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:5, Insightful)
Some people see disaster, some see a good buying opportunity ;-)
Re:SELL! (Score:5, Funny)
Some people see disaster, some see a good buying opportunity ;-)
I believe you're referring to a Crisitunity [urbandictionary.com].
Re: (Score:3, Informative)
I tried valiantly to buy in. Sadly, a limit order had already been placed that tapped my reserve cash. I tried to cancel, but after 15 minutes of 'cancellation pending' the event was over. Damn.
Re:SELL! (Score:5, Funny)
You might be happier with a Whisky and Prostitutes ETF. Consult your broker today.
Fat fingers + ammo? (Score:5, Funny)
Might be time to invest my money in something a little more solid, like canned food and ammunition.
Yes, because fat fingers and ammunition go together well...as long as you don't invest in a gun too.
Re: (Score:3, Funny)
Don't be silly; the real problem with fat fingers is opening up the cans of food! That's what the ammunition is for.
Re:SELL! (Score:5, Interesting)
It doesnt take a genius to figure out that the "typo" theory is BS... In 2008, it was a "computer fault"... Deflation is still very much in control at the moment, and it appears that we have only delayed it. As greece and many other sovereigns start to default on their debts, we will see the leg down... Acceptance is a b&^%*& sometimes...
Correct, but also incorrect (Score:3, Interesting)
It wasn't a typo, it was Bernie Sanders speaking for an hour on the Senate floor today, pushing for a bill to audit the Fed. Everyone who is anyone knows what we will find if we audit the Fed, and it isn't good. Not just for us, but for the world. Which is why Obama threatened to veto this bill, citing national security. The dollar is the world's reserve currency. If all the plebeians of the world found out how utterly worthless our currency is, we would suffer a crash that would make the last one look like
Re: (Score:3, Interesting)
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.
No, No, No.... (Score:5, Informative)
? The Fed's books are already open and reviewed by accountants regularly.
Really? Then please direct me to the assets in Maiden Lanes 1,2,3. Now, I don't mean the 'extend and pretend' valuations they report. Any external reporting is sent over with a topline valuation. Period. They do not provide enough information for any external party to establish values.
Please direct me to FRB NY's communications, oh let's go back 5 years. I don't want it all, just the stuff where it was decided AIG's creditors were paid 1:1 for debt obligations where a haircut (pennies on the dollar) is the norm. And... what about all those side bets that were made good?
Finally, it's not an either 'Business As Usual' or 'Politicize the Fed.' choice. That kind of rhetoric, by design, goes nowhere. Discarding the whole notion of greater transparency for the Fed has already cost us a trillion or so dollars. I'd like to use that money for other things.
Re:No, No, No.... (Score:4, Informative)
What you're asking for is not an audit, it's more like a criminal investigation or maybe a snipe hunt.
The company I work for has its financial statements audited by an outside firm every year. At no point does that firm ask for or review 5 years worth of communications so they can see why we made the decisions we did. Strategic decision-making is management, not financials. The purpose of an audit is to make sure the numbers add up, not to second-guess management.
You can look at the audited financial reporting of any public company and you won't get access to information like that. Why does Apple prohibit Flash on its phones? Why did Microsoft make a bid for Yahoo? Why did Google buy YouTube? The answers are not in the audited financial statements.
People say "audit the Fed" but the Fed is already audited. What they really mean is "control the Fed" or "scapegoat the Fed" IMO.
Re:Correct, but also incorrect (Score:4, Interesting)
The problem is there are a whole lot of people who know just enough about economics to understand that money has nothing backing it, but not enough to understand that really, that's how money has generally always been. For some reason they see gold as a magical substance that cannot lose value, and that if we just had that behind currency there'd be no problems. This ignores, of course, the Great Depression, when currency was on the gold standard (and some would argue the inflexibility of it helped create the depression). They can't separate the large amount of value gold has due to its use as a financial reserve with the smaller value it has for industrial uses.
So they have no faith in current currency, but think that a currency backed by metal would be worth something. They don't understand that money is just a theoretical construct that facilitates trade.
