulling money out of stock-market mutual funds steadily, even as the stock market has risen to five-year highs. The robots are getting most of the benefit.

Thing Two: Obama Closes Economy Gap: Global economic sturm und drang (see Things Three through Five below) poses a major threat to President Obama's re-election chances, but lately the economy as a political topic has slowly turned from a huge liability to a potential benefit to his campaign. A new NBC/Wall Street Journal poll finds Obama and his challenger, Mitt Romney, now tied on the question of who would better handle the economy. And people are getting more optimistic about the economy's future, according to the poll, with 42 percent expecting it to get better and 18 percent expecting it to get worse. Obama leads Romney by 5 percentage points among likely voters, 50-45, according to the poll.

Speaking of optimism: Even as Obama took to the Letterman show to mock Romney for his comments that half the country are mooching losers looking for a handout, Romney doubled down on said comments. He declared that this election is all about slashing the size of government and taking it out of the hands of the redistribution-happy Obama. His rhetoric might be firing up some of the Republican base, but it is also turning off those Republicans who still remember that they were responsible for helping get some of that 46 percent of Americans out of paying income taxes. What's more, that 46 percent includes quite a lot of people that Romney is going to need to help him get elected. It is helpful of him, though, to go ahead and openly let them know that he is going to be raising their taxes to help pay for tax cuts for the wealthy.

Thing Three: Even Japan Is Now Turning Into Japan Again: Congratulations, world, all three of the major developed economies are now printing money furiously to buy bonds and stimulate their economies. OK, Europe is not quite doing that yet (see Thing Four), but its printing presses are revving. Meanwhile, the Bank of Japan this morning announced more monetary stimulus of its own, just a week after the U.S. Federal Reserve announced its third round of quantitative easing. The BOJ, which has been fighting deflation since long before it was cool, had already been buying some bonds, but will double its purchases, Reuters notes.

Thing Four: Waiting For Spain: Meanwhile, Europe is having sort of an awkward moment. European Central Bank President Mario Draghi got everybody all exited a while back when he promised the bank would start buying the bonds of Spain and other countries to lower their borrowing costs. But he also said that Spain, et al., would have to ask, pretty please, with sugar on top, for an ECB bailout. And, funny thing, Spain's not asking! It turns out that the mere promise of ECB intervention was enough to temporarily lower Spain's borrowing costs, making a bailout less imperative, but still inevitable. So now everybody's just waiting for that other shoe to drop, the Wall Street Journal writes today, while the grins slowly drain from their faces and markets slowly get worse and worse. Meanwhile, people are pulling their deposits out of banks in Spain and other troubled European nations, Bloomberg writes, further complicating matters.

Thing Five: China Downer: China seems to be having a spot of bother of its own. FedEx, an economic bellwether if ever there was one, yesterday cut its outlook for global economic growth this year and next, and it put the blame on a slowdown in exports from China, the WSJ writes. Of course, FedEx also said that slowdown in exports was due to weakness in European and U.S. economies, so everybody's a little bit to blame. But it works both ways: Reuters points out that the biggest worry for Germany is not economic weakness in Greece, but weakness in China, a key customer of German exports.

Thing Six: Back To School: Bad news for Chicago schoolkids: The teachers' strike is over. The Chicago Teachers Union, after first rejecting a deal with the administration of Mayor Rahm Emanuel, decided after a second vote to accept the deal and end their seven-day strike. Both sides gave up significant ground, the WSJ writes, but ending the highly charged struggle will be a relief to Chicago parents, and to President Obama, who needs a happy union to help him in the election.

Thing Seven: No Mortgage For You! Mortgage rates are at record lows, and houses in many parts of the country are as cheap as they've been in years, but banks aren't making it easy for potential home buyers to take advantage. Mortgage lending has fallen to a 16-year low as standards have tightened, the WSJ writes. And the Washington Post reminds us that banks are pocketing the difference between Fed-induced low rates on mortgage-backed securities and the still relatively high rates at which they give us mortgages.

Thing Seven And One Half: Take My Wife, Please: A professor at Harvard Divinity School says she might have compelling evidence that Jesus was possibly married. It comes in the form of a piece of papyrus, written in Coptic, dating to the 4th Century A.D., that says "Jesus said to them, 'My wife...'. Maybe he was about to make a very early Borat joke? Scholars are undecided.

Now Arriving By Email: If you'd like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. OR, if you are logged into a HuffPost account, you could simply click on this link and tick the box labeled "7.5 Things" (and any other kind of news alert you'd like to get). Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing.

Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Housing Starts And Building Permits for August

10:00 a.m. ET: Existing Home Sales for August

Corporate Earnings:

Before Market Open:

AutoZone
General Mills

After Market Close:

Adobe Systems
Bed Bath & Beyond

Heard On The Tweets:

@SallieKrawcheck: Most individual investors think S&P down over past 3 years: post-traumatic stress http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20120918/BLOG03/120919934&NoCache=1

@TMFHousel: More charts showing who pays what in taxes have been made in the last 24 hours than in the previous decade combined.

@ReformedBroker: I support a tax on people who talk about taxes all day.

@conorsen: 14-straight extra inning wins for the Orioles. This team will infuriate stat geeks for decades.

@robdelaney: The smell of tomato plants in my garden reminds me of my grandmother. My grandmother was a bag of tomatoes.

You can follow me on Twitter, too: @markgongloff

Around the Web

Speed trading in Senate spotlight

Cramer Slams High-Speed Trading

For Superfast Stock Traders, a Way to Jump Ahead in Line

Fed warns high-frequency trading firms

Chicago Fed Study Blasts the Lid Off of High Frequency Trading

CFTC searching for cause of rapid oil price plunge

ECB's Nowotny calls for high-frequency trade ban

Britain opposes MEPs seeking ban on high-frequency trading

Searching for a Speed Limit in High-Frequency Trading

US exchanges weigh "speed bumps" for trading firms