Comments on: How a market crashes

By: AlbertSparks

AlbertSparks — Mon, 25 Jul 2011 04:29:55 +0000

The stock market crash on Thursday afternoon took financial Web sites down with it, as people hurried online to make trades and check their investments. Yahoo Finance, Fidelity.com, and Google Finance are among the sites that people complained were unavailable or slow for a period during the afternoon. This has definitely affected the e-commerce marketplace, which has become the virtual main street of the world. Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. The stock market crash has caused much volatility in the marketplace.

Albert
http://www.sparkstone.co.uk

By: M.Kingsley

M.Kingsley — Fri, 24 Jun 2011 09:56:26 +0000

The stock market business is a bustling arena of trading stocks. It is an amazing area to learn about business rise and fall and by spending time observing you can see how something like this can occur. The monitoring of the specific stock changes will tell the story of what went on for this short moment the 5th or 6th May. There are many programs available to ensure you are abreast of falling and rising shares. It appears at this time, stock investors pulled their money, this then created the flood of selling shares and reentry soon after. The graph is a great snap shot. – http://www.cifgltd.com

By: Macwizz

Macwizz — Wed, 26 May 2010 19:48:08 +0000

Anybody that thinks this was a mistake from some trader hitting the wrong key, should ask why the SEC allowed some trades up to 60 to go threw. while others were not.

This was not a mistake. the world economy is in a state of deflation. I found it strange they passed a bailout for 1 trillion for the EU, in just one weekend. had they not done this. the markets would have gone further down on Mondays opening trade.

All the bailout money in the world is not going to stop it either. they are just prolonging the painful truth that distressed companies need to fail. the world is at over capacity from to many cheap goods. interest rates at zero, index is rising and to many banks with unknown debt they hold. if the mark to market rule was to take affect right now. banks would fail right and left from the sheer weight of the credit default swaps, and housing market prices falling into the lower and upper 40% range.

The ride is just beginning. so put on your seatbelt, strap in, and watch the show. cause your fixing to see what happens with government bailout’s, and entitlement spending out passes revenue growth.

You have a nice day now.

By: dWj

dWj — Sun, 09 May 2010 21:27:33 +0000

@dicryan That would probably be a more compelling point if it were actually true. Retail customers typically have to post collateral worth more than the value of the stock being shorted, and typically earn no interest on it (or, if they borrow the cash to post as collateral, they pay the same call rate as they would for a long position done similarly on margin); while the obligations for institutional investors are different, they are typically parallel, with an ability to buy or sell by putting up some amount of collateral that usually is a slightly greater disadvantage to the short side than the long.

By: dicryan

dicryan — Sun, 09 May 2010 20:09:39 +0000

To invest, you have to put up cash – to short, nothing. Obviously there is a ton of whatever out there – waiting to short.
Make them put up cash to short and see how things change -

By: Acetracy

Acetracy — Sun, 09 May 2010 14:45:09 +0000

HFT, Program Trading, Proprietary Trading, etc. have literally taken over the financial markets. Why? Basically because of the US tax rates.

Think about it. In the 1970s the US experienced the most consequential change in its modern political and economic status: the oil embargo. Cheap fuel, the basis of the much of the US economic boom since WWII, was over and so was the US political clout. It had a major Achilles heel with no remedy. The equity markets did sell off hugely as to be expected. However, not a single major bank or brokerage firm failed. No bail outs, no Fed intervention, etc. Why? Because speculative trading, both in derivative and program trading, was for the most part non-existent.

Fast forward to 1986 post Reagan tax cuts and new Fed chairman: short term cap gains tax dropped from 70% to 35%. Only 15% points higher than long term cap gains tax rates. Plus derivative income tax rate on options of broad based indices went down to 10%. Greenspan pushed for deregulation and easy credit through low margin requirements. No wonder derivative business and hedge fund trading boomed. Now we see the consequences.

Main Street investors are now absolutely scared to go into US equity markets. Even knowledgeable Wall Street veterans realize that one of the bases of capitalism, long term equity investment, has been replaced by short term traders.

Unless the US changes its tax code (tax s/t gains and derivative trades at 80%), the boom/bust destruction will continue.

