> In addition, I wonder by what criteria one would evaluate how "properly" the markets are functioning. Who decides what is proper? For example, based on the bu

> In addition, I wonder by what criteria one would evaluate how "properly" the markets are functioning. Who decides what is proper? For example, based on the business fundamentals it seems ludicrous to me that Apple would have a lower P/E ratio than GM--but it currently does. Couple of things: 1. Reference to Apple PE ratio is likely a market driven phenomenon that has occurred before to the other technology company that grew very large very fast (MSFT) ie. sometime around 2000, most mutual/institutional investment funds literally owned more of MSFT (and now they likely do of AAPL) than they were legally allowed to own. At this cap, given that these buyers are the largest "long term" drivers of a stock's directionality, the stock must change direction. The second part of this effect is that now a bunch of them are underwater, and the psychology of holding a bad trade will affect whether they decide to book the loss (likely they wont for a while). TLDR: Apple is simply too large, relative to the tech sector, for its stock price growth to match its business fundamentals. 2. Re: markets functioning properly - we should remember that the "markets" are literally a construct. For all the logical arguments made about how HFT reduce the bid/offer spreads, I'm philosophically opposed to them. Mark Cuban has articulated why better than I can: http://blogmaverick.com/2010/05/09/what-business-is-wall-street-in/ http://blogmaverick.com/2010/05/09/what-business-is-wall-str... In a nutshell, if we constructed the markets fundamentally to make it easier for businesses in the real economy to raise and price capital, and HFT starts to account for a multiple of that, then the purpose of the "market" construct has been hijacked. This leads to all sorts of gnarly questions about how to decide what the right volume is etc, so I recognize its'a thorny area - just pointing out that HFT is not so benign, and oftentime comes with consequences that far outweigh the benefit, and happen too often to ignore.