5/6/10 Plunge is Still a Mystery

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5/6/10 Plunge is Still a Mystery

Post by tadamsmar »

As far as I can see, no one has indentified a trading error.

There was a rumor about European banks halting lending, but I don't see that anyone has claimed that that caused a sufficient panic that explains the events.

I guess it could have been caused by some kind of tipping point related to the system of automated trading. Perhaps the trigger will never be identified.

I wonder if we will ever know? The feds may have limited access to the data, and the people own the data may have a motive to hide or spin the story.
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Post by OkieIndexer »

There are plenty of knowledgeable folks (mostly traders) out there who think it was legitimate selling.

My initial thought yesterday when I saw the Dow going from -600 to -800 to -950 in seconds was "hedge fund liquidation" and "massive deleveraging." And when the Dow went slightly below 10,000, hundreds of computer blackboxes programmed to buy the Dow at 10,000 kicked in, which caused the big bounce.

I think CNBC may be pulling the wool over our eyes with the "data entry error" theory they trotted out quickly yesterday. But I don't know if there's any way to know for certain what happened.
Last edited by OkieIndexer on Mon Jul 26, 2010 2:15 pm, edited 1 time in total.
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Post by tadamsmar »

If it was a hedge fund liquidation, then it seems odd that the firm has not been indentified.
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Post by OkieIndexer »

tadamsmar wrote:If it was a hedge fund liquidation, then it seems odd that the firm has not been indentified.
Well, my initial thought was that it was a bunch of hedge funds deleveraging simultaneously, sort of like October 2008.
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Post by tadamsmar »

If it was a panic based on bank-related rumors, then you would think that would not have turned so in 25 minutes. Lots of buy orders arrived, and the later ones were near the pre-panic values. Yet no good news had been identifed that would reverse a panic so quickly.

Markets crash on panics, but they don't recover that quickly.
Last edited by tadamsmar on Fri May 07, 2010 9:38 am, edited 1 time in total.
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Post by tadamsmar »

OkieIndexer wrote:
tadamsmar wrote:If it was a hedge fund liquidation, then it seems odd that the firm has not been indentified.
Well, my initial thought was that it was a bunch of hedge funds deleveraging simultaneously, sort of like October 2008.
Wasn't that on news? Congress had rejected Paulson's TARP plan, IIRC.
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Post by OkieIndexer »

tadamsmar wrote:If it was a panic base on bank-related rumors, then you would think that would not have turned so in 25 minutes. Lots of buy orders arrived, and the later ones were near the pre-panic values. Yet no good news had been identifed that would reverse a panic so quickly.

Markets crash on panics, but they don't recover that quickly.
Hundreds of those blackbox supercomputers were probably programmed to buy the Dow at 10,000 if it fell that far (it went just below 10,000), and they probably kicked in, causing the big bounce.
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital
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Post by shariron »

Yesterday’s events was yet another affirmation for me of why to be anything other than a Boglehead is pure foolishness for the average investor. While all these crisis, bulls, bears, technical glitches, financial panic, wild swings etc, etc, etc, occur..... I comfortably watch from the sidelines, unwaveringly, with my 60 % VG Total Stock Market / 40% VG Total Bond Market (I’m 40 yrs old) allocation. Thanks Jack.
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Post by Schooly D »

Hege fund liquidations and programmed trading are nothing new. If that were the explanation for yesterday's plunge and rapid recovery we should have seen similar episodes many times over the past few years, but I can't recall any.
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Post by nisiprius »

I think it's disturbing that there's still no explanation almost a day after the event. I don't care whether the trades are executed by "fat-fingered" humans or by artificially-intelligent bots exhibiting artificial panic, don't the exchanges keep records of what happened?

This is not a plane crash where they need to disassemble physical wreckage and transport it somewhere to assemble like a puzzle piece, it's just bits flowing over cables.

