Friday, October 01, 2010

One simple act

(Via the Drudge Report)

"For want of a nail a shoe was lost". If you're of a certain age, you know that old proverb, and you understand its meaning: A single small event can lead to unforeseen and potentially disastrous consequences.

The report on the "flash crash" of May 6, 2010, where the NYSE dropped hundreds of points in a very few minutes, is out. According to the report, a single trade triggered a cascade of events that has had people staying up late trying to figure out why and how it happened.

Sure, the market recovered. But what if it hadn't, and that crash became long term? (Spare me the explanation of the "circuit breakers". IMHO, those were put in place so that Joe Average didn't jerk his money out of the markets in 1989 because they were "too risky". It could happen despite the circuit breakers--it just takes a few minutes longer. Computers trade fast, but you'd be amazed at how fast humans trade when assisted by computers.)

Given our recent discussion of hyperinflation and how easily it could start, this really ought to make people very uncomfortable. Wiggly, even.

Are you squared away--just in case?

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