Slashdot Mirror
Stock Market Sell-Off Might Stem From Trader's Fat Finger
s122604 points out a CNBC story according to which "the catalyst for today's extraordinary price swing (at one point the Dow lost almost 9 percent in less than an hour) may have been because a trader entered a 'B' for billions instead of an 'M' for millions on a trade of Procter and Gamble: 'According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble, a component in the Dow. (CNBC's Jim Cramer noted suspicious price movement in P&G stock on air during the height of the market selloff).' Unbelievable there are no safeguards to protect against this."
because in central EU(let me speak for Germany) - 10^6 is a "Million" you would say million (we all agree) - 10^9 is a "Milliarde" you would say billion - 10^12 is a "Billion" you would say trillion We also have a trillion but if our state debt would be measured in trillions of euros, we all would have "fun" like in the 1930s. Ok this is totally missing logic, he just had fat fingers.
A NYSE Spokesman disagrees with this: http://www.marketwatch.com/story/no-bad-procter-gamble-trades-at-nyse-spokesman-2010-05-06
Sturgeon was an optimist.
http://en.wikipedia.org/wiki/Trading_curb
The first circuit breaker gets tripped at -10%. Today's fall wasn't quite -10%
15 billion dollars cannot move the markets that way, even if it was an accident. That's like trying to blame 2008 on the fraudster at "Societée Generale". It wasn't just the US stock market, it was all the currency markets too. This is trillions of dollars we're talking about, moving away from the Euro and the US dollar and into Asian currencies. The trouble in Greece and the uncertainty about the UK elections were the excuse. The Chinese made a major move into the Japanese Yen yesterday, strengthening it. Today european bankers followed suit. As a result the Yen gained nearly 10% against the dollar, with Cable (GBP.USD) and Fiber (EUR.USD) dropping quite a bit too. This panicked the equities markets.
Seven puppies were harmed during the making of this post.
Unless you're due to retired today and your pension just got blown out of the water.
Put it all under the mattress. Seriously.
Generally, it is recommended that as you approach retirement age, you start moving more and more of your retirement savings out of stocks and into bonds. (Bonds are much less volatile.)
? The Fed's books are already open and reviewed by accountants regularly.
Really? Then please direct me to the assets in Maiden Lanes 1,2,3. Now, I don't mean the 'extend and pretend' valuations they report. Any external reporting is sent over with a topline valuation. Period. They do not provide enough information for any external party to establish values.
Please direct me to FRB NY's communications, oh let's go back 5 years. I don't want it all, just the stuff where it was decided AIG's creditors were paid 1:1 for debt obligations where a haircut (pennies on the dollar) is the norm. And... what about all those side bets that were made good?
Finally, it's not an either 'Business As Usual' or 'Politicize the Fed.' choice. That kind of rhetoric, by design, goes nowhere. Discarding the whole notion of greater transparency for the Fed has already cost us a trillion or so dollars. I'd like to use that money for other things.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
Wall Street has attracted the best and the brightest of all of our people, math PhD's, ... Our most brilliant citizens are pulled into Wall Street as "quants" ... And to do what? To game the system in favor of their wealthy masters at the expense of the middle classes.
Then the PHBs misunderstand and misapply the PHDs' work, and the whole thing comes crashing down on them.
Case in point: Mortgage-backed securities.
Risk on such things is hard to estimate, because it takes a lot of investigation and skull-sweat to evaluate the risk on each mortgage. Evaluating the risk on a bundle of mortgages was so much work it was not practical.
Then the young math whiz proved that price of mortgages was very strongly correlated with risk, and came up with a formula that, given price, estimated risk very well. (Well, DUH! They're correlated because smart buyers and sellers were researching the mortgages, determining the risk, and basing their trading prices on them.)
THen the PHBs came up with something like bonds backed by a "basket of mortgages" (to "average out the risk of individual defaults). Buy the bonds (to finance the mortgages), get paid dividends from the borrowers' payments. Sell THREE sets of bonds against each "basket" of mortgages, with missed payments coming out of the dividends of the third, then the second, then the first, so investors could get different prices and risk/reward tradeoffs from the same basket. So far so good...