I don't believe the "fat-finger" story any more. If a $16 billion trade was really entered, it would have been positively confirmed by now.
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Post by Lbill »

It was a preview of coming attractions. Hey, this was just Greece! There's a convoy of deadbeat countries lined up waiting to implode. The fun has just begun.
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Post by tadamsmar »

Lbill wrote:It was a preview of coming attractions. Hey, this was just Greece! There's a convoy of deadbeat countries lined up waiting to implode. The fun has just begun.
Such panics cause markets to fall quickly, but why the unusual quick recovery?
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Post by Fbone »

If it was human error of some type it wouldnt be made public until the company's risk management team formed a plan of action to minimize liability and public relation concerns.
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Post by DRiP Guy »

I hope this thread remains, to document what we learn, when we learn it, about the specifics of this event. It seems this is not a 'singularity' ; that there have been similar (but not as dramatic) events in the past... also poorly understood, and also attributed to someone 'fat fingering' an entry. That does not give me the feeling of a robust and honest market, and I personally think that is why rather than just returning to baseline, the markets remain down 3 or 4% yesterday, and are down 3-4% today -- if there is one thing people expect from their markets it is the *appearance* of stability, rationality and transparency. It is seeming we can't even keep the facade up, not to even delve into the reality...

(opens popcorn, sits on sideline)
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Post by tadamsmar »

I figured the thread might be a around for a while if this huge dip remains unexplained, that's why I put the date in the title.
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Post by Tuxx »

Some one made a lot of money and it was not the retail investor.
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Post by tadamsmar »

Here's a theory. A big sell order (or many sell orders) went in on PG causing it to drop 20 points - that's about 150 on the Dow. That set off a panic in a market already jittery about Greece. But some traders were quickly aware that the odd PG sale set off the panic and those traders brought the market back up quickly. CNBC reported that NYSE market makers were aware in real-time that PG's drop appeared to set off the panic.

There was a law suit announced against PG over chemical rashes caused by Pampers, maybe that was somehow the cause of the sell off. That news seems to have hit the public about 5 hours after the PG sell off, as far as I can tell.
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Post by tadamsmar »

Actually just an investigation by a personal injury law firm was announced, not really a law suit.
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Post by steve88 »

how about the plunger team buying in?
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Post by Lbill »

From Wikipedia:
In finance, Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong, spread west through international time zones to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%
A degree of mystery is associated with the 1987 crash, and it has been labeled as a black swan event.[7] Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached.
http://en.wikipedia.org/wiki/Black_Monday_%281987%29

Call 5/6/10 Black Thursday. But is May 10 the next Black Monday? Hey, is that light I see a locomotive?
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Post by InvestingMom »

I also find it very disturbing that we don’t know why the market crashed and then quickly recovered. However, I find it more disturbing that there is not more outrage about it. The media seems to cover it humorously, as if, wow what a fun ride. (I just about crashed my car when I heard that the market had fallen almost 1,000 points on the radio.)

I would like to hear more strongly worded statements from our politicians that someone is going to find the underlying cause. I did read that the SEC is investigating, but I have no faith in the SEC since they were unable to identify crooks like Bernie Madoff or identify "going concern" issues with the big banks.

This creates tremendous uncertainty and suspicion that we don't need right now (we have enough of it with the economy.)
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Post by chaz »

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Re: 5/6/10 Plunge is Still a Mystery

Post by zeugmite »

I thought an explanation was already given: there was no "price" for a small period because the high frequency trading desks that the markets have increasingly relied on stopped providing liquidity. NYSE also hit their so-called "liquidity replenishment points" (fancy trading bands) and took a break. During this time, the bid-ask spread was so large, "price" became meaningless/undefined.
Last edited by zeugmite on Fri May 07, 2010 11:10 am, edited 1 time in total.
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Post by VictoriaF »

nisiprius wrote:I don't believe the "fat-finger" story any more. If a $16 billion trade was really entered, it would have been positively confirmed by now.
Here is what I don't understand. Do people actually spell out "million" or "billion"? Or do they enter numerals with zeros? If I wanted to make a $16M trade I would enter $16,000,000. If I made a mistake, I may have entered $160,000,000 or $160M, not $16B. The latter would be $16,000,000,000 and I would have to press zero three extra times, which is highly unlikely. Even visually $16,000,000,000 looks very different from $16,000,000; it has 40% more digits!