It is one of the reasons that I think a basic economics course should be mandatory in high school. Too many people have their own half-assed ideas about how things work. Understanding the very basics is important, fundamentally that everything is just trade.
Re:Correct, but also incorrect (Score:4, Interesting)
You've created a strawman, attributed it to "they" and seem to be completely oblivious to the actual argument, and certainly nobody say there would be "no problems", they say it would constrain the government to only spend money that the country actually has right now.
When money is backed by something physical it prevents the government from spending more than it has by printing (or adding ten zeros) to its bank account whenever it wants, therefore devaluing the money that is already in existence.
You can't print gold so the government has to try a lot harder to spend money it doesn't actually have.
That's the real point of a hard money currency system, the fact that you hear gold (and silver) all the time is that it's just a convenient, historic store of wealth, if there was something more convenient the argument would be made for that.
Also you conveniently leave out the fact that it was while on the gold standard that the US, the UK and France became world powers, and once they went to fiat currencies became mired in debt and devaluation and lost their prosperity and declined.
It's not about money, it's about an inbuilt restriction to preventing politicians writing blank cheques until the country is broke, like most western countries are - as we see the beginnings of with Greece, Ireland, the UK and soon The US if it doesn't get its spending under control and cut the services it can't afford.
Finally you make it out like the current Fiat money system has proved itself superior, yet every single fiat currency in history has imploded at around 50 years due to unrelenting printing. You do realise it's only been implemented in the US for 38 years and that government spending has been increasing exponentially over that time compared to revenue? Do you think that can continue forever? Or do you think they'll get to a point and say, that's enough spending?
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:Correct, but also incorrect (Score:4, Interesting)
Re:SELL! (Score:5, Interesting)
It reminds me a little of a throwaway comment Stephen Hawking made in the recent series Into The Universe With Stephen Hawking [wikipedia.org] - he was asked not to speculate on the end of the universe in a certain lecture series for fear that it would affect the stock market. Really? Even if the universe was going to end in our lifetime, and no-one had noticed before now (oops), what kind of fool would hear the news and immediately worry about his or her stock portfolio? What are you going to do with your money after the universe ends? You would think (if people behaved rationally) that the stock market would grind to a halt when every trader says "Screw this, I haven't got much time left and I'm not going to waste it here".
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: (Score:3, Interesting)
I very much suspect that the panic would work AGAINST the workaholic trader.
Firstly, the only people left trading are also banking on the world not to end, so they're not going to sell cheap (or at all, your scheme relies on a bear market). The only shares that would be sold would be ones for companies that aren't expected to recover from the panic, which causes their share price to plummet, which means that if they weren't going to recover before they CERTAINLY won't recover now.
Secondly, even if they cou
Re:SELL! (Score:5, Funny)
I can't be sure what happened to Procter and Gamble, but I just made a killing on pork bellies and orange juice!
Re:SELL! (Score:5, Funny)
Louis: Looking good, Billy Ray!
Billy Ray: Feeling good, Louis!
Re:SELL! (Score:5, Funny)
Re: (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
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: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.
Re: (Score:3, Interesting)
Trading of synthetic instruments is only part of the problem. There is a lot of trade in very physical things -- trade that only inflates the prices and serves no other purpose.
Take any good condominium project. Those typically come in phases -- say buildings A&B are phase 1, buildings C&D phase 2, and so on. They are sold in pre-construction. A project that has good prospects and sells out phase 1 within say 24-48 hours -- will usually be done by a developer who has a clue, and there will be lots o
Re: (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
Re: (Score:3, Interesting)
Synthetic instruments are unregulated and exceed the value of the planet's GNP. Just because people are willing to posit a value in something doesn't mean that it actually has value. Take the Tulip mania of the 1800's http://en.wikipedia.org/wiki/Tulip_mania [wikipedia.org] for example.
The problem with the jerks marketing the derivatives again is that they were bailed out once and expect to be bailed out as many times as they can get away with it.
