Stock Market Sell-Off Might Stem From Trader's Fat Finger 643
s122604 points out a CNBC story according to which "the catalyst for today's extraordinary price swing (at one point the Dow lost almost 9 percent in less than an hour) may have been because a trader entered a 'B' for billions instead of an 'M' for millions on a trade of Procter and Gamble: 'According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble, a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff).' Unbelievable there are no safeguards to protect against this."
SELL! (Score:5, Insightful)
I suspect that I speak for everyone with their retirement money and/or savings invested in the markets when I say: HO-LY SHIT.
Frankly, I was more comfortable with the concept that the DOW could drop 1000 points in one afternoon due to some obscure overseas debt concerns than I am the idea that the DOW can drop 1000 points in one afternoon because of a fucking typo. I realize that markets and the economy in general are collective illusions to begin with and all that, but do we really need to be reminded quite so forcefully?
Might be time to invest my money in something a little more solid, like canned food and ammunition.
Re:SELL! (Score:1, Insightful)
If daily market fluctuations are affecting your long-term retirement savings its time to just dig your own grave and have a nap.
b n m (Score:2, Insightful)
Re:SELL! (Score:5, Insightful)
Some people see disaster, some see a good buying opportunity ;-)
Re:SELL! (Score:5, Insightful)
Yes, why should anyone be concerned that their ability to afford food and heat in their declining years is dependent on the long-term stability of a system that can be radically damaged by a single mistyped letter?
I guess we're all just lucky this guy hit "b" and not "z".
Re:SELL! (Score:1, Insightful)
Yeah, so "radically damaged" that in a matter of minutes the market had recovered and many trades that would have the potential of affecting longer term outcomes are being reviewed by the exchanges to see if they qualify as "Clearly Erroneous" so they can be busted.
GP is right. If your long term financial outlook can be unhinged by intra-day market moves you've got something seriously wrong with your long term financial plan.
Re:Slashdot, you missed the software part! (Score:4, Insightful)
I'm not sure exactly how you protect against that. The software is meant to detect a certain trigger and complete certain actions based on that trigger. It seems in principle impossible for the software to figure out the reasons behind the trigger occurring (how do you tell the difference between an aggressive speculative trade and a typo when they both result in the same thing? Namely, selling off $X amount of shares.). This is not just a problem with software, but you can imagine humans doing the same thing. They see a huge sell off of a certain stock and need to make a quick on-the-spot decision on whether to hold or sell. Maybe the seller figured out something was going on in the company. Maybe it was a typo. You can't know for sure.
So it seems less like a problem with the software, and more like just a side effect of a speculative trading model.
Re:SELL! (Score:5, Insightful)
It's not radically damaged. It slumped for a day.
I own P&G stock, bought it and its grown in value over the last 15 years. Thats through the dot-bomb, through at least one major recesssion, etc. etc. Today's hit might affect my dividends next quarter, but it'll hardly affect my ability to use that stock when I retire in 40 years.
Re:SELL! (Score:3, Insightful)
Well, the fat finger may have triggered the sell-off, but it probably would have happened anyway, albeit in a more controlled manner. Everyone's a little antsy with the Greece situation right now, and the market was eventually going to reflect the increased instability there.
Might I suggest sandwiches? As one expert so presciently said:
Actually (Score:5, Insightful)
When you can make money hand over fist doing nothing, a very bad thing has happened: work has ceased to become a rewarded function. Instead, it's who you can screw over with dodgy investment strategies and exotic financial instruments that are not only worthless, but a liability. It's time that we end the casino markets and return to investing in things that are actually part of the economy that creates jobs - manufacturing, infrastructure, and technology.
Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.
Re:SELL! (Score:4, Insightful)
If daily market fluctuations are affecting your long-term retirement savings its time to just dig your own grave and have a nap.
To be fair, a 1,000 point swing isn't exactly something that is considered a 'daily market fluctuation'. Granted, a 1,000 point loss over a week or two is still very possible, but you have a chance to sell your long positions during that period of time. When it happens while you're eating lunch or waiting for a bus then you're kind of screwed.
BTW, doesn't the market have some rules preventing a large percentage drop in a short time period?
Re:Safeguards? (Score:4, Insightful)
I'd love to have had my eye on the boards at that time, there was major money to be made in those brief minutes between when the B was bought and when it was immediately resold. This is not so much a problem of insanity on the stock exchange floor, as it is the automated stock trading programs running continually looking to take small advantages on micro market fluctuations. This one just tripped a few too many of them all at once, causing something of a domino effect. I'd expect 80%+ of the "very high volume" of that time period was done entirely by automated trade programs.
