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Former Goldman Sachs vice chairman Robert Steven Kaplan weighs in on Knight Capital's erroneous trades and market confidence.
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And rob what do you think all of us.
It's it's bizarre.
You know this is what -- does for a living.
Sort of make a mistake like this and have this -- loss this is their core competence this is what they do so it's it's mystifying.
And we've seen enough of these computer mistakes now in the last year.
Since the flash crash that it makes -- wonder.
The of the impact our computer trading on the market that this this one is.
Bizarre and it's going to be hard for night because this is their distinctive competence this is what they do.
And if they could make a mistake like this the cost this much money.
It casts doubt on that on their entire franchising capability Robert.
I want you to convince me if I'm sitting atomic -- investor you've had more than 300 billion dollars.
Leaving just US stock mutual funds in the last two years.
People whether it's market volatility whether it is trading glitches whether its losses they have lost all confidence in this market.
Give me some reasons why people would even think about committing money back to the stock market.
Well but the main advice that given investors you ought to have a three to five year horizon.
Pick a portfolio of stocks and an asset allocation generally that you can live -- I a one day trauma like this street in the flash crash.
Is not going to be relevant to you.
If you've got that kind of perspective and that's the way individual should be investing I never you can tell me that but you know what it is not resonating with people people will commit money to treasuries.
When it looks absurdly stupid but they don't care because at least they know they won't lose money.
Well the typical person in this country does have an asset allocation that make sense here's the problem.
Household.
Net worth.
And and household debt took to assets is is.
Is a problem households are still highly leveraged they don't have a lot of investor -- capital.
And a lot these mutual -- redemptions have been looking out over the last year some of it is to get on the market at some -- just to pay bills right so I think investors understand asset allocation but they got bigger problems which is that gotta pay the bills parent.
That's a pretty good -- point let me get -- call -- for quick comment on all -- come back to -- get his his thoughts and kind of a more macro.
I've seen I -- Europe is a big deal and what -- drive he did or did not do and how aggressive they were or were not this morning but job market confidence they -- hits on what is the key point here last couple days.
That's absolutely right knew what you see here and by the way Tom Joyce has been out and making comments and he himself actually noted that.
And his quotes -- were not happy that we added.
The lack of market confidence sending this comes on the heels of the FaceBook to -- all we all remember the flash crash how about fast trying to get their own.
IPO out so all this -- that the -- activity.
And obviously tech -- technology glitches.
Make -- investor at home very jittery as far as Knight capital.
When you look at -- this is a 1213 dollars stock and obviously been dwindling throughout the day yesterday.
A couple of things to note number one -- said late in the day yesterday for the stock was and they weren't that accompanied weren't gonna make it through the end of the week they're gonna have to do something dramatic.
And we see them doing that now.
Secondly they're noting that some of their clients were returning by the end of the day Wednesday I can tell you that a lot of traders on Wall Street.
Didn't want anything to do the night there there break even going go through them at all they don't want to touch it it's obviously painted at this point so that's one of the main reasons why also that they need to do this.
Okay so our confidence is shaken by that here in the US thank you to call and then.
You throw in rob what what Europe what happened in Europe this morning by the fact that may be more didn't happen in terms of buying you Spanish -- Italian bonds or whatever.
People might -- they're expecting to happen so.
The big picture view that you have of the market is one.
Well this is this is one small not even an act.
In a long running -- which is about deleveraging in the western world.
And Mario Draghi.
Can do things to put band aids.
On this deleveraging but there's no substitute.
For Germany.
And France and Italy and Spain getting together and agreeing to.
Got integrated governance in return for more help from Germany and all Mario Draghi did last week can say he'll do whatever -- needs to do.
It he's got limited tools what he's trying to do was buy time for the fiscal policy makers to get their act together right but we've got the same problem by the way here in the united state level that got to -- leverage what.
I -- going to be my question is that you have Americans poured money into treasuries and you know wind -- that happened S.
If you it were already we're both in the same shape what western world.
Needs to be leverage we've never been through it and our lifetime we don't know how to do it.
We've learned that austerity alone won't do it.
You need some austerity need some stimulus.
And this is gonna take five to ten years but you need an easy Central Bank ECB and the Fed need to be easy.
To buy time.
But the fiscal policy makers here in in Europe need to do their jobs and that's what -- he is hoping they will do.
-- is great to see -- Stephen Kaplan has always also thanks to Nicole Hadley -- and Charlie Gasparino.
-- a lot going on today and just one other note on the.
