My 2 cents on the market

The use of Market Capitalization in Public Equity markets as a measure of growth is idiotic. Very often valuations have had almost nothing to do with things that add to intrinsic value like actual revenue growth and future earnings and share prices are dominated by popular sentiment leading to volatility. In this era of convoluted accounting where businesses are allowed to keep separate books, one public and one for internal controls, unwitting investors are duped into a sense of false security. In turn, bullish sentiment prevails and we have escalating valuations as investors see their on paper worth increasing and add to the fervor. With the aggregation and quick deployment of liquidity through the use of Algorithmic execution and Automated trading, prop trading firms are able to increase volatility and push up prices. The retail investor who must rely on poor sell side research are lambs walking into a slaughter. In periods of crisis, when public sentiment turns, the opposite effect occurs where stocks are trading well below their intrinsic value. Much of the volatility is caused by trading firms sending out “false” data that is then acted upon by the legion of Neural Networks and CEP systems that must abide by preset rules and further cloud what happens. My belief is that with enough desire, one can create an algorithm that applies to any situation except for the one that eventually comes – market irrationality