The New York Stock Exchange's almost four-hour shutdown Wednesday, apparently thanks to a software upgrade problem, generated plenty of headlines. But in practical terms, it doesn't mean much, says financial author William Cohan.
"The NYSE long ago lost its dominance over the stock market, with the final blow coming in March 2006 when the veritable New York Stock Exchange, then owned by its 1,366 seat holders, completed its merger with Archipelago Holdings, an electronic-trading company,"
he writes in The New York Times.
The exchange turned into just another automated trading hub. Note that other stock exchanges easily absorbed trading volume when the NYSE went down Wednesday.
"Sure men — and the very occasional woman — seem to be scurrying around from post to post in their colorful jackets acting as if they have important things to do. But this is just an elaborate charade," Cohan says.
"The floor of the NYSE is little more than an elaborate backdrop for the cable-TV business programs at CNBC and Fox."
Elsewhere on the equity front, investment expert Jimmy Atkinson offers 10 reasons why the stock market may be overvalued in a column on
ETF Reference. Here are four of them.
- Warren Buffett has cited the ratio of total market capitalization to GDP as "probably the best single measure of where valuations stand at any given moment." That ratio is considered fairly valued between 75 and 90 percent. A reading above 115 percent is considered significantly overvalued. The ratio now? 124 percent. Uh oh.
- Robert Shiller's cyclically-adjusted price-earnings ratio, which includes 10 years of earnings, stands at 26.6 for the S&P 500 index. Recent levels have been topped only by the pre-crash periods of 1929, 1999-2000 and 2007.
- The appreciation of the S&P 500 index has outpaced its sales growth, generally by a large amount, in 19 of the last 25 quarters.
- The S&P 500 price-to-sales ratio reached a 14 year high at the end of 2014.
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