Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market into a Casino

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Today’s equity markets are a high-speed rigged casino: what investors must know, and what investors and regulators can do about it.

• The Flash Crash of May 2010: how it was caused by short-term traders and disastrous regulatory changes--and why it’s just a preview of disasters to come.
• Crucial information and practical action plans for stock investors who’ve become legitimately terrified of the markets.
• A clear, compelling story, packed with original reporting by one of Washington’s top correspondents.

Description

In just the past few years, the equity markets have been transformed into a high-speed casino that’s a pure crapshoot: a white-knuckle rollercoaster ride that has left individual investors legitimately terrified of equities. The Flash Crash of May 6, 2010–when the DJIA plummeted 734 points in 17 minutes, and dozens of top companies traded as low as zero–was just a harbinger of disasters to come. In Crap Shoot Investing, Barron’s Washington Editor Jim McTague reveals the twin causes of this massive transformation: high-frequency traders using mathematical hocus pocus, and blundering regulators whose attempts to promote long-term investment have massively backfired. McTague takes you through the Flash Crash moment by moment, revealing what happened and how it happened. Next, he burrows “under the volcano” to uncover the titanic, uncontrolled forces now at work in equity markets, showing investors exactly what they’re jumping into when they buy and sell stock today. You’ll learn how new exchanges, desperate for cash, are attracting high-frequency traders at everyone else’s expense… how “dark pools” of hidden trades are tilting the playing field…how even small investors are promoting dangerous volatility. McTague explains why regulators continue to ignore the big picture as the markets accelerate towards chaos. Last but not least, he presents a rational strategy for investors who need to get ahead in markets that have become riskier than most casinos.

"A valuable read for anyone considering investing in equity markets."

Reprinted with permission from CHOICE http://www.cro2.org, copyright by the American Library Association.

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Table of Contents

Acknowledgments     vii

About the Author     viii

Introduction     1

Chapter 1: Strange Encounters     11

Chapter 2: Not Your Grandma’s Market     27

Chapter 3: Screaming Headlines     39

Chapter 4: Accidental Senator     47

Chapter 5: Flash Crash     61

Chapter 6: Shock and Awe     81

Chapter 7: Poster Child     85

Chapter 8: Accident Investigation     91

Chapter 9: The Trouble with Mary–and Gary     97

Chapter 10: The Road to Ruin     105

Chapter 11: Busted!      113

Chapter 12: Precursor     125

Chapter 13: Birth of High-Frequency Trading     135

Chapter 14: Evil Geniuses?      149

Chapter 15: Dirty Rotten Scoundrels     165

Chapter 16: Dark Pools     171

Chapter 17: Volatility Villains     175

Chapter 18: The Investigation     183

Chapter 19: The Vigilantes     193

Chapter 20: The Tide Turns     199

Chapter 21: Letter Bomb     207

Chapter 22: Scapegoat     213

Chapter 23: The Real Culprits     221

Chapter 24: Investing in a Shark-Infested Market     229

Index     237

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