A modest prediction: We will never know the precise details of the “technical error” that caused Thursday’s stock market madness.
We’ll be told something. It might even be truthful. But it won’t (OMG will I ever forgive myself for encouraging conspiracy theories?) be the whole story.
And here’s a bet, though I wouldn’t stake much money on it (and in fact, I’m hearing already that I may be wrong): The theory they’ll end up with was the one that says a single trader mistakenly typed in billion when he meant million — something along those lines. Sort of like the “lone gunman” theory of assassination, only the guy or woman won’t have acted with malice, just momentary inattention.
No matter what the theory, we won’t be expected to ask many questions about the system that enabled one booboo, human or electronic, to turn into the NYSE’s most chaotic day and a threat to world financial stability. The Wall Street Journal and maybe even Wired will do some articles on how terrible it is that important trading systems are so vulnerable to error, Congress will hold hearings and promise a fix. Then the issue will disappear.
But I’m not paranoid or anything like that. Oh heavens, not me …
1) How can they know which trades to cancel? If I was a day trader and saw P&G go down I might be tempted to sell any Beauty/grooming/diaper stock I had (even at a loss). Would they bother to cancel that trade?
2) More disturbing is that they appear to have the authority to cancel trades in the first place.
I wonder more about the recovery than the dip. Stocks are insanely overpriced, and have been so for a long time. The only reason to buy any stock these days is because you think you can sell it to a greater fool at a higher price.
So the dip made perfect sense to me. About time! But within minutes, something happened, and the prices shot back up.
I’d like to hear the explanation of that trick. Like Claire, I know better than to expect the truth. But I also note that everyone has been discussing the dip, and no one is asking about the instant recovery.
Even a paranoid can have enemies. (:~>)
– Henry A. Kissinger
I don’t claim to understand it (makes my head spin trying), but this might shine some light on the subject: “How the New York Stock Exchange Really Works” (LewRockwell.com). I wouldn’t be surprised if the whole thing was just a charade. I’m just glad I have nothing to do with it.
The stock market conducts its trades electronically. That means via computer. There isn’t really any money changing hands at this level. It’s all electrons. Something happened that threatened to topple an already delicate and stressed financial system, and someone in control of the trading systems (the FED?), decided to fix it. Data was purged, databases restored from a few minutes before, some adjustments made and wa-la, the system was set back on an “even” keel. The players know better than to ask serious questions.
One thing I find conspicuously absent in all the news articles I have read is any mention of the infamous “Plunge Protection Team”.
This was obviously a “plunge”, and somebody obviously did something to goose the stock prices and “calm” the markets. I seriously doubt that there were enough investors trying to “catch the falling knife” to bid stock prices back up to “normal”.
“some adjustments made and wa-la,”
Sorry to nitpick Matt, but I think the word you were looking for is “voila”