Then one has to ask, was the mistake in the fat finger that hit "B" instead of "M", the (popular option) "are you sure you want to do that?", OR can we look at the trading apps that haven't been told to do a sanity check when they see a very unusual trade occur. IMHO this entire fiasco is a collection of bugs (ok we'll call them "oversights") in the auto trade programs on wallstreet. The people on the floor were just looking at the board with their jaws dropped open trying to figure out what was going on -- what the programs SHOULD have been doing. Should have been throwing up a flashy window on someone's screen saying HEY COME TAKE A LOOK AT THIS! Instead they just went wild selling and buying, thinking they were reacting to market conditions, not able to consider fat fingers.
Re:Institutional Traders Don't Enter Trades Like T (Score:5, Insightful)
It amazes me that the financial industry continually gets a free pass on matters that would result in public outrage towards any other industry that deals with people's livelihoods.
This explanation, whether true or not, is equivalent to saying that an airplane crashed because of a single faulty sensor.
Or a bridge fell due to one rusted bolt.
But, here, one fat finger led to the temporary destruction of nearly 1 trillion dollars of value! Would we tolerate such bogus explanations from aerospace engineers or architects? Why can we not demand the same from our financial "engineers"?
Re:Slashdot, you missed the software part! (Score:3, Insightful)
When I used to write my own automated trading system software, I wrote some code that ignored bad events until they had persisted for a small period of time. That was motivated by a stop loss order I had in place automatically taking me out of a position at a severe loss when a bad tick (one second) of data from a mistaken trade showed up, the chart was quite similar to today's mess. So it's easy to write something that rejects bad market data for a little bit, waiting for some confirmation before doing something rash. For what I traded, if I saw the same condition for five seconds straight, it was probably real and then I'd have the program act.
Unfortunately, the current situation market includes so many automated systems that try to make money based on high frequency trading [nytimes.com] that the normal safeguards here are rejected as "adds too much latency". It's yet another one of those situation where optimizing for the normal case, where fast trades are better, causes instability during unexpected situations.
Re:Actually (Score:5, Insightful)
That nails it. The synthetic instruments in trade now exceed the GNP of the entire planet. Smoke and mirrors - vast investments in products that have no intrinsic value - we are playing dice with the planet's economy.
Wall Street Steals the Best and the Brightest (Score:5, Insightful)
Fund managers who literally do nothing but piss away money are making $1,000 an hour, and the people who educate our children are making less than $20 an hour. Something is seriously wrong with this picture.
Yes. And further, consider how Wall Street has attracted the best and the brightest of all of our people, math PhD's, engineers, those with an excellent ability to see the broad patterns in society. Our most brilliant citizens are pulled into Wall Street as "quants" or traders or corporate lawyers, and are often paid six and seven figure remuneration per year. And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes. Do they create wealth, or are they merely helping to transfer it from the hands of the many to the hands of the few who can afford their services. Wall Street quants were supposed to make recessions a thing of the past. We all know how that turned out.
Meanwhile fields like science, engineering and medicine lose the most brilliant individuals. Citizens who would formerly have become professors, providing independent analysis of society's problems instead become selfish multimillionaires, who then retire at 40 to a life unproductive leisure. Think of what these brilliant people could have done if their abilities were harnessed in the right fields and with the right motivation. Think of the problems that could have been solved. Think of the knowledge that could have been gained. Think of the lives that could be saved by new medical discoveries. Think of the new technologies that could have been developed for the common good. Wall Street's co-opting of so many of the geniuses in our society will have profound consequences for our civilization. I can only hope that we can undo much of the damage been done by this corruption.
What is the value of this market speculation? (Score:2, Insightful)
Comment removed (Score:5, Insightful)
Re:SELL! (Score:3, Insightful)
canned food and ammunition.
Tools, guns, and garden space / greenhouses. Passive solar for heating the house... (electricity is really a luxury when you're talking about basic survival). Ammunition and the means to make your own. Etc.
SB
Re:What is the value of this market speculation? (Score:5, Insightful)
I mean really? What do these traders produce? Nothing. But they earn money, quite big money solely on speculation. What is the purpose of this at all?
Liquidity.
