I'm amazed at how ho-hum everyone seems to be about the market meltdown

[Phoebe Loosinhouse]

Particularly amazing is that the powers that be have pretty much admitted that they don't know exactly how and why it happened and are now "reviewing" the circumstances. The "fat finger" oops! did I enter billion instead of million? theory seems to be pretty much debunked.

No doubt some people made big bucks in minutes by profiting on this computer "glitch". I'm sure others were innocently ensnared in a nightmare.Thursday seemed like a techno thriller about some person or persons manipulating the markets and making a killing at the expense of a lot of innocents.

Doesn't this prove what a casino and crap shot our "free market" "invisible hand" stock market really is?

My in-laws regularly schedule buy-offs of their nest egg of company stock. What if they had put in a sell order on Thursday? What if their stock was one of the ones dropping like a rock but didn't lose 60% of value? What if it only lost 59% of value and was outside of the short term trading halt? Imagine seeing your nestegg reduced by more than half in fifteen minutes because of a "glitch" that no one can explain?

The only thing that props up the stock market is confidence that it behaves in an orderly fashion. Thursday proved we can fageddabout that. If they don't know what caused it, what's to say it can't happen again with far worse consequences? The possibility of losing 59% of value for no reason rooted in any reality is enough to keep me out for good.

Now, who still thinks it's a good idea to privatize Social Security into the stock market?

[jody]

1. Perhaps some/many/most are numb realizing they are impotent to do anything, know president/congress

can't do anything but babel inanely and reconciled to becoming the next victim.

[elocs]

2. So, the market melted down. Now that is news.

I knew it dropped, but I didn't know it had melted down.

[Warpy]

8. That 15 minutes of free fall was a meltdown

That whatever triggered it was halted is beside the point. If someone had been asleep at the switch that day, it could have been much worse, that 15 minutes extended to the final 2 hours of the day.

They have to find out everything that triggered this one. If it was market manipulation gone greedily wrong, someone has to go to prison.

This was serious. That the market can be that manipulated by one trader or one small group of traders is frightening.

[northzax]

24. No one stopped it

It was a collective buying spree that stopped it. And there's no one 'at the switch' so to speak, it's a series of computers that look at data in real time, much faster than a human ever could, and stop trading on anything that exceeds certain pre-defined limits. That's what happened to Accenture on Thursday, somehow (and it doesn't really matter in the moment what) someone sold stock for a penny, making the current ticker price a penny, down from $40. And the computers, who actually execute trades, stopped it for human review.

[KonaKane]

3. It's not as much of a crap shoot as you think.

There is actually a fair amount of study and wisdom that goes along with it. My wife is a day trader and she only did so after uncountable webinars, books, and other tutoring by market professionals. Even then, I'll grant you, the best are only "right" about 60 percent of the time.

One more thing - you could easily keep from losing any "nest egg" you have by placing a "stop" on your trades. That is a floor that you set for yourself whereby you are booted out of the trade before losing more than you want to if it goes way south, way fast.

[Zenlitened]

21. Stops were useless during Thursday's sudden collapse, weren't they?

I thought no bids meant market orders were irrelevant, while limit orders were left in the dust by the speed of the fall? :shrug:


edit: missing word

[Phoebe Loosinhouse]

22. You and your wife may not be as smart as you think

http://www.theglobeandmail.com/globe-investor/funds-and-etfs/etfs/stop-loss-orders-turn-into-double-edged-sword/article1560302/

Stop-loss orders turn into double-edged sword
Intended to shield investors from volatility, they backfired during Thursday’s plunge

John Heinzl

Investment Reporter — Globe and Mail Update
Published on Friday, May. 07, 2010 11:48AM EDT

Last updated on Friday, May. 07, 2010 2:13PM EDT

Stop-loss orders are supposed to protect investors when prices plunge, but during Thursday’s market chaos, the strategy may have backfired horribly and contributed to the massive slide in stocks.

A stop-loss order instructs the broker to sell a stock or exchange-traded fund when the price falls below a certain level. But when the price level is breached, the order is automatically converted into a market-order, meaning the sale is executed at the best available price.

Yeah, "study and wisdom", that's the ticket. Good to know you think anyone could have "easily" have kept from losing their nest egg.

A little bit of knowledge . . .

[northzax]

25. That's a 'stop-loss'

Not a 'stop' (speaking of a little knowledge...) a stop-loss order says 'if stock A drops below $x, sell' it's intended for more short term holders of more volatile equities to avoid losing more money than they can afford. It's then automatic, and 's often used by people buying stocks on margin to avoid ending up seriously underwater. In the case of someone doing a reverse dollar cost average like the OP's in-laws, a stop order like 'sell x shares of company Y on Z date UNLESS the price is below A, in which case ask me first' my brokerage house offers such a service, surely most do.

Also, as always. If you are dependent on regular income from selling equities you might want to consider liquidation and moving into cash or cash equivalents.

[Phoebe Loosinhouse]

30. I think you're referring to a "limit" order

But I am clearly no expert and I am sorry how snotty my reply above sounded. I just had already heard that "stops" and "stop losses" were of little to no value in the "incident".

I personally think every small order executed on behalf of an individual and not institutional investing should be reversed to make them whole before the "incident". Imagine being a Proctor&Gamble retiree selling a piece of your nestegg and getting hit with a 59% loss because you didn't make it to the magic threshold of 60%?

The word "nestegg" always makes me think of Albert brooks and Lost in America

[cbdo2007]

26. I agree with the first part of your post but not the second.

I've been studing the market in all of my free time for the past few years and it's turned into a wonderful hobby and second job for me bringing in a pretty good second income. It just happens to match up exactly with how my brain works.

