Turmoil Turmoil.
Spoke Evan Newmark, WSJ, and John Tamny, RealClearMarkets, re the "flash crash" of the NYSE approximately 2-3 PM Thursday 6 May. No explanation is yet adequate. Circuit-breakers may have failed. A "bad print" of prices may have triggered or may have been a reaction to a trigger. Rumors abound. Mr. Market was having a very bad, awful day already when the bottom fell out in a knife-like plunge. More investigation necessary. Evan Newmark says, "There goes their claim of an orderly market." John Tamny comments that the Europeans have created conditions that are unstable and therefore whatever happens will be chaotic. I am reminded that turmoil brings turmoil.
The Trouble with Greece.
Spoke Marko Papic, Stratfor.com, who says that the solution to the euro gyrations is Berlin. All eyes on the Germans. When and if the Germans decide to pay for the Greek debts, then the crisis will ease. The ECB does not help nerves when it boasts that it is not considering the "nuclear option" of buying the bonds of sinking countries. When in doubt of debt markets and equity markets, the wise man puts his money back in his billfold. The UK election results of no-decision (Cameron, Brown and Clegg all disappointed) also pushed the pound sterling to new lows of 145 with lower to tumble. And the US reports jobless claims in hours. May Day has triggered a festive month of unpredictable events.
Andy Busch, a global currency and public policy strategist and a regular on Kudlow's program, has been lobbing "Man up!" grenades at the ECB. If someone across the pond thinks this dithering makes them look prudent, in reality it has the stench of 1938 and 1992 cowardice that usually accompanies any crisis requiring quick decisive action over there. Considering the amount of sovereignty the EU states have sacrificed for the benefits of membership in EU, they have a right to expect more flexibility. What the citizens appear to have gotten is natural national sluggishness to the 27th power.
one commentator actually raised questions about the financial condition of ... france.
yesterday's freefall illustrated the way markets can gap down when no one wants to catch the falling knife.
accenture price $42 and trending down
buzz buzz click click
a piece of software cuts a market order to sell 62,000 shares
(market order means sell at the market price whatever it is)
no bids
market price ends up at $0.01 per share
you just bought 62,000 shares of a $42 dollar stock for $620
rofl
whatever the employment report today rest assured that there is one quant programmer with a shocked expression on his face looking for a new job.
modern finance gets very elegant mathematics out of about 5 ludicrous assumptions including the most egregious - you can buy or sell any size without changing the price.
as merton said in the FT in 2007 "my models were right. the markets were wrong."
Under this, what can be termed as the first in a long line of “accidental” U.S. presidents, we are entering into the “Accidental Ages” This is not to say that any of these presidents will be said to have suffered accidents or black swans from out of no where in particular. It simply means that everything that happens during their disastrous reign(s) will be reported as ‘accidental’: Barack Hussein Obama’s accidental election; the accidental failure of capitalism; the inadvertent torpedoing of a South Korean war ship; the Deepwater Horizon’s collapse; the explosion and fire at a Texas oil refinery; the ‘accidental’ failure of terror plots; the implosion of the PIIGS; etc. The pattern is clear. Now we can add ‘accidental’ U.S. stock market manipulation to the list.
I don’t buy the CITI ‘fat finger’ excuse. No finger is so fat as to span three letters on a standard size keyboard without missing ‘N’ for null. Our enemies are testing our vulnerabilities – and profitably so. It should be easy enough to find who profited from yesterday’s stock market debacle. But, have no fear; nobody will bother to check into it. Besides, the desired damage is already done; the weaknesses have been exposed; the markets spooked; the spoils divided as compensation for amputated tongues.
Still, I’d be interested to know by just how much Soros’ portfolio has been boosted by yesterday’s great adventure.
BTW, the ‘’accidental era’’ too will pass as the Dark Ages ended with the Renaissance. This will happen after final victory has been declared after a series of great “Accidental Wars”.
http://peterkoelliker.blogspot.com/
I always use limit orders. Seems to me that market orders are like an engraved invitation for somebody to either goof or intentionally screw you to some degree or other. Placing a limit order is like selling off the tail of how badly you're willing to be screwed.
Peter, I was actually thinking the same thing - the crash yesterday was similar to the Deepwater Horizon explosion in some aspects. Important difference though: the market recovered in two hours. The Gulf spill is going to take months to clean up. If the two events were masterminded by the same person, then the Gulf one didn't go according to plan.
Also, I used to hear people talk about how GWB was behind 9/11, and think what a stupid theory it was, because why would he do that if he had no reason to assume that he wouldn't enjoy 8 years in the Oval Office even absent any crises? At least Obama has something to be scared of. But I used to think it reeked of abject paranoia when I heard the lefties do it, and I don't want to jump on board the other side now. I can certainly keep my eyes open for further evidence, but I don't think there's conclusive evidence as of the moment.
Lou – I appreciate your comment. However, you make two assumptions that do not necessarily hold water. First, the market did not ‘recover’. It went down almost 350 points yesterday. Today, it went down another 140 even despite all the optimistic talk about the latest unemployment numbers. Second, there is not only one single enemy attacking us. We are being attacked from all sides by a broad base of bad actors - including from within. We’re quite on the ropes already.
