Swimming in the Dark

First Solar, Inc. (FSLR) is down today so it turns out waiting a day to buy was a good move. I made my purchase early this morning on WallStreetSurvivor.com. FSLR is down 4.52 (1.74%) which is almost as much as it was up yesterday. I’m watching the price and already its gone up from what I bought at! Watching the price can be a very addicting habit that I do not recommend. I’m like a moth to the light, attracted to the green glow of numbers. Must. Stop. Now.

Checking my stats on PredictWallStreet.com, I’m still a glowing four star-er, but my actual accuracy percentage went down about 3%. Yesterdays predictions show a lot of giant red X’s. I predicted up for 5 of the 7 stocks I predicted on yesterday. All this red is reminding me that it may be time for the bulls to leave – it’s a bears world now. I love all these animal references in Wall Street. It really spices things up. The opportunity for puns and metaphors is boundless. Likening investors to the instincts of two brutal and merciless animals seems quite appropriate.

My new goal for my portfolio (and blog) is to find new stocks and not just the usual cult favorites like Apple and Google. I’m doing too much piggybacking and I’d rather be blazing my own trail here. First Solar, Inc. was the beginning of this path and I hope to research more companies and hopefully diversify my portfolio as its been looking pretty wimpy lately.

I recently came across Dark pools- trading networks that have at large remained under the radar and out of the public eye. The phrase itself conjures up magical Harry Potter-esque images but these Dark pools are not some magical puddle in the middle of a forest. Dark pools are a sort of underground trading network between private banks. The banks stand as platforms for trading away from public exchanges and are used by hedge funds and institutionalist’s to buy and sell large blocks of shares without ever having to show there face. Through this anonymity, the risk of moving the public price of the stock is evaded by preventing piggybacking of other investors. Tabb Group consulting says dark pools account for 12 per cent of US daily stock trading volume and rising.

This immediately alarms me, without even being a serious investor or having extensive insight into what moves the market. The first of red flags raised is regulation. The SEC has no governance over Dark pools. The second red flag raised is information (withheld). If significant amounts of trading is happening in the dark, public markets cannot accurately reflect true investor sentiment and price quotes. Investors should be guaranteed information publicly as they have been for years on regular exchanges. Prices should reflect supply/demand and the general confidence in a stock. Excluding activity only means these prices are not indicative of the fullest information available aka price manipulation.

It’s surprising to me that more people haven’t begun to question this type of trading. Its surprising to me that this has even been allowed. Wall Street is an elitist club and Dark Pools are there new hang out place. The exclusivity of investing is innate to the market, but Dark pools seems to be taking it to another level. I think its only a matter of time before some light is shed on this issue.