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The Market Just Triggered a 'Circuit Breaker' That Keeps Stocks From Falling Through the Floor (cnbc.com) 463

The S&P 500 fell more than 7% Monday, triggering circuit breakers that prevent a further plunge. From a report: The index hit "limit down" shortly after the open, halting trading below that level for 15 minutes. The market was set to resume trading at 9:49 am ET. In addition to the S&P, the most all-encompassing large-cap stock index, the Dow Jones Industrial Average fell 7.3% while the Nasdaq, which is concentrated in technology names, slid 6.9%. According to the New York Stock Exchange, a market trading halt may occur at "three circuit breaker thresholds" on the S&P 500 due to large declines and volatility. Under "circuit breaker" rules, stocks will resume trading 15 minutes after the halt. The halt on Monday morning was the first since the rules were implemented after the financial crisis. If there's a subsequent drop of 14% from the last trading close, there will be another 15-minute trading halt. If there's a 20% drop at any point, that would halt trading for the rest of the day.
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The Market Just Triggered a 'Circuit Breaker' That Keeps Stocks From Falling Through the Floor

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  • by Anonymous Coward on Monday March 09, 2020 @09:05AM (#59810698)

    The past few years have gone according to plan for Putin, certainly!

    Destroy the markets by leveraging your mates' oil businesses. Clever, and obvious, after the past few years.

    • Re: (Score:3, Insightful)

      by sinij ( 911942 )
      Russia is a banana republic, only with oil and gas instead of bananas. With oil prices tumbling 25% just today, Putin's budget just got into a massive gaping red hole. Putin's troll army will have to be paid with potatoes.
      • by r2kordmaa ( 1163933 ) on Monday March 09, 2020 @09:25AM (#59810794)
        Russia has it pretty good with oil, demand for oil is going to drop but it can only really drop so much. Other industries and especially services can pretty much flat line to zero. Such a low price of oil also isn't going to be sustainable for more than a month or so, much of world oil production has costs exceeding 30$/barrel, often by a lot. These oil producers will either shut down or run out of money pretty fast. Russians and Saudis on the other hand can continue producing at these prices and still make a profit.
        • by DarkOx ( 621550 ) on Monday March 09, 2020 @10:11AM (#59811002) Journal

          ^^THIS^^

          This is about Russia increasing their influence in the middle east. They may even be able to undercut the Saudis on when delivery and refining products are considered. This will put the shale guys here in the states out of business though.

          Its also true that Putin does not have to worry about anything even resembling an election again for several years. Bad economic times today will be forgotten by then; at least if good ones follow. Putin may be able to capture a lot of additional oil/gas market share this way so he can profit when demand recovers. In the mean time creating a supply glut into a softening of demand costs him less both financially and politically than many of the other players.

        • Russia has run pretty close to $30/barrel production cost for the last few years. USA producers cost to produce a barrel of oil was, on average between 2016 and 2019, about $5 less than Russian producers. USA used to be an expensive producer -- all our easy fields were long ago played out -- until fairly recently with the discovery of the Jack Oil Field in the Gulf of Mexico (2006) and fracking innovation (around the same time, but reset by Great Recession).

          Russia isn't going to be able to stay in the gam
  • by sinij ( 911942 ) on Monday March 09, 2020 @09:09AM (#59810716)
    The market is pricing-in rapid and involuntary de-globalization as a consequence of COVID-19. International supply chains cannot function in the environment of restricted travel and quarantines. Now, as a result of proliferation of just in time shipping and lean manufacturing we will have widespread stoppage with no prospects of quick resumption. This will result in massive hits to revenues. This will also result in run on insurance (as this is how JIT is hedged).
    • by bobbied ( 2522392 ) on Monday March 09, 2020 @11:50AM (#59811552)

      No mention of today's big even then? The Saudi's dumping oil on the market to thwart Putin's "I'm going to keep pumping as much as I can" one finger salute to OPEC? This is not all about some virus, there are other things going on here.

      The supply chain is strained, but NOT crumbling. There may be shortages of some things and higher prices because of the virus, as the supply chain adjusts, but make no mistake, it will adjust fairly quickly. That's how capitalism works you know.

      The stock market is over reacting to a bunch of things right now... We just need some time for cooler heads to prevail.

  • by Kunedog ( 1033226 ) on Monday March 09, 2020 @09:16AM (#59810748)
    An old friend once commented on the artificiality of the stock market as an assessment of value. Unlike a stock, he said, a house simply does not lose most of its value in a day, short of using gas can and a match or other disaster. And if one of those disasters does take away all that value, then the house certainly cannot "gain it back" in a day or two.

    What to make, then, of a measure called a "circuit breaker" that claims to prevent loss of value during what we sometimes might call a "correction" . . .
    • by sinij ( 911942 )
      Tell that to all homeowners in Detroit. House absolutely can lose nearly all value.
      • by spun ( 1352 )

        Not in a day, that's the point.

        • Not in a day, that's the point.

          You would have to sell it every day to find out. Houses just aren't liquid enough to have daily values like that.