On the second part, stops are great but it most definitely CAN happen that the market falls so quickly that your stops won't catch it in time, especially if you're one of us small timers using one of the online brokerages. Most of the online brokerages are notorious for locking up during major market turmoil and it could easily be an hour before your trade goes through. It should help your wife during a normal market but in our most recent fall last week and even go back to 2008 and there were a few days in there where her brokerage woudl have definitely frozen up before her trade went out automatically.

[Andy823]

4. My opinion

I think this was the big money taking profits, big time, in case there is some kind of tougher regulation coming down from congress, although i doesn't seem to be look to tough so far. I think they bought at rock bottom prices, and now sold making huge profits! I also think that they will be buying back a lot of the same stocks they sold because they still might be able to do it all over again, buy very low, and sell high making millions, maybe billions! If nothing happens as far as tougher regulations go, they know they can do this, if tougher regulations do come about, they made a bundle, and will have plenty of time to find ways "around" the new regulations while the market goes back up! I could be wrong, but this is my view on what happened.

[lunatica]

5. Obviously Obama did it so he can enforce regulations

Just like he blew up the oil rig and pipes so he could stop oil drilling. He probably dropped a nukular bomb in that insanely named volcano in Iceland too. The man is just pure evil

Hey, it's as good a reason as any...

[OutNow]

6. Ho Hum

It is a terrible idea to privatized Social Security. This probably will not happen unless the Democrats lose both houses in 2012, then all bets are off. Unfortunately, thousands of defined benefits pensions have already been legally privatized by turning them into defined contribution accounts.

By this time I believe many people here on DU understand exactly how the equity market is a crap shoot. So, what happened in the market last week doesn't shock me at all.

It's also why I, contrary to most suggested investment allocations, have reduced my holding in stocks and mutual funds to a minimum. My returns will be small, but I'm not willing to roll the dice on the market any longer.

[DJ13]

7. A large number of people didnt believe the rally of the last year was real

Volume on the markets has been terrible all during the pseudo rally as a result.

The average person had been burned too many times to try to jump on a bubble.

That disbelief is likely why few are concerned.

[4lbs]

9. The market drop was precipitated by happenings in Europe, especially Greece.

So, unless you think President Obama or the United States somehow has this great power to stop all this financial trouble from happening in Europe, what is worrying and hair-pulling going to do?

[gravity]

10. Because the markets corrected themselves in minutes

it actually proves that the invisible hand did work in finding the right price in the market after the glitch.

Also 99% of the people who lost money during that day were short term traders and hedge funds. Those who invested long term were not affected by it at all.

[onethatcares]

11. that invisible hand thing is kinda scary

along with the idea it could find the right price for those stocks that fell.

Has anyone seen the man behind the curtain in the recent past?

I'm not poking you with a stick, I'm just wondering how an invisible hand can correct something but not alter it the other way.

[gravity]

13. It was a glitch that caused the drop

Whatever it was, it was something that was something that shouldn't have happened. Large cap stocks just don't dive like that in seconds no matter how much fear is in the markets.

The invisible hand is really just what traders are guessing what the right price should be of a stock. Once traders realized that it was a glitch that caused the drop and nothing tangible changed, they started trading around the best guess which were the prices before the drop.

The invisible hand can get out of order, but it is usually takes a longer period of time to do either generating a bubble or a crash.

Nothing moves real quick unless there was a surprise piece of news out. If you were the man behind the curtain, creating false rumors is the best way to manipulate the markets. Even then, once traders realize it was false, the prices will move back to what they were originally were before the rumors.

[Tuesday Afternoon]

12. invisible hand?

kind of like god, eh?

[dkf]

14. They need to look at electronic trading.

The system simply got overwhelmed.

[Better Today]

15. It's #1 not a meltdown, and #2 anyone with a brain has been expecting it.

[Phoebe Loosinhouse]

16. Expecting what exactly?

I think Proctor and Gamble going from $40 to 1 penny in 15 minutes could be called a meltdown. Who "expects" that?

The fact that it was corrected doesn't mean that it didn't melt down in the first place

[Better Today]

18. Sorry I don't see a 15min oddity as a meltdown. And expecting the market to retract, as it has been

doing regardless of the 15 minute oddity, and I expect will continue to do till it is another 1500-2000 pts down.

[Phoebe Loosinhouse]

19. Nice! A "fifteen minute oddity"

Excellent phrasing and downplaying. Nothing to see here, move along everyone.

If program "investing" causes "oddities" like that, I think we have room for concern.

[cbdo2007]

28. Right....$$Billions$$ of dollars were lost during that "oddity"....you're confusing

the natural 3% drop that was expected with the 15 minutes of terror with many stocks dropping 3-15% or more within minutes, triggering countless automatic trades to sell at unnaturally low prices before recoving before anyone could buy them back again at the true price.

For as much as you think you know about the market, it's obvious you really don't seem to know anything about it.

[Better Today]

29. I know about it, I just don't particularly give a shit that would support this hysteria.

The market is a crap shoot for most investors. If you think otherwise, perhaps you're the one who needs to get real about what the stock market really is instead of pretending that you know.

[Kringle]

17. Greece is going to go out of business ... so what?

visitors won't notice much difference

[ShortnFiery]

20. Guess it's because many of us don't have much invested in our *wealth portfolios*?

:eyes:

[Historic NY]

23. I'm making money with my bank bonds & mutual fund.

[RandomThoughts]

27. Funny isn't it, it shows the failings of the system.

And that is the one story they don't hype.

Its rigged, and that is going to stop, or why have the system at all.

It is just silly to have a system made and rigged for corruption, better to have no system then that.