The most amazing thing about markets to me is that no matter how many previous instances I have, I can never find days that are anywhere near the ones we are currently having. The S&P is moving from x day highs to y day lows with impunity and alacrity and then hanging on the balance scale at the end of day when Zeus decides who will win.

Peter Earle replies:

I remember reading a book several years ago about Roger Bannister and his breaking of the four minute mile in 1954. At the time there were any number of physicians who predicted that the record was physically impossible to break; one predicted that Bannister's heart would explode in accomplishing such a feat.

I was reminded of this in both watching (and hearing) that, once again, in a seemingly inexorable march of highs (and lows), world records were broken throughout the Olympics in Beijing.

It bears mentioning that the events themselves have changed greatly from year to year: not only in the rise of professional Olympians, undistracted from a training (indeed, a living) regimen by employment, formal education or social duties, but as well in the structure of the events themselves. Engineered swimsuits, deeper pools, vacated end lanes, and other such changes in swimming events alone have contributed to the aforementioned increase of extremes.

So too, in the markets: that the year-over-year outdoing of previous records in extremes have as much, if not more, to do with the character, fragmentation and specialization of market venues; the "democratization" of access to various markets, bringing millions of additional opinions and hundreds of billions more dollars in; the rise of electronic, in particular algorithmic trading; better/faster processing speeds in technology; and the like, ad infinitum — than of any intrinsic quality of markets.

Kim Zussman ponders:

Like global warming, it is hard to measure whether the market becomes progressively and durably more efficient, or just temporarily stations in an efficient regime. Presumably the proportion of outperforming trader/investors who persist over long periods must go down if markets get more efficient, but that number ought to be hard to get, in that widespread knowledge could discourage the hopeful machine.

Anatoly Veltman adds:

I'll give you another factoid: TY (10-y Treasury futures) lost 10% of Open Interest on the Fri, Aug 22 drop. We just found out that FV (5-y Treasury futures) gained almost 10% of Open Interest in Tue, Aug 26 slow trade. Any connection to the recent abandonment of 10-y as the benchmark?


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