I wouldn't be at all surprised if today's little "accident" wasn't just a f
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.
Re: (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: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.
Then the PHBs misapply their work, and KABOOM. (Score:5, Informative)
Wall Street has attracted the best and the brightest of all of our people, math PhD's, ... Our most brilliant citizens are pulled into Wall Street as "quants" ... And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes.
Then the PHBs misunderstand and misapply the PHDs' work, and the whole thing comes crashing down on them.
Case in point: Mortgage-backed securities.
Risk on such things is hard to estimate, because it takes a lot of investigation and skull-sweat to evaluate the risk on each mortgage. Evaluating the risk on a bundle of mortgages was so much work it was not practical.
Then the young math whiz proved that price of mortgages was very strongly correlated with risk, and came up with a formula that, given price, estimated risk very well. (Well, DUH! They're correlated because smart buyers and sellers were researching the mortgages, determining the risk, and basing their trading prices on them.)
THen the PHBs came up with something like bonds backed by a "basket of mortgages" (to "average out the risk of individual defaults). Buy the bonds (to finance the mortgages), get paid dividends from the borrowers' payments. Sell THREE sets of bonds against each "basket" of mortgages, with missed payments coming out of the dividends of the third, then the second, then the first, so investors could get different prices and risk/reward tradeoffs from the same basket. So far so good...
But to sell these bonds they needed a rating. So they talked the rating companies into using the shiny new risk-estimating tool to rate them. Oops! Any controls engineer who understands these bonds and the market will recognize that this substituted a positive feedback loop for the signal from the real world. Higher price -> lower risk estimate -> higher price... (The guy who did the original work said not to use it this way - but nobody listened. And he moved on to other things.)
And now that they could get a rating they could get a rating from reputable companies they could sell a bunch of these bonds. So they could buy up mortgages to make more. So this raised the demand for mortgages, which raised the price. The positive feedback loop was kicked off with a big up-push, the ratings went sky high, the prices of the bonds climbed, and the bubble was on.
With the price skyrocketing more people wanted to buy in. So the demand for mortgages went through the roof. Banks and the like could sell any mortgage they could write, even to "NINJA" borrowers with no income, job, or assets. Who cares if some of the loans in the basket are "subprime"? The price says the aggregate risk is low and it will all average out, right?
So the bubble blew up bigger and bigger, with developers building more houses that were bought by more subprime borrowers with more and more unconventional mortgages - until finally there were enough defaults to actually cause problems.
The last straw was probably because a gas price hike made the commute expensive enough that people commuting between big cities and the "executive homes" tightly clustered in former farmers' fields a two-hour commute away from their job could no longer afford both the gas and the payments.
So enough mortgages defaulted that some of the bonds were doing worse than expected. So the demand for them went down. Oops! The positive feedback loop was still in place and it finally got a signal strong enough to get it out of saturation. Lower demand -> lower price -> higher risk estimate -> lower rating -> lower price. Rinse and repeat. Prices for mortgages drop, interest rates rise, more defaults, more positive feedback.
And thus the subprime mortgage market collapsed.
(Then the government throws a trillion or so of our money into pumping it back up...)
Now stock market guys are used to this sort of thing: It's the old chartist vs. value investor dichotomy. Every so often somebody finds a function that predicts the market pretty well from its past behavior, starts trading on it, and makes some money. Then he lets others in on the system, creates a positive feedback loop, a bubble (or crash) forms, the market eventually saturates, it pops (or bounces back), and the now-failed system is abandoned. The later investors lose money to the investors with enough money, wisdom, and a long enough time horizon to trade on their good estimates of the actual value of the underlying stocks. Similarly with commodities (with other pathologies thrown in).
But the bond market investors were used to instruments based on single underlying things - like a big company that borrowed some money - that could be reliably rated. When the rating companies suddenly got themselves into a chartist mode (without realizing it) on these new things they didn't recognize it either.