You obviously have no idea what a stock market is. The buyers want to buy, and the sellers want to sell. The trader makes it easier for them. Forget stocks, look at something possibly easier for you to understand: you want to buy a house. You have money. But no one is willing to sell you a house. So what happens? You don't get a house. Conversely, you need to sell your house, but no one wants to buy one. So you have to wait 10 years. Get it?
Traders are middlemen, but they facilitate transactions. When they are right, and correctly estimate the direction of the market, they make a profit (call it a commission). When they're wrong, they make a loss. Traders aren't costing anyone anything - the buyer WANTED to buy and the seller WANTED to sell. No one is being forced.
You say that traders make "quite big money" on speculation. Yes. They also LOSE a lot of money on speculation. Today I lost $9,000. Are you happy now that you have a day job? Even if you work at McDonald's, you earned more than me - today. I'm not bothered, because eventually I will make that money back. However there is RISK involved. If you don't take risk, well, what do you expect? Minimum wage. If you take risk, you can make money. However you can and WILL lose money often.
But please don't go thinking that traders are the cause of all problems - they're not. It's banks that borrow money at 0% from the government and lend it out to you at 15%+ that are the problem. Enslaving people through debt is not something capitalism should be proud of. However corporations need to sell shares to raise the billions they need to make the products/services that benefit you and I. The only place they will get that money is from traders.
Re:Actually (Score:3, Insightful)
You're missing the point. All of these highly educated fund managers missed the boat on the real estate crash. Simply put, they don't serve a good purpose to our society. So why pay them such high salaries?
Re:Actually (Score:5, Insightful)
Except that how do you suggest getting rid of it without getting rid of the entire Economy as it stands right now on the printing press of the Governments, who are in so much debt because they all need to be reelected and thus all of their efforts are about taking on more and more debt to continue the illusion of the good times.
Somebody will have to pay the debt. Question is: will anybody really pay it?
Greece has no ability to print Euro (not legal ability anyway, I am sure they can print it somehow somewhere in a basement), Greeks are used to their Government handing out a pretty sweet life there. The party will last as long as someone finances it.
US has all the ability to print the USD in the world, US is in worse shape than Greece is in terms of the total debt amount.
Greece decided to go the unpopular road and make good on the debt and this pissed off the Greeks something awful, they don't want to pay! Their Government decided to pay 100cents on the borrowed dollar + interest. Now, the people who were lending money to Greece did the same thing that the people who lent money for the sub-par mortgages. They lent the money to Greece and probably also repackaged the debt into some SIVs and sold it off.
This debt, all the debt of all the debtor nations, that's the stuff that fuels the markets. It's free money that is being printed, it's the crazy low interest rates that allow banks to borrow at almost nothing.
When you have all that insane cash around, it's easy to see how it becomes target of various schemes, like betting against certain SIVs, short bets against the debt that is known not to be payable.
However. Greece decided to bite the bullet and pay. This means cutting spending and increasing taxes.
Will US do that when it is cornered into the same question? No. Of-course it will not. Will ANY politician in US say to the 'voters': You have to bite the bullet. There is no money for Medicare. There is no money for Social Security checks. There is no money for any Government run program. However here is a nice new tax on anything that moves, all of that so we can make good our interest and principal payments to the lenders like China, Japan etc.
Do you believe that anybody in US will say: -Hell yes, let's bite the bullet and pay that debt!?
NOBODY.
Nobody will say that. The US will end up doing what it does: it will monetize the debt, print more and more USD to buy back the bonds and treasuries that will be sold off at an increasing rate, who wants the useless USD, who wants to hold the debt that is known to be paid in useless money that will inflate faster than the interest payments can ever make up for?
This. This is caused by the Government borrowing and spending without any production to back up the transactions. Do you really think that Governments can do anything at all to stop the markets, to stop the wheel turning? The Government is NOT interested in stopping anything because it WILL trigger the sell off and decline of USD.
However the BIG Sell Off is coming whether the Governments do anything or not.
The difference between US and Greece is this: Greece is in Euro and cannot print, so it either quits Euro and goes back to Drachma and prints the money into oblivion causing a crash of its bonds/treasuries/currency OR Greece bites the bullet. Greek's Government for some reason decided to go the High Road and to be Honest for some reason, I need to figure it out.
US will NEVER do this, it's impossible. It will print and print USD into hyper-inflation.
So when you say:
work has ceased to become a rewarded function.
, just understand that for a Government work has ceased being a rewarded function long time ago, when the government decided it can print money and set interest rates. That's the primary problem.