By: andy_c_m

andy_c_m — Sat, 08 May 2010 02:12:10 +0000

This is no techinical failure as the stock market people are tring to make us belivie , this is a money laudering operation, someone with “cold” money or money that he cannot lawfully declare, lets say drug delaing money, he makes the sell pg at 62 and the buy at 49 and the other partner of the operation lets say a stock fund buys at 32 and send at 49 in a daytrade , the fund gets the loss the traficant send the “cold” money to the inescrupulous fund manager, the huge and almost equal volume of the these orders says so and i susgest IRS and SEC perople shouls examin very weel all the participants of this operation

By: DanHess

DanHess — Fri, 07 May 2010 16:12:33 +0000

I am glad that blame is being placed where it belongs, on algorithmic trading.

High frequency trading makes up 75% of volume and serves no other purpose than to find the other side’s limit price and eat up the difference.

http://market-ticker.denninger.net/archi ves/1259-High-Frequency-Trading-Is-A-Sca m.html

It is a fraud and a major reason why traders like Blankfein, in charge of this manipulation, really ought to be in orange jumpsuits.

High frequency trading serves no meaningful purpose and the suggestion of a tiny transaction tax is right on. High frequency trading, as we have seen is not real liquidity but make-believe liquidity that vanishes when we need it most.

The unfortunate thing is that as a result of this, more people will try to do limit orders, which are just what high frequency algorithms need to skim the difference. Market orders won’t do. Thankfully for Goldman Sachs and others, high frequency trading fraud is about to become even more profitable.

By: usaf7209

usaf7209 — Fri, 07 May 2010 13:30:20 +0000

My investment strategy has changed. There is absolutely no way I can cope with this grand casino. I am buying 5 $1.00 lottery tickets each week. At $260 per year it will be less costly and incredibly more sane.

By: niveditas

niveditas — Fri, 07 May 2010 03:09:27 +0000

I’m wondering why everyone is focusing on PG and ignoring the really weird trades in Accenture, Exelon, a whole bunch of Vanguard ETFs, all of which traded down to zero?

By: butopia

butopia — Fri, 07 May 2010 02:39:12 +0000

The 16 billion DOLLAR VALUE trade was in the ES. The mistake was 100 fold. If you were watching the DOM at that time (and your charts didn’t stop)you saw super thin market and as the futures dropped, all the linked trading cascaded things lower.

On the so-called “glitch” trades like Accenture, look at any Level 2 bid/ask and you will see resting orders at the extremes. If some dummy has a stop market order hit and everyone backs away (like the goobers at the NYSE did) the electronic market is all that is left and if 1 cent is the best BID, that is the market price that is filled. Any REAL market maker would have stepped up and bought Accenture at a dollar or ten, if they had not been asleep at the wheel. Same with PG. What knowledgible MM would let it trade to $40? What a joke.

If you don’t know how to drive a car, stay off the road. If you don’t know how to enter a stop limit order or understand how electronic trading works don’t do it.

The real crooks are those like GS, C, BAC, etc etc that manipulate the market with the Fed and govt’s assistance.

You are sadly mistaken if you think the game isn’t rigged.

By: fred5407

fred5407 — Fri, 07 May 2010 02:03:35 +0000

I think the market is unstable at best. The market people may have to outlaw automatic sell or buy triggers to put stability into the market. Otherwise you will see investors departing in droves and the traders can keep playing there little games for each other.

By: MarkC123

MarkC123 — Fri, 07 May 2010 01:31:19 +0000

Felix’s article this morning about investing retirement funds in TIPS instead of equities could not be more prescient…

http://blogs.reuters.com/felix-salmon/20 10/05/06/why-invest-retirement-funds-in- stocks/

By: sedrak

sedrak — Fri, 07 May 2010 01:29:46 +0000

My problem with the fat finger theory, assuming that a trader did indeed send out an order for billion shares instead of million, does P&G even have that many shares outstanding, or the order just scooped up all the shares available in the account or available to be borrowed (in case of short sale)? seems like just some error on the tech side to me

By: jomiku

jomiku — Fri, 07 May 2010 00:26:10 +0000

Why did Nasdaq cancel trades?