But to sell these bonds they needed a rating. So they talked the rating companies into using the shiny new risk-estimating tool to rate them. Oops! Any controls engineer who understands these bonds and the market will recognize that this substituted a positive feedback loop for the signal from the real world. Higher price -> lower risk estimate -> higher price... (The guy who did the original work said not to use it this way - but nobody listened. And he moved on to other things.)
And now that they could get a rating they could get a rating from reputable companies they could sell a bunch of these bonds. So they could buy up mortgages to make more. So this raised the demand for mortgages, which raised the price. The positive feedback loop was kicked off with a big up-push, the ratings went sky high, the prices of the bonds climbed, and the bubble was on.
With the price skyrocketing more people wanted to buy in. So the demand for mortgages went through the roof. Banks and the like could sell any mortgage they could write, even to "NINJA" borrowers with no income, job, or assets. Who cares if some of the loans in the basket are "subprime"? The price says the aggregate risk is low and it will all average out, right?
So the bubble blew up bigger and bigger, with developers building more houses that were bought by more subprime borrowers with more and more unconventional mortgages - until finally there were enough defaults to actually cause problems.
The last straw was probably because a gas price hike made the commute expensive enough that people commuting between big cities and the "executive homes" tightly clustered in former farmers' fields a two-hour commute away from their job could no longer afford both the gas and the payments.
So enough mortgages defaulted that some of the bonds were doing worse than expected. So the demand for them went down. Oops! The positive feedback loop was still in place and it finally got a signal strong enough to get it out of saturation. Lower demand -> lower price -> higher risk estimate -> lower rating -> lower price. Rinse and repeat. Prices for mortgages drop, interest rates rise, more defaults, more positive feedback.
And thus the subprime mortgage market collapsed.
(Then the government throws a trillion or so of our money into pumping it back up...)
Now stock market guys are used to this sort of thing: It's the old chartist vs. value investor dichotomy. Every so often somebody finds a
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
I know far more people who have been screwed over by doctors, mechanics, and contractors than by accountants or investors.
I am a certified accountant. If you believe that, you don't understand accounting at all. I have a textbook downstairs which is all about how accountants can fudge the numbers. Even the best financial records have a lot of slop in them and it is REALLY easy to commit fraud as an accountant often on a very large scale. Even if no laws are broken, finance experts can seriously screw you, often without you even being aware of it. I'm not required to take classes on ethics every year because accountants have been so honorable in the past. If accountants were so honest there would be little need for audits.
No, I'm afraid accountants and finance professionals are no more ethical than anyone else.
Yes, teachers should be paid more, but there should be higher standards for teachers as well.
You get paid more for doing things that either A) other people can't do or B) other people don't want to do. Teaching generally falls into neither category. The ability to teach is not a rare ability and plenty of people chose it as a career. (note that I did not say teach well - that's a different issue) Ergo supply being relatively high compared with demand dictates that teaching will not be a lucrative profession.
There's no reason that teaching should be any less a noble profession (as determined by the general population, not Slashdotters) than being a doctor or professor.
Who said it is less noble? It just pays less. Being a college professor or a doctor requires a PhD or an MD and there are fewer people who have the brainpower and dedication to earn those degrees. Nobility of a profession isn't determined by pay and being a teacher is generally quite well respected.
the dollar has also never gone to zero.
The dollar has lost about 94% of its value since the Federal Reserve was chartered in 1913.
As it happens, the reason we have the gold and silver clause in the constitution is because of the havoc wrought by the collapse of the continental dollar.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Gold never went over $500 an ounce in 1982. That's $1096 today, and gold's current price is $1202. That's almost a 10% gain.
The equivalent of $2000 in today's dollars in 1982, the price you claim gold reached, was $911.59, a much higher figure than what the data shows. This can be verified by looking at current and historical gold prices and using an inflation calculator, which is exactly what I did.
What would prompt you to make up other numbers?
Your brain is not a computer.
He got the year wrong - 1980 was the high. The peak was Jan. 18- 20 1980, $830-$850 = $2146 - $2184 in 2009 CPI- adjusted dollars.
Last 6 months gold has been $1100 - $1200. In highly understated 1980 CPI adjustments, that is about $430 - $470 in 1980 dollars. The price of gold was nearly always higher in real terms from about 12/79 to 6/81. See kitco.com and http://www.westegg.com/inflation/infl.cgi for documentation.
As you said: "What would prompt you to make up other numbers?"
"Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery?" - Patrick Henry