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Post by VictoriaF »

Lbill wrote:From Wikipedia:
...
A degree of mystery is associated with the 1987 crash, and it has been labeled as a black swan event.[7] Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached.
http://en.wikipedia.org/wiki/Black_Monday_%281987%29

Call 5/6/10 Black Thursday. But is May 10 the next Black Monday? Hey, is that light I see a locomotive?
On 11 May, the 2nd edition of "The Black Swan" will be out. Each time we have a Black-Swan event Taleb gets credit. ;)

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Post by Lbill »

I think Taleb collects a royalty each time the phrase "black swan" is used. :) He calls that a "white swan" event.
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Post by CaliJim »

..
Last edited by CaliJim on Thu Apr 14, 2011 3:05 pm, edited 1 time in total.
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Post by strafe »

People are taking mark-to-market a bit too seriously. In the absence of an urgent need to buy/sell at that exact moment, do you really care about the minute-to-minute spot price? Shut off CNBC, and it never happened!

This article by William Bernstein comes to mind:
William Bernstein wrote:Of Risk and Myopia
To repeat: the risk tolerance of an investor is determined largely by how often he checks his portfolio. This is nothing new. Benjamin Graham commented in The Intelligent Investor that holders of obscure mortgage bonds happily held onto them through the depths of the Depression until they eventually recovered their value because they were highly illiquid and not often quoted. On the other hand, holders of frequently-quoted corporate bonds (far less risky but priced daily in the papers) panicked and sold after their initial drop. The largest financial holding of most families is their house—it's a good thing we don't see its value printed every day in the financial section.
You can decrease the risk of your portfolio without decreasing return simply by checking its value less frequently. That's a free lunch.

nisiprius wrote:I think it's disturbing that there's still no explanation almost a day after the event. I don't care whether the trades are executed by "fat-fingered" humans or by artificially-intelligent bots exhibiting artificial panic, don't the exchanges keep records of what happened?

This is not a plane crash where they need to disassemble physical wreckage and transport it somewhere to assemble like a puzzle piece, it's just bits flowing over cables.

I don't believe the "fat-finger" story any more. If a $16 billion trade was really entered, it would have been positively confirmed by now.
Would a $16 billion trade show up in the records as a single transaction/order? I bet it's split into thousands of small orders coming through numerous trading desks/brokers/whatever they're called. At least with a plane we know all the pieces came from a single aircraft? Is such a decentralized process traceable?

What worries me most about all this is that some cyberterrorist out there could hack into the stock exchange computers, manipulate quotes, and provoke reactionary traders into causing a permanent financial meltdown.
Last edited by strafe on Fri May 07, 2010 11:36 am, edited 1 time in total.
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Post by nisiprius »

InvestingMom wrote:However, I find it more disturbing that there is not more outrage about it. The media seems to cover it humorously, as if, wow what a fun ride.
My theory is that this is the real personality of Wall Street showing. I think the mainstream of "Wall Street" consists of risk-lovers; competitive, macho types who are addicted to the adrenaline rush and live for the days when they can "tear the face off" somebody. And the financial press is part of this and understands it.

Wall Street is peopled with gamblers who have discovered a game where the house percentage is negative--the odds work in their favor--so it attracts a much smarter class of gamblers than the casino. Like poker I guess, there is doubtless an element of skill, but the gambling element is there.

The market has the important side effect of supplying capital so that businesses can expand factories and do an honest job of work selling useful merchandise to people who need it, but that's not what it's about.

The market, unlike the casino, can be of genuine value to individual investors and retirement savers, but it was not created for that purpose. With a few rare exceptions who I think include John C. Bogle, that too is a side show. The brokerages are happy to have us buy their wares, and they are willing to serve us by creating minivan products for us as well as Indycars for their traditional clientele. But the basic mindset is about driving fast around the track at the hairy edge of control, and if you crash and burn, that's all part of the fun.
Last edited by nisiprius on Fri May 07, 2010 11:38 am, edited 2 times in total.
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Post by zeugmite »

strafe wrote:What worries me most about all this is that some cyberterrorist out there could hack into the stock exchange computers, manipulate quotes, and provoke reactionary traders into causing a permanent financial meltdown.
I hope the feeds brokers and hedge funds are using are authenticated and encrypted. Otherwise you don't even need to hack into exchange computers to do what you say.
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Post by gotherelate »

InvestingMom wrote:I also find it very disturbing that we don’t know why the market crashed and then quickly recovered. However, I find it more disturbing that there is not more outrage about it. The media seems to cover it humorously, as if, wow what a fun ride. (I just about crashed my car when I heard that the market had fallen almost 1,000 points on the radio.)

I would like to hear more strongly worded statements from our politicians that someone is going to find the underlying cause. I did read that the SEC is investigating, but I have no faith in the SEC since they were unable to identify crooks like Bernie Madoff or identify "going concern" issues with the big banks.