Comment removed (Score:4, Insightful)
Re:Correct, but also incorrect (Score:5, Insightful)
the Big Problem the audit would "uncover" has nothing to do with the dollar's worthlessness, but in majority of people finding out our Federal Reserve is just local branch of international banking cartel, manipulating th economy of and draining jobs and wealth from the U.S. for those in a position to take advantage of economic cycles.
Re:Correct, but also incorrect (Score:5, Insightful)
I find that when people go off about the Fed, monetazation, etc they generally don't know jack about economics and ultimately start babbling about end of world scenarios, the government, blah, blah blah rather than economic facts.
Re:SELL! (Score:5, Insightful)
You are presented with evidence of a possible global catastrophe in a few hours. You can do one of two things:
1) Quit what you're doing, go eat a pizza or something for your last hours alive. Maybe spend it with your loved ones.
2) Take advantage of the panic to make a profit.
Now, there are two possibilities here, resulting in four outcomes: a) the world ends, b) the world doesn't end.
1a) You're dead. Who cares?
2a) You're dead. Who cares?
1b) You had some pizza, kissed your kids, but hope they don't want to go to college 'cause you're broke.
2b) I'M RICH, BITCH!
So option 1 has outcome of x% dead, y% poor. Option 2 has outcome of x% dead, y% rich. Clearly, option 2 is the better solution.
(Yes, I know many will opt for option 1 anyway, particularly the "spend time with family" part. These people don't work on Wall Street.)
Re:SELL! (Score:5, Insightful)
Re:Wall Street Steals the Best and the Brightest (Score:3, Insightful)
On the second thought, where would they work now that the age of independent research is mostly over? Military-industrial complex? Big Pharma? When there is nothing productive happening, maybe the smartest thing to do is have fun being unproductive.
Re:Correct, but also incorrect (Score:2, Insightful)
? The Fed's books are already open and reviewed by accountants regularly.
Where are the m3 numbers?
The fed has been actively inflating America's way out of debt for years. It just hasn't told anyone yet - gotta wait until it'll do more good than harm.
Re:SELL! (Score:2, Insightful)
If the stock market crashes, gold will do you no good. People will be bartering for food, gas, and other staples. Gold will not do a thing for you. Look at any economy after a natural disaster or crash - people will give anything for clean water.
Gold will drop just as well as anything else. It is not a safe place for investing.
Re:Actually (Score:3, Insightful)
Social Security has never cost the US Government a dime.
- a pyramid scheme, money from which were spent long time ago and which is now paid just like everything else is by borrowing and printing.
As to the military spending, you are correct, that's another huge debt based Government program designed to enrich a few. The Wall street financial institutions are bad, but at least they did not kill millions of people around the world as opposed to all of the US military invasions.
The issue is that Greece cannot devalue it's own currency, as the US can through the Fed. It is forced to keep the Euro, and France and Germany do not want their currency devalued. Fiat money systems are purposefully designed that way - the restrictions of gold based currencies were the cause of massive crashes in the 19th and early 20th centuries.
- except that it is the creation of Fed and the fiat money printing that caused the 'Great' depression rather than gold standard, and Nixon got rid of the gold standard to pay for more of his programs, you can't print gold. Saying that gold is responsible for massive crashes is basically insane.
They've been able to print money and control interest rates since the mid 1930s. America has had a good debt level for most of those years - only when taxes were cut for the wealthy in the 80s did real investment in production stop.
- Investment in production stopped because of tax cuts? Do you understand what income tax is? Income tax is a disincentive to reinvest, like a consumption tax would be the disincentive to consume. However the production decline in US has to do with Government propping up Monopolies by printing money (not gold) and giving it away at low interest rates and by creating regulation that reduce competition by creating barriers to entry. Only the biggest can survive when you have to comply with endless regulations. Monopolies though were bad in one specific way for US economy. As the USSR collapsed and the markets globalized, the Monopolies had the ability to move their production to places with low production costs (China).
Moving jobs away to China due to Globalization is done by Monopolies to escape the expensive regulations, the taxes, the minimum wage laws, the unions. It makes perfect sense to move production away to low costs zones especially when you gain from economy of scale and Monopolies do gain there. Middle size and small size business cannot gain as much from moving production as huge, Government created Monopolies.
Mid-thirties is mid-depression years that were ended by the WWII and then, because US has gained the most out of that war than any other country and because its home was not devastated by the war, the US was able to grow their economy the most.
