As of this post, the S.E.C. ( Security and Exchange Commission) came out with its final report on what has become known world-wide as the “Flash Crash.”
It took nearly 6 months of investigations and countless interviews. Guess what? They found ( I’m paraphrasing here ) that the event was caused by a legitimate “Sell program” implemented by an account as a device in a hedging strategy. It found that it was not a mistake, it wasn’t a so-called “fat fingered” order, nor was it the act of intentional manipulation. Get ready, because here’s the kicker…..Although they have put some newer safeguards in place, they can not confidently say that it might not happen again! Just makes you feel warm and cozy now doesn’t it?
After the panic that happened that day, I speculated all the hand wringing, the jawboning, and everything else said about it being a mistake was a load of road apples. I stated having watched the market in detail that afternoon what I witnessed was the result of what happens when no one is buying, regardless of the price. I also stated that if it was a so-called “mistake,” why hadn’t the market gone right back up to that level? Would it not then have been a bargain bonanza?
The market since then has recovered, but it has taken months for people to forget about the implications of that day. I have written extensively that the market has been on shaky ground and could fall under its own weight even as everybody in the media is lauding it. Even during all this rally of the last 6 months my views have not changed. (Actually I’m more convinced than ever.) Some have tried to convince me otherwise, but their argument is based more on what I call “hopium” rather than facts. Only the market in the end will tell us what the truth is, so we’ll have to just wait and see. As I’ve said before, I could be totally wrong, but I’ll let my batting average speak for itself. Always remember in trying to prove if you’re right or wrong against the stock market…”The market can stay irrational much longer than one can stay solvent.”
Be rational…Stay solvent!
For those who forgot what the S.E.C. said could happen again at any time, Here’s the link from my original post.
“They do not allow cameras there, but they do allow this service to be broadcast. It’s subscription only. You have all likely seen on TV the shots of the exchanges with all these guys screaming Buy….Sell. Well here’s a link provided courtesy of TradersAudio of what that fateful 15 minutes of panic sounded like.”