This creates tremendous uncertainty and suspicion that we don't need right now (we have enough of it with the economy.)
Maybe the stock market is simply not for the meek (prudent/cautious/conservative/timid/risk-averse). Aren't the circuit breakers a relatively new phenomenon, having been instituted after Black Monday in 1987? How safe can the market be made and still allow speculative trading?

-Grandpa

edit: I composed this before nisiprius posted a similar point much more eloquently.
Last edited by gotherelate on Fri May 07, 2010 11:41 am, edited 2 times in total.
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Post by strafe »

InvestingMom wrote:I also find it very disturbing that we don’t know why the market crashed and then quickly recovered. However, I find it more disturbing that there is not more outrage about it. The media seems to cover it humorously, as if, wow what a fun ride. (I just about crashed my car when I heard that the market had fallen almost 1,000 points on the radio.)

I would like to hear more strongly worded statements from our politicians that someone is going to find the underlying cause. I did read that the SEC is investigating, but I have no faith in the SEC since they were unable to identify crooks like Bernie Madoff or identify "going concern" issues with the big banks.

This creates tremendous uncertainty and suspicion that we don't need right now (we have enough of it with the economy.)
Yes, we need some strongly worded statements from politicians (pounds fist), followed by a congressional inquiry. Toss a few people in prison for good measure.

"You'll hunt me. You'll condemn me, set the dogs on me. Because that's what needs to happen. Because sometimes... the truth isn't good enough. Sometimes people deserve more. Sometimes people deserve to have their faith rewarded." --Batman
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Post by zeugmite »

nisiprius wrote:Wall Street is peopled with gamblers who have discovered a game where the house percentage is negative--the odds work in their favor--so it attracts a much smarter class of gamblers than the casino. Like poker I guess, there is doubtless an element of skill, but the gambling element is there.

The market has the important side effect of supplying capital so that businesses can expand factories and do an honest job of work selling useful merchandise to people who need it, but that's not what it's about.
Actually, it was what it was about in the beginning, I'm sure. More and more it becomes not and it's hurting its primary purpose. That's certainly something the regulators should be thinking about at a high level. There are technological ways to make markets orderly, but then it wouldn't be that "exciting" and it would destroy a whole industry, one of the few that America (or some of its members) is still making a killing in.
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Re: 5/6/10 Plunge is Still a Mystery

Post by InvestingMom »

zeugmite wrote:I thought an explanation was already given: there was no "price" for a small period because the high frequency trading desks that the markets have increasingly relied on stopped providing liquidity. NYSE also hit their so-called "liquidity replenishment points" (fancy trading bands) and took a break. During this time, the bid-ask spread was so large, "price" became meaningless/undefined.
I am no expert (obviously quite the opposite) but isn't there something wrong with this and then can't we prevent it from happening. Shouldn't they stop all trading for a limited time if this occurs?

CaliJim wrote:
I'm not sure that a satisfactory narrative will ever emerge. One problem with understanding panics like this is that each participants story can ring true without giving the clarity that one is looking for. Participants will way says something like:

"I don't know what happened, I just stopped buying, it was too volatile".
Or
"I was afraid. I sold at that price because the market was tanking and I wanted out."
or
"We had a margin call and needed to sell in order to raise cash."

It is doubtful that someone is going to come forward and say "We went short, then cornered the market and drove it down, and made bank" or something like that.
Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it? In otherwords there has to be something very wrong with our system if one entity can drive the market down to such an extent to cover their short? Again, forgive my naivety (which is why I only invest in index mutual funds.)
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Post by InvestingMom »

strafe wrote:
InvestingMom wrote:I also find it very disturbing that we don’t know why the market crashed and then quickly recovered. However, I find it more disturbing that there is not more outrage about it. The media seems to cover it humorously, as if, wow what a fun ride. (I just about crashed my car when I heard that the market had fallen almost 1,000 points on the radio.)

I would like to hear more strongly worded statements from our politicians that someone is going to find the underlying cause. I did read that the SEC is investigating, but I have no faith in the SEC since they were unable to identify crooks like Bernie Madoff or identify "going concern" issues with the big banks.