        • Re: (Score:2, Insightful)

          Unfortunately, it can happen quite rapidly. A factory closes that used to employ most of the neighborhood's residents. Large rival gangs set up shop. The first minority person moves into a formerly non-minority neighborhood (not defending the practice of blockbusting or racial segregation, simply acknowledging it). Insurers refuse to insure houses there affordably. Lenders (this happened mostly in the more distant past) refuse to write mortgages there. A bus line that used to serve the neighborhood is
      • by plopez ( 54068 )

        but they still have a home. They still have shelter.

    • It's to save on the overtime and counseling costs for the people tasked to clean up Wall St (the road) after massive corrections. Takes a lot of scrubbing to get those stains out, both physically and mentally.

  • Maybe people would learn that high frequency trading is a bad idea.
    • by XXongo ( 3986865 ) on Monday March 09, 2020 @09:30AM (#59810822) Homepage

      Maybe people would learn that high frequency trading is a bad idea.

      If we charged sales tax when stocks were sold, high frequency trading would vanish instantly.

      • Not likely because that tax would have to be restricted to only what was gained in profit. You would have a hard time justifying that you can tax on the amount that was processed because that money would already have been taxed and taxing it subsequently again on every transaction would be wrong for obvious reasons.

        But hey, its not like you folks have any morals... fuck everyone, fuck'em all and let the rich politicians get everything. If you think big bad business is a problem... you have not been lookin

      • by Kohath ( 38547 ) on Monday March 09, 2020 @09:57AM (#59810926)

        Almost all securities trading in the US would vanish instantly. Everyone would move their trading to London or Hong Kong or somewhere else, exactly like what happened when Sweden tried it [wikipedia.org].

        It will never happen in the US. Politicians listen to wealthy campaign donors, not so much to random internet dudes talking about things they don't understand.

        • It will never happen in the US. Politicians listen to wealthy campaign donors,

          I believe that you should consider this a bug, not a feature.

          • by Kohath ( 38547 )

            I believe that you should consider this a bug, not a feature.

            Can we start by considering it a reality, so we can understand what might or might not happen? What good is talk about what you might prefer if you don't even understand what you have and how it works?

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      People who don't know anything about markets say stuff like this.

  • by BAReFO0t ( 6240524 ) on Monday March 09, 2020 @10:00AM (#59810936)

    When research realized in the 80s, that real-world worth doesn't go up and up like the imaginary stock valuations, forcing the disparity to become so big that every 30 years, it *has* to crash, to get the stock valuations back to axtual reality.

    And when then, a law and system is created, to "prevent" that "bad" thing, allowing stocks to rise to insanely imaginary values, completely unrelated to reality.
    Like putting a cork on a volcano and calling it "solved".

    And it crashes anyway, but only worse.
    And all they do, is put a *bigger* cork on it, allowing pressure to rise even more... (Genius!)

    And then an idiotic panic pokes that volcano ....

    How could there *possibly* be anything but the biggest crash ever!

    I prepared. Got a farm, where I can get all the food and water and shelter I need, for helping out. It even has a bunker. And lots of tools and wood for building things. Money could completely devalue, and you didn't even have to notice.
    So have fun with your cancerous market! So long, suckers!

    • by rho ( 6063 ) on Monday March 09, 2020 @10:48AM (#59811236) Journal

      Snark aside, you have a point. So much of our public debt is tied up in private stocks now (public employee pensions, that sort of thing) that market volatility is now looked at differently than it used to be. Nobody cared much if a bunch of traders took the express elevator to the sidewalk when the market tanked back in the day, but now a down market means Fireman Jones loses his pension.

      Our addiction to credit and leverage to keep our economy running at unsustainable rates will eventually come to a screeching halt. The downside to our globally connected economies means that any disaster will ripple out worldwide very quickly, but the upside is that any fix than can be implemented will also happen quickly. We just need to ensure going forward that our fixes are actual repairs and not just duct-tape and baling wire applied to fundamental problems. For example, the market's fetish for efficiency uber alles has come at the expense of robustness. It's really efficient to offshore all of your tech manufacturing to China, but as we now see, China isn't bulletproof.

      Markets love to chase the latest, greatest thing, but that's not always the best way in the long term.

  • Ah (Score:5, Insightful)

    by pele ( 151312 ) on Monday March 09, 2020 @10:01AM (#59810940) Homepage

    So that's how "free market economy" is supposed to work? When you're ripping off the rest of the world then all is good but when you start loosing money then you have "circuit breakers".
    What a novel concept!

    • Re:Ah (Score:4, Informative)

      by Solandri ( 704621 ) on Monday March 09, 2020 @03:45PM (#59812654)
      Read up on stock circuit breakers [investopedia.com]. They were implemented in response to pre-programmed trading. For the free market to work, people have to actually think and make an informed decision about their trades, before they make the trade. But people are lazy, and were setting up automatic sell orders that would trigger if the stock fell below a certain price, no thought required. So it's not addressing a problem with the free market per se. It's a problem with people being lazy and using an automated mechanism to participate in the free market. And that automated mechanism sometimes doing stupid things.

      Also oil prices are subject to an oligopoly manipulating prices [wikipedia.org]. The lower price when they lose control like right now, is actually closer to the true market price. The chaos we're seeing is the result of people who were counting on that manipulation to continue, suddenly being thrown into uncertainty because the manipulation might be ending. Nothing to do with the free market (unless OPEC dissolves, which I consider unlikely).

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