The great FAILURE of the Keynesian ideas was that it predicted that once the war ends, the US would be in worse shape because of all of the men returning from the war would cause a huge unemployment in the minds of Keynesians. The Austrian school predicted correctly that there would be a boom following the war as the women would quit the work force but more importantly because there would be a huge supply of cheap labor and resources would free from fighting a war (which in case of Austrian school is seen as a burden, as opposed to the Keynesians, who see a war as just another huge Government consumption project.) Keynesians are shamans, not economists.
You call the printing, the borrowing and spending a success of Keynesian school?
Keynesian's main theme is that the normal economic cycles of Boom and Bust must be distorted by removing the Bust. Governments liked that because Governments shrink during a Bust and they can't have it. Government can be anything, but it cannot allow itself to shrink, that much is certain. So Keynesian ideas were perfect: never shrink anything, fight the business boom/bust cycle by creating artificial demand instead of allowing
Re:Wall Street Steals the Best and the Brightest (Score:5, Insightful)
I know a lot of Slashdot might feel that genius = morally superior, since as we all know, here on Slashdot we're all certifiable geniuses. And we're inherently morally superior. None of us want safe jobs, nice cars, and enough money to buy a woman. We've above that.
Re:SELL! (Score:5, Insightful)
I sort of wish I'd bought gold when Jon Stewart told us to, on December 13th, 2000, when it was something a little south of $300 an ounce. Gold is great thing to hold onto if you predict calamity, like for example, the US starting an aggressive war in the middle east, or for example, a black man becoming president (snark on the second one).
However, if a calamity doesn't happen, you'll lose a ton of money on the opportunity cost versus putting the money in the stock market, or a house or real estate, or bonds... Gold'll never go to zero, but there are times (like maybe this one?) where it's stupedously over-expensive, with demand being driven by paranoid old people watching commercials on Glenn Beck, and your returns might be awful. The deltas of the spot price of gold at this point are dominated by speculation buying and selling, the price change since 2001 has far outstripped price inflation of any currency, and an ounce of gold buys a larger basket of goods than at any other time since at least WW 2, if not before-- the gold market right now has all the earmarks of a bubble, frankly.
Re:SELL! (Score:5, Insightful)
http://en.wikipedia.org/wiki/Trading_curb
The first circuit breaker gets tripped at -10%. Today's fall wasn't quite -10%
What is most interesting about this, is that if you read Seth A. Klarman's book Margin of Safety, he mentions how the stock market is irrational. And even more irrational in that there are systems to prevent great loss - but strangely no systems to prevent obscene gains...
Gotta love cynics (Score:4, Insightful)
US will NEVER do this, it's impossible. It will print and print USD into hyper-inflation.
That's a nice theory. Complete nonsense of course. The US has been in this situation before multiple times.
The US has never defaulted. Not once - even when the national debt was a much higher percent of GDP [wikipedia.org] than it is now, which happened after WWII. It also was approximately as high as it is now around 1880 as well as throughout the 1930s and in the 1950s and 1960s. Sure the numbers are bigger (inflation does that) but our GDP is bigger too. The solution to the deficit is fairly simple - cut spending on some combination of the military, social security and/or medicare. Not politically easy of course but certainly possible.
The reason your argument is nonsense is that if the US were to continue to just print money without regard to the consequences, the economy would crater since no one would trade with the US, and the government would be cast out of office. Your assumption that people can never accept any legislation that is good for the country but not them personally is demonstrably wrong and pathetically cynical. It also assumes that the people in charge have no clue or sense of responsibility or fear of losing power. As much as we criticize our government, they aren't complete fools - at least not all the time.
Investments and profits (Score:3, Insightful)
If you think that the markets reward long term investments that don't turn up in quarterly reports, you're not paying attention.
I'll take Warren Buffet's opinion on that over yours. Here's a hint: he disagrees with you. Yes the markets can be myopic but long term success gets rewarded handsomely. Companies of all sizes make investments with time horizons measured in decades on a daily basis. If few thought long term, the companies that did would have a heck of an advantage.
Moving jobs to third world countries is rewarded in the stock market, not building American factories to employ American workers.
Actually neither of those things is rewarded in the stock market. Profits and growth of profits are rewarded. Nothing else. If you can grow profits with American workers, the stock market is fine with that.
Re:Wall Street Steals the Best and the Brightest (Score:4, Insightful)
Hey! What do you have against quants!
