The market treaded water again today as all 1,800 (give or take ~1,795) macro reports were vague enough and relatively inline enough (though absolutely out of line, like the phone number on a Chad Ochocinco cereal box or Fed Reserve Bank of Kansas City President Thomas “T Ho” Hoenig after one too many brandy snifters in the Fed’s conference room that caused him to vivaciously yell for Fed Vice Chair Janet Yellen to “put ‘em on the glass”) to leave investors hoping for better while HFTs pumped out just enough volume to make everything ok.

Before Money McBags gets to the macro news, it is important to share that the SEC has seemingly and finally found the cause of the flash crash and it wasn’t those pesky HFTs who consist of >50% of the market volume and buy and sell every nano-second based on the gap between bollinger bands on the S&P, the lunar tides on the planet of Uranus (as opposed to her anus), and the next digit in Excel’s random number generator, nor was it a fat finger (known to Ellen Degeneres as “heaven”).  No, none of that is the case as after long and detailed analysis that likely involved much tranny porn and many hours studying noted market maker Paul J. Mladjenovic’s opus, the SEC has shunned industry fucking experts like well known HFTer Mark Fisher (who compared the current market structure to the Matrix) and instead is blaming a pissant midwestern do-shit asset manager called Waddell and Reed for igniting the crash by having one of their algorithms too heavily trade E-mini S&P futures while hedging their portfolio.  Huh?  Come again (and if you are Tiffany Selby, Money McBags means it in every homophonic way)?  Money McBags believes this was the driver of the flash crash as much as he believes in the grassy knoll theory, alien life forms, or OJ ever having seriously looked for the real killers (except of course when he looks in the mirror everyday, but whatever).

But ok, let’s presume that somehow this milquetoast asset manager somehow had an algorithm go a bit fucking nutty, but then:

1.  How did it infect the whole market like Nadja Benaissa on a bender or the US government in Guatemala quicker than Ben Bernanke can say “extended period?”  If it was just this one “big trade” by this one do-shit firm’s algo, then how the fuck did it perpetuate faster than bacne or that fucking Justin Beiber kid?

2.  How has WDR not done this before?  Presumably they hedge their portfolio all the fucking time and don’t cause a once in a lifetime (until the next one) ubercrash that had the market dropping faster than Jenna Pressley on pay day?  So why on that day was WDR’s e-mini algo different from all other days?

3.  Why haven’t other, larger asset managers managed to trip up the market like this before?  Are you telling me that Fidelity has never traded 75k contracts or whatever the fucking number was?  Come on, we’re talking about Waddell and fucking Reed here, not T Rowe, or Cap Group, or George Soros’ lefticle.

4.  And most importantly, what the fuck are you going to do to make sure this doesn’t fucking happen again?  Let’s throw away our bullshit detector, suspend our disbelief, and believe that the SEC findings are valid.  Even if that is true, while the flash crash may have been triggered by E-minis, it had to have been perpetuated by HFT’s sniffing out that trade and having their algorithms go more ape shit than Mel Gibson in marriage counseling.  So how the fuck are you going to stop that from happening again?

Money McBags eagerly awaits the entire report and only hopes it is filled with other absurdities like pictures of unicorns humping Alan Greenspan’s stellar reputation (both figments of the imagination) because Money McBags remains whatever is more skeptical than just plain skeptical about the SEC’s findings (and after checking with the judges, both “fucking skeptical” and “rational” are acceptable terms).

In macro news, the President of the Federal Reserve Bank of New York William Dudley told the Society of American Business Editors and Writers (known collectively as “clueless”) that the Fed should get their quantitative ease on and buy more long-term assets to completely devalue the dollar, or as he says “support household net worth, allow more homeowners to refinance, reduce macroeconomic uncertainty and spur business investment,” potato, putaaato.  Also, the ISM was down from 56 to 54.4 (and surprisingly inline with analyst guesses), construction spending was up .4% thanks to delayed stimulus spending on public works projects such as complex drainage systems to ferry away all of the shit economists have been throwing out there, consumer spending rose .4% (as the Commerce Department used the same memo to hardcode both the construction and consumer spend number), auto sales beat guesses, and consumer sentiment dropped to 68.6 but beat analyst guesses of 67 (though it still remains remains at its lowest level in a year and the forward looking consumer expectations dropped to the lowest since March of 2009, but those are just minor details).

Internationally, the market was a flutter this morning with news that China’s PMI rose from 51.7 to 53.8 as the country produced more specialized funnels to help put pee pee in to coke cans everywhere.  Alas, all was not good news as Europe’s PMI fell but that news was shrugged off by European markets where trading is now a function of Katie Price’s bra size (which luckily seems to keep getting bigger) rather than economic fundamentals.

In the market, HPQ was down ~3% after naming SAP’s former CEO Leo Apotheker as their new CEO as apparently investors were not impressed by a guy who had to resign abruptly after 7 months of running his previous company or who said he wants to focus HPQ on software (because apparently making shitty hardware isn’t enough) which is only 3% of their current business.   And NFLX fell again, this time as a result of Susquehanna downgrading them to “negative” because apparently Susquehanna doesn’t understand world domination.

In small cap news, GYMB was up ~20% on a price target rise and a report that they broke a deal to be sold to a PE shop before loudly yelled “no backsies,” while IMAX shot up after announcing Regal Entertainment has agreed to add 25 more IMAX JVs so more people can pay premium prices to see Kelly Brook‘s boobs in 3D on a large screen (which actually doesn’t sound too bad).

As for deeper small cap analysis, Money McBags is drained right now but he still has HSTM on his radar and wants to look in to OPEN which on the surface seems more overpriced than a can of soup.  So he’ll be back next week with more analysis, but in the meantime, don’t forget to tell a friend (especially if this is your friend) about the award winning When Genius Prevailed and don’t forget to follow us on facebook and twitter.  And as always, enjoy the weekend.

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