The cute thing about this is that, once everybody stops using the formula to estimate risk, it will START WORKING AGAIN. And then stop working once more than a few start using it. So be ready for a possible series of similar bubbles now and then as somebody finds another way to apply this, or similar hacks, until enough investors understand what's happening to discredit them as soon as they pop up.
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: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: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.
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.
Re: (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 'G
Re: (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?
Pay does not determine nobility (Score:4, Informative)
I know far more people who have been screwed over by doctors, mechanics, and contractors than by accountants or investors.
I am a certified accountant. If you believe that, you don't understand accounting at all. I have a textbook downstairs which is all about how accountants can fudge the numbers. Even the best financial records have a lot of slop in them and it is REALLY easy to commit fraud as an accountant often on a very large scale. Even if no laws are broken, finance experts can seriously screw you, often without you even being aware of it. I'm not required to take classes on ethics every year because accountants have been so honorable in the past. If accountants were so honest there would be little need for audits.
No, I'm afraid accountants and finance professionals are no more ethical than anyone else.
Yes, teachers should be paid more, but there should be higher standards for teachers as well.
You get paid more for doing things that either A) other people can't do or B) other people don't want to do. Teaching generally falls into neither category. The ability to teach is not a rare ability and plenty of people chose it as a career. (note that I did not say teach well - that's a different issue) Ergo supply being relatively high compared with demand dictates that teaching will not be a lucrative profession.
There's no reason that teaching should be any less a noble profession (as determined by the general population, not Slashdotters) than being a doctor or professor.
Who said it is less noble? It just pays less. Being a college professor or a doctor requires a PhD or an MD and there are fewer people who have the brainpower and dedication to earn those degrees. Nobility of a profession isn't determined by pay and being a teacher is generally quite well respected.
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 Ame
Re: (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: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: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.
Comment removed (Score:5, Insightful)
Re: (Score:3, Informative)
This doesn't deserve "Troll"!
Somebody mod this back up. He hasn't written anything that is incorrect.
Gold Prices [goldprices.com] - Gold hasn't ever gone to zero.
Fiat Currency [wikipedia.org] - US Dollars are a fiat currency.
Comment removed (Score:4, Informative)
Re:SELL! (Score:4, Interesting)
And why's that? It must be because you assume that your stocks, bonds, deeds etc. increase in value with time, whereas gold does not and costs money to store it safely. Am I right? ;-)). This is a fact.
:-) ). But besides the sunlight, Earth is a closed system, and we're probably using up too much of the long-term concentrated chemical potential energy stores (oil) and should switch to weaker, more direct energy sources (solar photovoltaic, solar heating, wind, biogas, biodiesel) to sustain our civilisation longer-term than just this century.
Gold is an inert metal that doesn't wear down with age (unlike the Dutch tulip bulb craze
The paradigm that in general stocks increase in value with time is *not* a fact. It is an assumption based on past behaviour, explained by a world-wide exponential growth in economy, as we got more people, the people extracted more raw materials (including non-renewable and non-recyclable materials such as oil) from our planet's crust, and those resources in turn fueled the economy and consumption rate.
Our planet is an open system in the sense that we get free sunlight from our sun and ultimately this is the power source for all economic growth (except nuclear fission and, as mentioned in another discussion [slashdot.org], tidal
How can you believe to have permanent exponential growth of power resources / manufacturing / consumption in a closed system? IT DOESN'T MAKE SENSE.
Listen to this:
In a steady-state economic system, solar energy input == economic production. Your stocks and bonds are valuable but will not increase in value (I don't see how?). I haven't found any economics articles that I could understand about what such a world would look like, but the transition is probably painful (I'm not a doomer btw).
:-)) discussion of the discrepancies between economy and reality, I refer you to The Oil Drum [theoildrum.com] forum, where people much smarter and possibly more clear-minded and rational than me discuss these things :-).
Just because Malthus (1798) and the Club of Rome (1972) were impopular doomers doesn't make them wrong. Our generation and the next few must *prove* them wrong.