Well, in any society there is a certain portion of persons who are intellectually gifted. Before widespread public education, many of these persons likely wallowed in obscurity from a lack of education. Universal education and social mobility has given many of these gifted persons the ability to use their gifts for the betterment of society. They have been responsible moving our society forward, technically and socially.
The problem with quants is that, in my opinion, they are using their great intellectual gifts in a way that does not create significant benefits for society. I believe that the main purpose of their careers is to extract money from other less astute investors and put it into the pockets of their masters. I believe that most of the supposed economic benefits to society of the implementations of their elegant mathematical models are illusory. Quants were supposed to produce economic stability. The current world situation suggests that they have failed.
But I would take this even further. I would argue that the migration of many of our intellectual elite to Wall Street is a symptom of a creeping corruption of our intellectual class. Since the Renaissance, universities have been places where the rational search for Truth was paramount. The university system was modelled after the ancient Greek academies. Initially, the only subjects studied at universities were classical Greek and Roman history and philosophy. Again, the primary purpose of university study was the discovery of Truth, about the world and about life.
Fast forward to today, and we find universities that are beginning to assume roles of revenue generation machines. They are beginning to frame their purpose in society around the revenue that their students generate in their careers. Instead of being places of free rational enquiry, they are becoming cogs in a huge amoral corporate machine. I believe that this shift of purpose corrupts the search for truth. I believe that members of institutions such as the University of Chicago school of economics have fooled themselves into believing in economic models that are not as certain as claimed. Specifically, the "Efficient Market Hypothesis", which is the foundation of much of modern economic thought, rests upon an assumption that market actors are rational. This assumption is not, in my opinion borne out by evidence, recent or otherwise. To ignore the existence of economic bubbles, and other evidence of market irrationality is in itself profoundly irrational, and I believe is evidence of a corrupted search for truth.
I understand that there are profound economic pressures on smart people to follow careers in high finance. The rewards are immense. However, a system that rewards what amounts to theft from the poorer and enrichment of the richer is perverse and immoral. I would argue that such an economic system must be defined as being broken.
Re:SELL! (Score:5, Insightful)
I work in finance, the hypothesis of the article is ludicrous. No one enters m or b in any system among dozens that I have ever seen. No one even enters all the 000s, as the layperson typically initially assumes. You enter 100 for a 100 million order. Virtually all the control reports for middle and back offices also output that way. And lets not even talk about most products/systems trading screens generally having dual static and the four-eyes principle and deal review of trades from done to verified states by the middle office (traders are front office) and so forth. The whole premise of the billion vs million typo is a pretty dubious posit from unfamiliarity. It doesn't defy the rules of physics, but just...unlikely...
The clearest fix, imho, is that most products / banks / trading house have modules for traders limits. Which do what you'd think - a trader simply cannot trade a billion, it auto-rejects. Not every system has this setup, primarily as the product vendor's often charge semi-ludicrous ad-hoc fees for every last module to their product, including the trading limits modules, but really, it's becoming more and more pervasively standard.
If you want to be concerned generally? Be concerned or activist about things like hedge funds over-leveraging under the current lack of regulation and counterparty/exposure visibility, where a political battle is long overdue to unfold to more transparently regulate hedge funds (via clearinghouses and regulatory disclosures, for instance). Or be worried that no one understands very well how to predict where the trillion dollar range massive amounts of overall global liquidity flow and behave under irrationality, overwhelming the tools at central bank's disposal in a way not seen in prior decades.
If you want to be concerned personally? Diversify your stock holdings outside the US market. Honestly, it's silly to hold your own country's stock too heavily. Probably illustrated best by people in small European countries having a portfolio made up of 80-90 percent of businesses based in their tiny country. Versus considering the world economy, and making your country perhaps weighted, but more accurately reflect it's percentage slice of the global economy.
This article is just silly headlines pandering. Though it beats the Slashdot article today on how many keys to carry in your pocket. Jesus. Non-judgment day must be growing near.
The house always wins (Score:3, Insightful)
Suppose that the article is correct and some high-power trader accidentally placed an order 1000X the size of the intended order.
The mere fact that there is ANYONE in this market with this sort of power is all the evidence I need to convince me that the stock market is a rigged game and the big financial firms have the deck stacked in their favor. If their advantage was merely a result of sophisticated research and analysis and they played the game according to the same rules as everyone else, more power to them. When they can game the market with high frequency trades and cause wild price swings with a single keystroke however, they're just preying on the small investors who can't pull the same stunts.
