Yesterday, a "merger" was announced between the fabled New York Stock Exchange (NYSE) and the mighty stock exchange of Germany or the Deutsche Borse. With the majority of board seats going to the Germans, it is more like an acquisition of a American institution. At first, I was simply sad, as an American, to see the grand old NYSE owned from abroad.
However, now I'm more worried than sad. During the legislative battle over financial re-regulation last year, I was hoping to see more effective regulation of derivatives, that murky world where astronomical bets are made that nobody knows about. Unfortunately, the tiny additional regulation of these dangerous investment vehicles was testimony to the enormous lobbying power of derivatives dealers and exhanges, including the New York Stock Exchange.
The combined NYSE and Deutsche Borse will be the largest derivative dealer on the planet. If we couldn't get adequate regulation of this risk when it was based in the U.S., we have no chance now. The danger is both bigger and harder to regulate!
In the past, I've watched the relationship between 50-day and 200-day moving averages as a primary technical indicator that a major correction was possible. Given my increased concern following this merger, I will add a LIBOR "trip-wire" as well. This will take awhile to devise.
If I was invited to this wedding, I'd probaby bring a shotgun to STOP the marriage/acquisition!
