Before Helaine and I had a child I was already saving for our retirement. We’ve got a 401-K plan at work. It’s been a slow but steady stream of cash compounded over decades. It’s a nice nest egg and much of it is still in the market.
Thursday the market was the wrong place to be. Stocks tanked then rebounded–mostly.
On most days the Dow Jones Industrials being off 347 points would be tragic. On Thursday there was relief. The close was 600+ points above the session’s low!
You’re probably not worried about how the Foxes will make ends meet after TV dries up. Fine. There’s another more substantial reason to worry about what happened Thursday even if you’re not in the market.
A gaping hole ripe for terrorism has been revealed. That’s because the market meltdown seems to have been mostly artificial–a cascade triggered by one mistaken trade! If it could happen by accident it could certainly happen on purpose!
NY Times: [W]ithin a few minutes, the United States stock market appeared to be collapsing. Some of the decline was real, but another part of it was simply trading gone awry.
Temporary plunges in the price of Procter & Gamble and 3M, the former Minnesota Mining, cost the Dow about 300 points, and appeared to be the result of errors, not intentional sell orders. Similarly, Accenture, a large consulting firm, fell from more than $40 a share to one penny.
One rumor, retold multiple times during the afternoon and evening, had a trader mistakenly hitting a “b” instead of an “m” on a computer keyboard. The effect was to signal billions when he meant millions!
As the market quickly fell automated trading kicked in at predetermined decision points. The falling market was creating its own inertia driven by computers. Think of a snowball rolling down a steep hill. It fell so fast humans lost control!
Why blow up Times Square or hijack airplanes when a few well placed computer hacks or even strategically placed takeovers of brokerage houses could bring down the U.S. economy? I’m serious.
So, yeah, it was a scary afternoon for my portfolio. It was scarier still for its wider implications. This needs to be fixed yesterday!
It certainly was a wild ride, Geoff. And yes, there needs to be a lot more oversight into this stuff!
What makes this even worse is the wall to wall nonstop coverage in the media and on the internet. We always hear about how vulnerable the stock market is but never seem to talk about how mass media multiplies the issue by many many times simply by going with a story ad nauseum and driving the whole country to a frenzy. I totally agree with you but how do we even try to control this?