Picture one of those soapbox derby races we used to get roped into back when we were Boy Scouts. We’re going downhill, hoping that our wheels don’t fall off before we reach bottom. They won’t come off this time. The skids have been carefully greased and each little push only makes us go faster. They’re all out there pushing: the progressives, the communists, the unions, the anarchists, the atheists, the illegals, the environmentalists, the gays, the blacks, the browns – every malcontent who’s ever had a hung toenail is pushing. …and while they’re pushing, they’re spitting at our flag.
It doesn’t stop there. Internationally, we’re being pushed as well. Look at the military build-up to our south - courtesy of Russia and Iran - in the fallen dominoes of South and Central America. Look at who’s threatening our allies around the world. Look at the oil exploration about to begin practically in our own backyard by the likes of China, while our own hands remain tied. The Deepwater Horizon ‘accident’ sealed out fate in this regard. Instead, we’ll now concentrate on building windmill farms. Pretty soon it’ll be raining birds.
One plan is to choke off our energy supply. I can’t see it any other way. It’s already been decided at the highest levels of our own government that we should come begging for our energy needs. The rationale is that it would save the planet, but it’s really not that. It’s to diminish our influence and power. Some would say, it is to destroy us as a nation; to reduce us to that gushing wound that once was America; or Greece; or Rome or Great Britain (the empire on which the sun never sets).
The Islamists and the communists are all in this together. Their mission is to destroy America; capitalism. Once that’s done, they’ll sort out the differences amongst themselves by killing each other. We’re so rattled now that every time someone drops a pack of Lucky Strikes on the sidewalk somewhere, we close down Times Square. Don’t tell me it’s not having an effect.
We can be reasonably certain by now that our president is a communist. Until I see his birth certificate you can’t convince me that he isn’t a Muslim as well.
http://peterkoelliker.blogspot.com/
Well, the market's on the way down, no doubt about it, but it's hard to argue that it wasn't already on the way down. It was a bubble and it was due to burst and maybe it was even fortuitous that it got some help popping yesterday.
I'll grant you thinks are looking dark and stormy. But they'll turn around before we know it. I give you my word, in fact.
a touch of irony
failing foreign policy makes the world flee to us.
look at the yield curve.
massive inflows from the rest of the world.
frightened money.
trying to hide here.
inflation risk? no problem.
they will accept negative real rates if it means they can preserve principal.
we have a chance to see in greece a mini-future
government unions running the nation into the wall
smell the coffee
CC,
France is trying to hide in the weeds. It thinks if it doesn't make any noise, nobody will notice that it is in deep doo-doo debt wise as well. So is Germany. Take a look at just the PIIGS' hooks into them:
http://www.taipanpublishinggroup.com/images/web/taipandaily/euro-debt-map-2.jpg
corlyss,
very very cool diagram on the link.
i commend it to all.
tyvm.
the a corner of the debt web.
euro-dollar parity in the wind.
I always wonder when I see charts like that, if they just sat down with Monopoly money and paid each other everything they owed, whether all those lines wouldn't cancel out and there would be no debt left at all.
CC,
Thanks. The illustration of the interlocking debt really brings home how a nation that accounts for only 2.5% of Eurozone's GDP can create such havoc.
Lou,
The lines between and among the PIIGS are less important than the lines out of each to Euro nations alleged to be "safe. Notice that the "safe" states are all the same, i.e., the Big Three economies that make up the Eurozone economic powerhouse. This is not the extent of the Big Three's sovereign debt; it's only the part that relates to the PIIGS. Peter Navarro of UCal has been saying for months that the 2008-9 global economic crisis and the weaknesses it revealed in the EU's working structure were going to destroy the EU and the Euro. This is only the beginning. IMO that can only be a good thing because the founding premise was an unrealistic Utopian fantasy to start with.
Way back when they introduced the Euro I predicted it would fail. I said it was one of the worst ideas I'd ever heard of in my life. My impression of Europe then was a bunch of nations with the mindset of a typical irresponsible adolescent. England was the only "adult" in the group and they had the sense to stay out. I was wrong in that I thought the Euro would fail within 2 years, and it's taken a lot longer, but nothing's happened in the interim to change my mind about the responsibility of the various governments.
You know that saying about how a successful marriage happens when both partners think they're getting better than they really deserve? Well, that explains the mindset of the Eurozone. They all got in because they thought it would benefit their own countries relative to the others in the group. Of course it's going to go belly-up; the only question is how it managed to stay afloat for this long. And the answer appears to be: unfunded liabilities, off-balance sheet, irresponsible promises made to public sector employees, etc. Similar to Kellyfornia.
the government should be required to conform to the financial disclosure and accounting requirements that public companies operate under. replace GASB with FASB.
disclose entitlement liabilities, pensions and long term government contracts
distinguish between
spending for long lived stuff (tanks and buildings) - ie cap ex and
spending for salaries and benefits rents and fuel and payoffs - ie expenses
and on and on
summary financial statements - p&l, balance sheet, cashflows with footnotes
everything that is material - material = what a reasonable citizen would want to know
quarterly reports(10QG) signed by the pres, sec treas, speaker
annual report (10KG) add the sigs of the majority and minority leaders of house and senate
then any voter that cares will be able to grasp what is going on.
earmarks are swill and distasteful but they are not the looming doom. they are a bump on the log and they distract the citizens from the real risks.
Still no explanation. NYSE and NASDAQ have thousands of electronic connections, World class firewalls and NSA level encryption are used, What about the member networks, Is every member of NASDAQ secure?
I've sold security solutions to Financial Institutions, they buy the minimum mandated by law or their partners. not a penny more. Risk is ignored in Finance.