For any serious (and really not always doomer-like
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: (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 agai
Re:SELL! (Score:4, Informative)
Gold never went over $500 an ounce in 1982. That's $1096 today, and gold's current price is $1202. That's almost a 10% gain.
The equivalent of $2000 in today's dollars in 1982, the price you claim gold reached, was $911.59, a much higher figure than what the data shows. This can be verified by looking at current and historical gold prices and using an inflation calculator, which is exactly what I did.
What would prompt you to make up other numbers?
Re:SELL! (Score:4, Informative)
He got the year wrong - 1980 was the high. The peak was Jan. 18- 20 1980, $830-$850 = $2146 - $2184 in 2009 CPI- adjusted dollars.
Last 6 months gold has been $1100 - $1200. In highly understated 1980 CPI adjustments, that is about $430 - $470 in 1980 dollars. The price of gold was nearly always higher in real terms from about 12/79 to 6/81. See kitco.com and http://www.westegg.com/inflation/infl.cgi [westegg.com] for documentation.
As you said: "What would prompt you to make up other numbers?"
Re:SELL! (Score:5, Interesting)
If you're worried about that kind of collapse, then yes, gold would go to zero, too. What can you do with gold other than look at it? You think you're going to arrange a deal with the typical large industries that actually put gold to a useful purpose? After a massive currency collapse? Good luck!
Baskets of metals are ok as a hedge, though all bets are off in a real crisis, and there is so much more out there you could be involved in that doesn't involve getting ripped off by a sketchy company with cheesy ads.
Re: (Score:3, Interesting)
Comment removed (Score:4, Insightful)
Comment removed (Score:4, Insightful)
Re:SELL! (Score:5, Informative)
Unless you're due to retired today and your pension just got blown out of the water.
Put it all under the mattress. Seriously.
Generally, it is recommended that as you approach retirement age, you start moving more and more of your retirement savings out of stocks and into bonds. (Bonds are much less volatile.)
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.
Re:SELL! (Score:4, Funny)
Why would hitting 'i' be so bad? If he'd hit 's', he would need to do an inverse Laplace transform to set things straight. If he'd hit 'i', the transaction would have been imaginary anyway.
Re:SELL! (Score:4, Interesting)
" . . . in a matter of minutes the market had recovered . . ."
Yes, but think of the people in the following situations:
1. Had stop-losses in place
2. Got caught on the wrong side of "put" options at the wrong time
3. Had margin requirements and were automatically liquidated from their positions to meet those requirements
This whole thing stinks.
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:SELL! (Score:5, Informative)
http://en.wikipedia.org/wiki/Trading_curb
The first circuit breaker gets tripped at -10%. Today's fall wasn't quite -10%
Re:SELL! (Score:5, Insightful)
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...
Re:SELL! (Score:5, Funny)
Clippy: "Hi, I noticed you were trying to buy one billion shares of Proctor and Gamble even though there are less than a billion in existence. Would you like me to make that a shortcut for you?"
Re: (Score:3, Informative)
Clippy: "Hi, I noticed you were trying to buy one billion shares of Proctor and Gamble even though there are less than a billion in existence. Would you like me to make that a shortcut for you?"
For the record there are approx 2.88 billion shares of PG in existence.
Re:SELL! (Score:5, Funny)
Clippy: "Hi, I noticed that you are arguing with an anthropomorphic office supply. Would you like to have a debate?"
Happens to the best of us (Score:5, Funny)
I can relate because one time I typed :q! instead of :w, losing about 5 minutes worth of typing. The typed text had sentimental value worth billions.
Re:Happens to the best of us (Score:5, Funny)
Which is why you should use C-x C-c. Totally avoids that sort of confusion.
FTFY.
Slashdot, you missed the software part! (Score:5, Interesting)
CBC Story about software controls for selling on the market: http://www.cbc.ca/money/story/2010/05/06/tsx-markets.html [www.cbc.ca]
Nuts to fat finger keyboards, there are automated software controls in the industry that caught-on to the sale and snowballed this individual's mistake into something really big. The issue wasn't just in this guy's mistake, but the fact that potentially billions of dollars changed hands because of a trust relationship these systems have with market indicators.
