"The recent piece from 60 Minutes on High Frequency Trading was indeed frightening. Doesn't it make a nonsense of everything that you and David, and our whole community of Empowerment Through Knowledge, stand for? The fact that only the "quants" know what is really going on? That it doesn't matter what the company makes, whether it makes a profit, whether the CEO is a crook, nothing matters except "the math". I think I'm going to give up - or just maybe, put it all into gold."

And

"Thanks for the video on High Frequency Trading. As a subscriber my concern is not so much short time period trading such as HFC but if similar computer systems are also being used for longer term sell decisions especially if firms are using the same mathematical methodology which I would expect to be quite likely. The thought of all those systems reacting to the same information at the same time is really worrying. There is a huge danger as these computer systems become more widely used and accepted. I would be interested in fellow subscribers experience and opinion."

Eoin Treacy's view Thank you both for these interesting emails. Program trading is not in and of itself a problem in my opinion. A computer making trading decision that might otherwise have been made by a fallible human has an attractive quality for some. That is of course until they all act alike and influence each other just as humans do. Crowd behaviour is not something that can be excised from the financial markets because as David has said for years "financial markets are manmade resources for us to harvest when the timing is right".

High Frequency trading is somewhat different because it does not seek to invest. These logarithms skim over thousands of prices, pinging stocks or commodities and attempting to exploit short-term inconsistencies and sometimes to create the illusion of a buyer or seller. When they all act together they still resemble a horde but the liberties afforded them set them apart from regular market participants. This makes the issue primarily one of regulation.

In an industry where fractions of a second can make the difference between a profit and loss, co-location offers an unfair advantage to those capable of exploiting such data feeds. The information that such privileged traders receive from the exchanges is also materially more detailed than what is available to regular traders. Aside from dubious trading practices such as quote stuffing and intentionally contributing to slippage, the above two issues are completely contrary to the equality of opportunity upon which investors base their faith in the efficacy of financial markets. It is imperative that these two issues are addressed by future regulation if investor confidence is to begin to be restored.

If the flash crash on May 6th taught us anything it is that computers moving en masse exhibit the same extremes of emotions as crowds of people. I see no issue with continuing to apply Behavioural Technical Analysis to markets in which high frequency traders are active. However, financial market governance remains of concern. The preferential treatment given to high frequency traders strikes at the fundamental basis of financial markets. The unregulated credit default swap market and naked short selling are also issues that will need to be addressed at some point. A mantra at Fullermoney is that governance is everything and this is no less true of the USA.

As global investors, we need to make a decision about whether the risk of participating in such markets is justified by the rewards on offer. Right now, the USA is lagging in the regulatory environment needed to foster investor confidence. Asian and Latin American countries are doing a better job in this regard.

Gold continues to benefit from a loss of confidence in the regulatory framework as well as the competitive devaluation of currencies just about every government is engaged in. The metal hit another new high today and a sustained move below last week's low at $1325 would be required to question the consistency of the impressive 10-week advance.

This article from Mineweb on gold may also be of interest.