House Calls For Hearing On Stock Market "Glitch"

Lucas123 writes "The House Financial Services securities subcommittee plans to hold a hearing next Tuesday to examine what caused the US stock market to plunge almost 1,000 points in a half hour Thursday, and it called on the SEC to investigate possible problems with computer algorithms that may have exacerbated a human order-entry error and led to the precipitous drop. 'Reports have surfaced that much of this movement was potentially as a result of a computer glitch,' Committee Chairman Kanjorski said. 'We cannot allow a technological error to spook the markets and cause panic. This is unacceptable. In this day and age and with the use of such complex technology, we should be able to make sure that our financial markets are effectively monitored and investors are protected.'"

Comments

I guess I just don't see what the problem is

[DarkOx]

So the argument being offered by or worthless President and his cohorts of blowhards on Capitol Hill appears to be something to the effect of:

The market should not move that fast because it means people are speculating on various herb behaviors and looking to turn quick profits by being on one side or the other of a brief out sized move; rather than speculating that a company has better ideas, management, and more desirable products then others and is more worthy of investment.

I have problems with this. Firstly nobody should have money in equities they can't afford to lose ever! Equities even by the definition Obama and friends seem to like are for growth; and growth almost always implies risk. Money you can't afford to lose belongs on deposit at an insured bank. The rest in dept instruments like bonds, which offer varying degrees of growth and risk and its usually possible to quantify the downside unless the government steps in and gives you a screw job. Remember the real criminals, the ones truly breaking the rules on Wall Street are in Washington. Equity investing is a gamble always has been and was always supposed to be.

Automated trading does not do anything humans did not do on paper before; going all the way back to when traders shouted at each other on soap boxed from the street corner swapping the certificates right there on the spot. It just does it much faster. People did program these rules you know the computers are just following them. The rules also make sense. If stock you own is tanking in way that it appears its headed for zero you very well might want to unload it while you can. This happened in the old days too; there are plenty of wood cuts depicting the frenzy on the corner of Wall Street.

The market can shed eight or ten percent and gain it all back in the course of a few weeks; most don't complain when that happens.