If someone can do this "accidentally", then they could also "deliberately" skim off profits from anyone with stop-losses in place. I cringe to think of what happened to some small traders who might have had margin purchases in their E-Trade accounts and were auto-liquidated to meet margin requirements. Seems like the big fish could also game the options market.
Re:SELL! (Score:1, Insightful)
Just like how the SEC doesn't investigate until there's great losses, and how the mortgage market got away with grand fraud for years and it wasn't until it blew up that people started getting investigated...
And how market pumpers get all the time on-air they want to spew garbage while someone who states things aren't as rosey as they seem will get ridiculed.
It's all due to the emotional tilt that people have towards reassurance that "everything's going to be alright". They'll believe a doctor that gives a good prognosis over one that states it's negative. They'll believe a real estate agent that says the value of their house will always go up as opposed to someone who says the value is going to crash. Problems on the news happen to people in other parts of the world, and will never happen to them.
People listen to those that tell them what they want to hear. It's why we have incompetent, self-serving, corrupt crooks running the countries. It's not because they're best suited to the job. It's because they told people what they wanted to hear.
This flaw in our emotional makeup has probably caused as much damage to our future as greed. People need to learn to look past it and seek the truth, no matter how bad it might be.
Re:Correct, but also incorrect (Score:4, Insightful)
By America, you mean Canada right.
Canada and Australia are in far stronger economic positions, especially per capita. It is our relatively small sizes that prevent us from expanding this further.
Investors are nervous about America due to your growing debt, Greece crashed when it's debt reached 110% of it's GDP and Greece counts on the rest of Europe to save it. The US debt is 10+ Trillion whilst your GDP is 14.6 Trillion. That's more then 2/3 of your GDP. Compared to Australia where our national debt is under 80 billion and our GDP is slightly over 1 Trillion (about 1.05), less then 10% is quite healthy for a nation in good times, very healthy for a nation in bad times. Then again Australia didn't really go into the GFC with a lot of debt to begin with.
Debt is only one of the factors, economic growth is also where Australia is beating almost all other first world nations.
My point is that the US needs to fix it's economy before it will entice investors back. The first step is to eliminate that money sink called the Iraqi war. Secondly would be to cut back on the thing that takes up over 50% of your budget, the military and then to ensure that the income is equal to or slightly greater then the expenditures including the scheduled payback of your loans (this will probably mean raising taxes) but American citizens wont permit this.
Re:Actually (Score:3, Insightful)
Well, you have a point - but the risk associated with developing real property is substantial and not necessarily foreseeable or controllable by the developer (e.g. September 2008).
Moreover, the risk is spread - typically a bank makes a construction loan that is paid off very quickly after the completion of construction - and that, in turn, means that the developer has a major incentive to line up buyers for the condo units so that they pay the developer and the construction loan issuing bank at the closing. Once the construction loan has been retired, the rest is profit.
Of course, the potential for default - or a chain of defaults - is always present where a prime contractor or a sub creates the first default in the domino chain that takes the project south. Liens, breach and litigation are the stuff of a construction project gone bad.
Re:SELL! (Score:3, Insightful)
Ask the baby boomers and the greatest generation how much money they made holding on to gold?
In 1982 Gold was worth $2,000 an ounce in today's dollars. Its still only half its original price adjusted for inflation.
Gold is risky and my parents know people who lost half of their retirements to Gold back in the 1981 recession. If the market recovers all the gold buyers will be in a hurry to sell to buy cd and bonds once interest rates recover.
They will go up again and when they do cd's will become popular again.
Comment removed (Score:4, Insightful)
Re:Wall Street Steals the Best and the Brightest (Score:5, Insightful)
Who the hell are you to tell me that I should use my gifts to benefit society? I have a right to care or not care about whatever I want.
Well, first off, our entire economic system is supposed to be designed so that your career choice does serve the public interest. It's called capitalism. Supply and demand. The market is supposed to represent the public interest. If citizens demand, say potato chips, then the market is supposed to supply them, and in the least expensive fashion possible. The potato chip company borrows money from investors to build a factory, and to buy materials. They hire the best workers they can for the least amount of money they can. Ideally they won't be able to hire computer engineers to sweep the floors; to them, computer engineers would be too expensive. And the computer engineers wouldn't likely accept jobs sweeping floors, since they can earn more money designing computers or software. The potato chip company isn't thinking "we won't hire computer engineers to sweep our floors because that wouldn't serve the public interest". The system simply ensures that such a misallocation of labor is unlikely. In the end, the company makes the potato chips with the lowest possible cost and makes a profit. Thus the "interests" of the customer are served.