Not that there's anything wrong with that: on a good day this could protect big firms from being the guy caught holding the bill, but I think we've discovered where the next upgrade in broker software might be :)
-Matt
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: (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 s
Re: (Score:3, Funny)
Protections may be bypassed... (Score:5, Interesting)
So you implement some protection. Then some prima donna trader comes by and asks that they be disabled and his trades unquestioned. If the company makes good profit off the guy, down the protection goes.
Reminds me of this story on a commodities trader that not only didn't close his position, but actually ended up taking physical delivery of the commodity. Oops. Sure there were protections, but the guy had them disabled.
http://thedailywtf.com/articles/special-delivery.aspx [thedailywtf.com]
Hell, for all we know, this is exactly what happened - most traders can't enter in a "b", except a succint few well-trusted individuals. Just one of the "gods" managed to fumble it.
Re: (Score:3, Interesting)
Trust me, the Daily WTF story didn't happen (if you want to, you could read about coal futures until you believe me, but I'd recommend just trusting me on this). However, I know personal trading platforms all come with "Yes, I know what I'm doing, really really really let me shoot myself in the foot" options, I can easily accept that institutional systems have the same for some traders, and even more likely have bugs in the protections...
Institutional Traders Don't Enter Trades Like That (Score:5, Interesting)
It may have been a system problem, that's quite possible. But institutional traders don't type in "b" or "m" next to some number they type in of stock they want.
But even in some strange world where they did, entering in a standard lot quantity that required an "m" (much less a "b") for the stock that is suspected to be the issue at hand (PG), would result in an order that exceeded the 30-day avg vol for PG by a factor of 10.
And that's not even considering that the firm's risk management would, in theory, have caught the issue already.
I am, obviously, doubtful of this explanation.
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: (Score:3, Interesting)
Financial engineers as a whole are a bunch of Dilettantes. They literally play guessing games disguised with fake knowledge. Any scientist would look at the markets as an optimization or stochastic problem. Not financial engineers. They look at indicators that have minimal mathematical basis and "psychological" levels.
They're also damn good at what they do. No offense to scientists, but anyone trading using the scientific method is just going to be giving money to people who use more effective methods. The simple explanation is that the scientific method is far from optimal for the problem of rapidly evaluating the price of a security in real time. Market trading also isn't an optimization or stochastic problem. Those are approximations for the real deal. As I see it, a seat-of-your-pants market maker is going to know mo
look at the volume! (Score:4, Interesting)
I suspect that something funny did happen though, in TFA they are quoting that PG was trading down at $30 per share at some point, so something definitely slipped. Fortunately, we managed to avoid another Black Monday [wikipedia.org], where the DOW went down and stayed down.
Market correction due and it's here! (Score:5, Interesting)
They've been saying for some time the market was due for a correction. Mind you, at the height of the financial meltdown, the Dow was at 6500, and has almost doubled value in about a year, it was rising too fast considering that the recovery still really hasn't come (i.e., there are still no jobs).
The only people making money are the same ones that are always making money -- the fat cats. Now it looks like the market will correct, and probably stablize around 10k, maybe 9. And even more people will lose their jobs and the cycle will continue until America admits that it is bankrupt.
Then will come some really hard times, but, once we address the real issues plauging the country, we'll come out of it stronger. But first, we need to start getting rid of all the lawyers....
I'm surprised, somewhat. (Score:4, Interesting)
However, I am somewhat surprised that the guys who do UI design for financial systems don't design systems to make things like power-of-ten or million/billion errors very difficult. Having a 3 factors of 10 difference be just one key away(and phonetically not all that dissimilar) seems like a mess waiting to happen.
