What a Day

Back in October 2008 when the worldwide markets were crashing, I wrote daily posts to capture my thoughts on what I believed to be a once in a lifetime occurrence. Yet, today's action was in some ways even more amazing.

All sorts of feel-good explanations are being given for the slide--someone accidentally use "b" for billion instead of "m" for million, high frequency trading was triggered as sell orders when the markets crossed beneath their 200=day moving averages, smart market makers took out a bunch of stop orders under the market, etc--all intended to put a positive spin on the damage. I don't buy it.

If it was just a slip-up, why was there no liquidity in the market? Why were bid-ask spreads on options nearly 100% of the exchange price? Why was the market down 3%+ even before the sharp, sudden slide? I get the feeling that the modern complexities of equities markets make them more vulnerable to crashes, not less.

We're once again entering a period of increasing volatility which will culminate in another bear market low. It may not be the final collapse that wipes out the economic system as we know it, but it will cause major pain and suffering.

Notice that though commodities were down across the board, gold rallied to a new all-time high. Gold is on its way to regaining its rightful place in the world as meaningful money.

Share this

2/3rds trades made by computer programs

Were the computers that sold shares on the way down the same ones that bought on the way up? Same stocks and same clients? It would be interesting to know. Or did humans buy it back up?