This creates tremendous uncertainty and suspicion that we don't need right now (we have enough of it with the economy.)
Yes, we need some strongly worded statements from politicians (pounds fist), followed by a congressional inquiry. Toss a few people in prison for good measure.

"You'll hunt me. You'll condemn me, set the dogs on me. Because that's what needs to happen. Because sometimes... the truth isn't good enough. Sometimes people deserve more. Sometimes people deserve to have their faith rewarded." --Batman
Ha ha.
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Post by nisiprius »

VictoriaF wrote:
nisiprius wrote:I don't believe the "fat-finger" story any more. If a $16 billion trade was really entered, it would have been positively confirmed by now.
Here is what I don't understand. Do people actually spell out "million" or "billion"? Or do they enter numerals with zeros? If I wanted to make a $16M trade I would enter $16,000,000. If I made a mistake, I may have entered $160,000,000 or $160M, not $16B. The latter would be $16,000,000,000 and I would have to press zero three extra times, which is highly unlikely. Even visually $16,000,000,000 looks very different from $16,000,000; it has 40% more digits!

Victoria
Oh, well, as for that... I'm the guy that walks to the kitchen with frozen peas and a dirty plate and puts the peas in the dishwasher and the plate in the freezer. I can easily imagine saying to myself, "$16 million," then the phone rings and distracts me, I put it down, say "Now, about the $16 billion trade" and typing in $16,000,000,000 and not saying "oops" until three seconds after clicking OK. Or looking carefully at the number $16,283,916.23 written down on a Post-It and carefully typing in one-six-two-eight-three-must-scratch-itchy-ankle-right-now-two-eight-three-nine-one-six-point-2-3-OK-OOPS.

I'd even believe Rosemary Wood's story of how she accidentally erased 18 minutes of the Watergate tape, having efficiently and mechanically operated the interlocks to press "record" when I meant to press "play" myself. If it hadn't transpired that there the 18-minute gap was actually the result of dozens of separate erasures.
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Post by OkieIndexer »

Schooly D wrote:Hege fund liquidations and programmed trading are nothing new. If that were the explanation for yesterday's plunge and rapid recovery we should have seen similar episodes many times over the past few years, but I can't recall any.
We saw some examples of that in fall 2008.
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Post by OkieIndexer »

tadamsmar wrote:Here's a theory. A big sell order (or many sell orders) went in on PG causing it to drop 20 points - that's about 150 on the Dow. That set off a panic in a market already jittery about Greece. But some traders were quickly aware that the odd PG sale set off the panic and those traders brought the market back up quickly. CNBC reported that NYSE market makers were aware in real-time that PG's drop appeared to set off the panic.

There was a law suit announced against PG over chemical rashes caused by Pampers, maybe that was somehow the cause of the sell off. That news seems to have hit the public about 5 hours after the PG sell off, as far as I can tell.
It's pretty funny to think diapers could cause $1 trillion to momentarily be wiped off the U.S. stock market. :lol:
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital
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Post by VictoriaF »

OkieIndexer wrote:
tadamsmar wrote:Here's a theory. A big sell order (or many sell orders) went in on PG causing it to drop 20 points - that's about 150 on the Dow. That set off a panic in a market already jittery about Greece. But some traders were quickly aware that the odd PG sale set off the panic and those traders brought the market back up quickly. CNBC reported that NYSE market makers were aware in real-time that PG's drop appeared to set off the panic.

There was a law suit announced against PG over chemical rashes caused by Pampers, maybe that was somehow the cause of the sell off. That news seems to have hit the public about 5 hours after the PG sell off, as far as I can tell.
It's pretty funny to think diapers could cause $1 trillion to momentarily be wiped off the U.S. stock market. :lol:
Procter and Gamble has now earned bragging rights for power wiping. :)

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Re: 5/6/10 Plunge is Still a Mystery

Post by CaliJim »

..
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Post by tadamsmar »

Sometimes, markets can return to rationality while you are still solvent.
Wolkenspiel
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Re: 5/6/10 Plunge is Still a Mystery

Post by Wolkenspiel »

InvestingMom wrote:Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it? In otherwords there has to be something very wrong with our system if one entity can drive the market down to such an extent to cover their short?
As I said in a related thread, I am sure there are many many smart people trying to figure out exactly what happened yesterday - such that they can exploit the underlying inefficiency systematically for their profit.
Wolkenspiel
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Re: 5/6/10 Plunge is Still a Mystery

Post by Wolkenspiel »

CaliJim wrote:
InvestingMom wrote: Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it?
I would rather have a free market set prices than a government regulator. I don't want a regulator saying when I can and cannot trade, or how much I need to pay for an asset.