In other words, capitalism is supposed to be a tool to serve the public interest, by ensuring that labor and goods are efficiently distributed to members of society. And it is an excellent tool, that has given us a high standard of living. But capitalism was never supposed to be an end in and of itself. It is simply a tool. The problem I was referring to, namely that our most brilliant citizens are being pulled into corrupt careers, is that the incentive system that drew them to Wall Street in the first place is corrupted and broken. In this case, the profit motive is not, in my opinion serving the public interest.
As to your one line comment above, it belies a serious lack of ethics and a misguided sense of selfishness. We live in a democratic society. If enough citizens turn inward and ignore the broad interests of society, then our democracy will be in serious trouble. As a citizen of a democracy, it is your duty, my duty, everyone's duty to pay attention to important and serious issues that affect society. That you do not seem to care is not something to be proud of. It is shameful.
Re:Actually (Score:3, Insightful)
In recent times (past few hundred years), gold has been steady. You can buy a meal with the same amount of gold now as 50 years ago as 100 years ago (averaged, not for the specific dates). Gold doesn't appreciate. It fluctuates, but doesn't appreciate. Money may depreciate, but that's a separate issue than "gold" being useful at all for currency (note, barter isn't currency, and gold for currency is a bad idea and has destroyed the economy of more than one nation).
Of course it's not very realistic to stay away from money. But what you can do, is in case the value of money goes downwards, be sure to always have as little actual money anywhere as possible. And if it goes upwards, have as much of it as possible. Then you will be one of those that the wealth went to in this imaginary "economic crisis". (As there is always someone where the wealth goes to, when "everybody" loses it.)
Money never goes up in value. Always have as little as possible. Buy stock. Buy land. Buy gold. Buy T-bills or mutual funds or at the least high interest bank accounts. But to hold cash as an investment is going to always lose money. We aren't in deflation, and if we are, then the government is going to destroy our economy to fix it because it thinks that's bad. Buy investments based on your risk tolerance and keep out of cash and cash-based securities. You'll beat the heck out of inflation. Deflation is feared by economists (with rational actors acting purely selfishly, deflation will destroy the economy because people will stop investing and hold cash, taking it from the economy and halting economic growth in a spiral that causes economic paralysis). So, the government will prevent deflation by any means possible, including lying when we are experience deflation.
Re:Correct, but also incorrect (Score:3, Insightful)
Re:SELL! (Score:3, Insightful)
If the collapse of the Roman empire taught us nothing else, it's that what you actually want in a serious crisis is not gold, but land you are capable of defending. Preferably with tenants to help you fight. Because that's the currency that is capable of keeping you and any supporters you may have alive.
Re:SELL! (Score:2, Insightful)
So it lost most of that as, get this, a non-fiat currency. So, why all the whining about "fiat."
Actually, it lost most of its value since 1971, as a fiat currency.
Looking at http://www.usinflationcalculator.com/ [usinflatio...ulator.com], we find the following:
From 1913 to 1971, inflation was 309.1% over those 58 years.
From 1971 to 2010, inflation was 437.4% over those 39 years.
Total inflation from 1913 to 2010 is 2098.3%.
Re:Actually (Score:3, Insightful)
I figured out how to fix the stock market:
You must hold all stock for at least six months.
That is all.
Why is it easier and faster to sell 10% of a multi-billion dollar company than it is to sell my car? (Which requires me going to the courthouse to transfer title.)
The stock market is a casino, and stockholders hire CEOs that make the stock go up for short periods of time.
Not 'Make a long-term profit', not even 'make a short-term profit', hell, not even 'make the stock go up semi-permanently'.
No, they just want a damn bump so they can sell. In, fact, the bumpier the stock price the better...they can sell when high and buy when low.
The whole thing is goddamn absurd. It's like if we had a horserace where the people who had the most bets in choose the jockeys. That might be an entertaining little game, but the point of a horserace is to get to the finish line as fast as possible.
Likewise, the point of a company is to make money. Which they can then use to pay their workers and make stuff. It's capitalism, and while it might sometimes be cold and heartless, it does actually serve a purpose. And in general people live under it, doing their job, getting paid, and demanding more money, which they sometimes get.
The stock price, however, is entirely orthogonal to that, and yet that is, for some inexplicably reason, what the company is being managed to maximize. Companies are doing things that harm them, but push up a completely unrelated value of 'what random other people think the stock of this company is worth at this exact moment in time'.