The Farmer’s Almanac for stocks is wrong again.  The September swoon came early this year with the Dow Jones Industrial Average (DJIA) down - 4.34% for the month of August and down - 4.0% year to date through August 31.  And the faithful fall rally has come early as well, with the DJIA up a fabulous 5 %

High Frequency Trading – Good or Bad?

Computer-generated buying and selling of stocks, bonds, and derivatives, using sophisticated programming and ultra-high speed order entry and execution, or called high frequency trading.  now accounts for roughly 80% of all trading on the New York Stock Exchange, according to experts.  This can make for volatile markets.  Upward volatility, of course, is better than downward volatility.

High frequency trading is done by a number of investment firms and is based on statistical analysis of trading activity, done at incredible speed throughout the trading day, with orders analyzed and executed automatically in microseconds, as instructed by “black box” trading algorithms.  The “black box” requires no human interaction, although it can be turned off at any time, and the algorithms may be modified from day to day by the “quants” of the trading firm to adapt to changing market conditions.

Is this good or bad, and how does the individual investor deal with this change in market dynamics? One money manager has achieved excellent returns with just 36% of the risk of the S & P 500. ⁽¹⁾ The OKLO Core Investment Program uses sophisticated mathematical modeling to:

1. PREDICT VOLATILITY using quantitative analysis of securities markets and their derivatives;
2. MINIMIZE DOWNSIDE RISK by reducing exposure to volatile assets;
3. DIVERSIFY and actively allocate to obtain the ideal moderated risk portfolio.

A side effect of risk aversion is above average performance.  Never a home run, never a strike out, just consistent above average performance with below average risk.  Financial system “shocks” cannot be avoided should they occur, but OKLO's management system is designed to weather these shocks successfully, and I have clients and accounts which have done so.

More information about OKLO Financial and their track record can be viewed at www.oklo-financial.com.   OKLO Financial is a Registered Investment Advisor offering management services to investors through Foothill Securities, Inc.  If would like to learn more about OKLO, please let me know.

ATimely Opportunity

For many years I have counseled clients about the seasonal nature of the stock market, how the “best six months”, November through April, have provided 99% of the stock markets returns since 1950. ⁽²⁾ This year I am saying, don’t wait.  I see tremendous opportunity starting now for possible excellent results over the next six months, one year, and longer, by investing in a diversified portfolio suitable for your risk tolerance and time frame.  Now is the time.

As always, I remain available to discuss with you your individual goals, needs and circumstances.  I appreciate your referrals and look forward to speaking with you soon.  Please call me anytime if you have questions or concerns about your investments.

Yours truly,

Paul Drescher, CFP®
Foothill Securities, Inc.

(1) See risk and return data at www.oklo-financial.com.

(2) The Stock Traders’s Alamanac 2010, John Wiley & Sons.