I've seen in doctor's offices(and I know pharmacists and pharmacy techs, especially ones where compounding and other tougher than "dispense stock pill" type activities go on get drilled hard on this) outlining acceptable and unacceptable notetaking protocols to reduce the risk of power-of-ten dosing errors(things like ".2 is wrong, there should always be a leading zero to clue you in to the decimal point, use 0.2.") Some of them are even domain specific conventions, specifically trading off other factors in favor of reducing the risk of error. In science, for instance, saying 2.0, or even 2.0000 if you have that much precision, instead of 2 is a good thing. It tells your reader how precise the value they are looking at is. In prescriptions and medical notes, "2.0" is dangerously close to "20", and is thus avoided.
One would think that, even if it meant making up arbitrary symbols, or using UI element sizes to convey magnitudes, or something, financial UIs would adopt a similar set of domain-specific tricks to head off the most common and dangerous errors.
That's what they get for running Linux (Score:5, Funny)
This should happen EVERY DAY, would be good (Score:5, Interesting)
You read that headline right. This should happen ALL THE TIME. It would be good for the markets.
Speculators would be driven out, or driven insane. Emotionally driven traders would have heart attacks.
Sound judgments made based on factual data would not be affected.
Next week, people like me won't give a toot that this ever happened. However, a lot of day traders just pooped their pants. I'm buying men's underwear stocks.
The person who made the mistake will be punished dearly.
Re:This should happen EVERY DAY, would be good (Score:4, Funny)
Speculators would be driven out...a lot of day traders just pooped their pants. I'm buying men's underwear stocks.
So, you're admitting you're a speculator?
So soon on /.? (Score:5, Funny)
Shouldn't this hot topic be debated on /. in, say, a week?
He, was from Europe/ non UK ! (Score:3, Informative)
NYSE Spokesman Disagrees (Score:5, Informative)
I think you guys are missing the actual point (Score:5, Interesting)
What's being talked about here isn't the general decline in the market today, but a very suspicious "blip" that occurred in a huge number of stock prices at 2:45 EST, followed by immediate recovery.
Look at the blip:
Adobe [google.com]
Google [google.com]
Westlake Chemical [google.com]
Cabela's Incorporated [google.com]
Apple [google.com]
Microsoft [google.com]
Titanium Metals [google.com]
Fidelity IIS [google.com]
This shit is across the board, with very few exceptions. You try explaining how something like that happens apart from some major fuckup somewhere.
See?! (Score:5, Funny)
Obesity is destroying America!
The market runs on lemming stupidity (Score:3, Interesting)
We all know this and have known this for decades. The people who operate within the market like to think of themselves as sensitive to trends and currents and activities, but the reality is further from the truth -- a bunch of people doing what everyone else is doing hoping that the person in front of them knows where they are going.
The cure for much of this (not all of it) is setting up rules that limit the number of times a single item can be bought or sold in a day. Whatever the real "best solution" is (and I'm sure my notion isn't even close) it should probably focus on getting rid of the lemming factor that tends to send people marching off the edge of a cliff taking the whole market with them.
Re: (Score:3, Interesting)
Dvorak -- B next to M (Score:5, Funny)
Rubbish (Score:5, Informative)
15 billion dollars cannot move the markets that way, even if it was an accident. That's like trying to blame 2008 on the fraudster at "Societée Generale". It wasn't just the US stock market, it was all the currency markets too. This is trillions of dollars we're talking about, moving away from the Euro and the US dollar and into Asian currencies. The trouble in Greece and the uncertainty about the UK elections were the excuse. The Chinese made a major move into the Japanese Yen yesterday, strengthening it. Today european bankers followed suit. As a result the Yen gained nearly 10% against the dollar, with Cable (GBP.USD) and Fiber (EUR.USD) dropping quite a bit too. This panicked the equities markets.
Goldman Sachs (Score:3, Funny)
Naw, its Goldman Sachs selling their holdings to pay for lawyers.
That's ... (Score:5, Funny)
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: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: (Score:3, Interesting)
What's interesting is that the online boards (websites) weren't able to keep up with the market due to so many people hitting their servers. Even Yahoo and Google Finance couldn't keep up.
The Web Struggling to Keep Up with the Market [techcrunch.com]
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.