After Friday's mega jump in the US stock market, the expression "irrational exuberance" just doesn't cut it anymore. Even if last week's unemployment number should be an indicator of recovery for the US economy - which is doubtful - it is not a valid argument for sending the Nasdaq index to a 11 year high. This behavior has more in common with bipolar disorders than anything else. Europe's regulators now want to stress test the stock markets and the electronic trading platforms in the same way they've (relatively) successfully stress tested European banks in the past. Well, let me remind you that stress, in general terms, is regarded only as a symptom of something else.
"Here it is; the first ever Global Markets Mental Health Test!"
But let me point out that there are per definition two kinds of stress - the biological kind and the mechanical kind. I'm not 100% sure, but I think the famous bank stress tests is of the mechanical type. So it may be quite possible that the authorities are missing vital facts about the stressed-out banks by disregarding the human factor.
As reported by Tim Cave from Financial News.Com, a number of industry practitioners have called on European regulators to force exchanges and alternative trading platforms to adopt stress-tests, in a bid to improve their resilience to large-scale shocks, volatility and the rise of high-frequency trading.
While the concept of stress tests has become common in the banking sector after the financial crisis, and measures are also being implemented to simulate the resilience of clearing houses in times of stress, no similar measures have been suggested for trading venues.
Speaking at a high-frequency trading conference in Paris yesterday, Carlo Comporti, a director at regulatory consultancy Promontory Financial Groupand former acting secretary-general of the European Securities and Markets Authority, said that needed to change, fiercefinance.com reports.
However, both mechanical and biological stress have one thing in common; its a symptom that something isn't right.
The actual problem is usually far more difficult to identify.
But with the recent market volatility in mind - here's the clinical cognitive symptoms of stress:
- Memory problems
- Inability to concentrate
- Poor judgment
- Pessimistic approach or thoughts
- Anxious or racing thoughts
- Constant worrying
To me, that pretty much sums up the market sentiment at the moment.
And the similarities between biological and mechanical stress are fascinating.
"Biology primarily attempts to explain major concepts of stress in a stimulus-response manner, much like a how a psychobiological sensory system operates."
A Market Mental Health Test
It's also common knowledge that stress can be a symptom of a mental disease or disorder, as well as long-term stress is known to cause mental problems.
However, to my knowledge there has never been a mental health test for the financial markets (and I'm not sure if there ever will be).
So, I have put together some free online tools that might be helpful in determine what kind of stress the stock market (and the banks) is struggling with, and give us a clue to what is the real and underlying problems.
Here it is; the first ever Global Markets Mental Health Test!
Do you have a mental disorder?
Which mental disorder do you have?
Are you schizophrenic?
Do you have a borderline personality?
How depressed are you?
How manic are you?
How well do you manage your anger?
Do you have a alcohol or drug problem?
Are you addicted to cybersex?
Are you a workaholic?
Do you have obsessive-compulsive disorder?
Are you a retard?