3c hapter - Index of

208 Locavesting
at least $490,000 to the 2010 congressional elections—about fi ve
times the amount they gave in 2006. 15 )
Meanwhile, mini–fl ash crashes keep occurring, making market
watchers nervous that another big one could happen any
time. “It’s like seeing cracks in a dam,” James J. Angel, a professor
at the McDonough School of Business at Georgetown University,
told the Times. “One day, I don’t know when, there will be another
earthquake.”
Or as Andrew W. Lo, director of the Massachusetts Institute
of Technology’s Laboratory for Financial Engineering put it: “The
U.S. equities markets have become the Wild, Wild West.” 16
No wonder investors are skittish. They have been fl eeing stocks
in droves for the relative safety of bonds and fi xed income. In the
wake of the fl ash crash, investors pulled more than $19 billion
from U.S. stock funds in May 2010 alone. 17 And they were poised
to plow $300 billion into bond funds in 2010, an amount second
only to the previous year’s $350 billion infusion. That’s quite
a statement, considering that bonds are barely keeping pace with
even ultralow infl ation. In fact, some investors have purchased
bonds at negative face value.
The big picture is not pretty. Citing two decades worth of
advances, including electronic trading, dark pools, fl ash orders,
new trading venues, unregulated derivatives, and high- frequency
trading, Thomas Peterffy, an industry veteran and founder of
Interactive Brokers Group, told a group assembled in Paris in
October for a World Federation of Exchanges conference: “What
we’ve got today is a complete mess.” 18
That is a shame. In its original form and intent—as a mechanism
for marshaling passive savings for productive and profi table
economic growth—the concept of the stock market is something
of a marvel. The markets fi nanced the growth of the nation, supplying
the capital that allowed key enterprises from railroads to
Silicon Valley startups to grow and prosper. Investors, too, were well
served by the markets. “When people started meeting under the
buttonwood tree to exchange shares, it was pretty cool, it was working.
But that is not our markets today,” says Katovich, the attorney.
“In so many different ways, we’re letting this market control