I'm sure the guys who took haircuts in the panic yesterday are working to improve their HFT algorithms. These things tend to be somewhat self-correcting.
I would *love* to know who was on the winning and losing side of the trades that happened yesterday - did the HFT funds trade amongst themselves, or was it mostly poor souls with ill-advised market orders that got caught out?

One winner is clear: This will mean gainful employment for armies of lawyers.
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tadamsmar
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Re: 5/6/10 Plunge is Still a Mystery

Post by tadamsmar »

Wolkenspiel wrote:
CaliJim wrote:
InvestingMom wrote: Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it?
I would rather have a free market set prices than a government regulator. I don't want a regulator saying when I can and cannot trade, or how much I need to pay for an asset.

I'm sure the guys who took haircuts in the panic yesterday are working to improve their HFT algorithms. These things tend to be somewhat self-correcting.
I would *love* to know who was on the winning and losing side of the trades that happened yesterday - did the HFT funds trade amongst themselves, or was it mostly poor souls with ill-advised market orders that got caught out?

One winner is clear: This will mean gainful employment for armies of lawyers.
I have a feeling that the losers were selling based on the market price slide, and the winners were those that noticed that the volume was not there and the an odd PG trade set off the panic.
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tadamsmar
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Post by tadamsmar »

Panic selling is not that unusual, but to have a segment of the market start buying after only 10 minutes of panic selling is unusual.

Some sort of special indicator must have set off that buying.
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Post by jack1719 »

Schooly D wrote:Hege fund liquidations and programmed trading are nothing new. If that were the explanation for yesterday's plunge and rapid recovery we should have seen similar episodes many times over the past few years, but I can't recall any.
As the computer age has taken complete control,more and more of buying and selling is automated,in fact the vast majority of this day and age buying and selling is automated & programmed now,and when certain stocks or certain market level is breached on the low side,its triggers an automated response~"sell" ..I think thats what happened,kinda like a snowball scenario...

I think it could have been minor glitch(certainly would not be the first) that set off automated triggers..and snowballed..

How else can one explain such a superfast crash and then 75% return with a few minutes..computers all went to automated sell when the glitch happened and breached a low mark that trigged an automated response in computers,then when it came back the minor glitch straighened,computers all signaled buy..
InvestingMom
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Re: 5/6/10 Plunge is Still a Mystery

Post by InvestingMom »

CaliJim wrote:
InvestingMom wrote: Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it?
I would rather have a free market set prices than a government regulator. I don't want a regulator saying when I can and cannot trade, or how much I need to pay for an asset.
Just for the record, I don't think I said or suggested that the govenment should set prices. As for when you can or cannot trade, that is already regulated and there are many other regulations now in place to help protect investors. I only suggested (or meant to suggest) that we should continue to endeavor to understand and prevent any loop holes that would allow someone to manipulate the markets.
jack1719
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Post by jack1719 »

I have always said use limit orders and not market orders,over and over on threads on here..what happened yesterday just really strengths that arguement.

as for stop loss orders,I think in this day and age of majority driven computer automated & programmed buying and selling,that you could have massive sell automated responses when a level is breached and then just as quick massive automated buy signals..using that in this day and age can be a risky thing..
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Re: 5/6/10 Plunge is Still a Mystery

Post by VictoriaF »

CaliJim wrote:
InvestingMom wrote: Don't we have a responsiblity to find out what could cause such a thing to happen and try to implement changes to prevent it?
I would rather have a free market set prices than a government regulator. I don't want a regulator saying when I can and cannot trade, or how much I need to pay for an asset.

I'm sure the guys who took haircuts in the panic yesterday are working to improve their HFT algorithms. These things tend to be somewhat self-correcting.
What are HFT algorithms? Who uses them?

Thanks,
Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
Tuxx
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Re: 5/6/10 Plunge is Still a Mystery

Post by Tuxx »

VictoriaF wrote:What are HFT algorithms? Who uses them?

Thanks,
Victoria
http://www.cnbc.com/id/15840232?video=1487183693&play=1

What happens when machines take over, with Mark Fisher, MBF Clearing Corp.

video at the link
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