May 8 2010

Weekend Links: Safe Traders Caused Dow to Drop 900 Points

Thursday May 6, 2010 was a fun day for the stock market and all investors – pardon my enthusiasm. As I had my Scottrade streaming quotes on my screen and the Dow went skydiving, I was able navigate my account in such a flawless manner to transfer some cash over in order to not miss the largest sale of the year on the stock market.

It became a saddening sight to watch the Dow pull back up from its 900-point drop as I was about to punch in my buy order. Nonetheless, I shopped and I bought.

Clearly, it was an odd day to the jittery souls at the New York Stock Exchange and at home with their daytrading stations. The weirdest part is the speculative theories on what caused such a financial anomaly.

Do you really think a guy who had mistyped a “B” for an “M” could wreak such a havoc? Even if this person had input “billion” instead of “million”, the collective automated sale of stock is the true cause of the steep market dip. Add on the fears of Greece’s debt and other economic noise and we’ve got a recipe for pandemonium.

Don’t point the finger at the fat-fingered individual and blame those who scheduled stop-loss orders. Maybe automation wasn’t such a good idea‚Ķ.

Personally, I don’t agree with the actions that stock exchanges are taking – canceling orders on stocks that experienced sharp volatility. There was no computer error. Automated electronic trades are legitimate orders, correct? Can you cancel my order when I buy a stock that goes from $100 to $70 then to $120 and back to $50 in 20 minutes?

In fact, I hope this happens again – so I could continue to build my portfolio on a tight budget. Praise the Oracle of Omaha, “Be fearful when others are greedy and greedy when others are fearful”.

Don’t mind my opinion, there’s more to life – like these great posts:

Carnivals that Realm of Prosperity participated in recently:

(Photo credit: artemuestra)

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1 Comments on this post

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  1. Lorne Marr said:

    Let’s be realistic – if the stock exchanges were so extremely volatile, the financial market as we know today would collapse in a while. A stock represents some fragment of a real company and this company doesn’t substantially change value every 20 minutes. People don’t like volatility in their lives. Would you like your pension prospects change every day??

    May 12th, 2010 at 4:09 pm

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