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Another "Flash Crash" in the financial markets could happen at any moment because of high...

Another "Flash Crash" in the financial markets could happen at any moment because of high frequency trading, warns former hedge fund analyst David Lauer. These disasters are causing retail investors to flee the equities market - $283B already since the Flash Crash in May 2010 - and their flight during a period of incredible stock market returns is a sure sign this exodus is a result of mistrust rather than economic conditions. And it's simply "a matter of time" Lauer says, "before we have another."
Comments (27)
  • TruffelPig
    , contributor
    Comments (4091) | Send Message
     
    I think the real crash is more to blame that happened 2008/09. There is still this underlying nervousness in the market since then. Even now when we are supposed to be all happy according to fear barometers, many have concerns - and not so much because of HFT. Things that concern investors are political instability, congress etc. without much brain and direction, structural problems in the job market, debt burden of the country, instability in the middle east, ................

     

    Incredible market returns - yes. Incredible volatility too! One year ago we were at S&P 1050 or so..........the retail investor doesn't seem to understand what "buy the dip" means but panics because listening to the blow horns on CNBC etc etc.
    20 Sep 2012, 08:08 PM Reply Like
  • IgnisFatuus
    , contributor
    Comments (2128) | Send Message
     
    Could it be that a good portion ofthe 283B that has left the market is a result of the under-employed/unemployed attempting to maintain their previous lifestyle?
    20 Sep 2012, 08:29 PM Reply Like
  • petten
    , contributor
    Comments (128) | Send Message
     
    Software and network/systems crash. It's a fact of life, and it does not matter that much. Akin to Fukushima and Three Miles Island, all these gross exaggeration and crying wolf are unnecessary.

     

    The real danger lies in the real/bubble crashes as in 1929, 2000/1, and 2008/9.
    20 Sep 2012, 08:30 PM Reply Like
  • divinecomedy
    , contributor
    Comments (466) | Send Message
     
    As someone who makes a living writing software (some of which are pretty complex), my humble take is that there will not be a crash provided the following:
    1a . There's a mathematically proven algorithm that works out all possible permutations in the market OR
    1b. The software only deals with relatively simple situations.
    2. Adequate testing is done, and this is much harder than it seems, in fact it can be harder than writing the software itself.

     

    Since 1a is pretty much impossible, competition will make sure that someone will violate either 1b or 2.
    20 Sep 2012, 08:30 PM Reply Like
  • J 457
    , contributor
    Comments (951) | Send Message
     
    Ever hear of KCG? Well then, that blows all of the above.
    20 Sep 2012, 08:39 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4091) | Send Message
     
    No - they violated 2. He is right ;P
    20 Sep 2012, 08:42 PM Reply Like
  • pollyserial
    , contributor
    Comments (1093) | Send Message
     
    J457 I think that's divinecomedy's point.
    21 Sep 2012, 12:08 AM Reply Like
  • surfnspy
    , contributor
    Comments (415) | Send Message
     
    I'm a retail investor and not an "active trader." How much does HFT really affect me??? I'm sure there are those self-styled "active-traders" who could be burned by being at the wrong place at the wrong time by trading against computers but, does it really affect retail investors who trade less frequently???

     

    Am I confusing the issue?
    20 Sep 2012, 08:51 PM Reply Like
  • mike8599
    , contributor
    Comments (592) | Send Message
     
    I think you hit it on the head. Retail traders are trading at their own peril - against computers. Investors on the other hand are a different story. I think some of the flight is companies that can't compete with some of these high end computer systems.

     

    (At some point in time I think someone is going to regulate the time a trade must be held)

     

    I can never tell if the author(s) have got this straight.... its like apples and oranges - retail investors vs traders.
    20 Sep 2012, 09:23 PM Reply Like
  • surfnspy
    , contributor
    Comments (415) | Send Message
     
    Absolutely. Retail traders are trading at their own perill-you win some you lose some but, the advantage is always with the house.

     

    Seems like much ado about nothing.
    20 Sep 2012, 11:09 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2895) | Send Message
     
    Flash crashes are wonderful gifts to those who stick to value investing.
    20 Sep 2012, 09:11 PM Reply Like
  • chopchop0
    , contributor
    Comments (3523) | Send Message
     
    yup
    21 Sep 2012, 12:01 AM Reply Like
  • Bainjer
    , contributor
    Comments (61) | Send Message
     
    Maybe the retailer is not all that dumb. He may think the market is a fake because it is puffed up on Bernanke QE. He know there are very little if any fundamentals in the market so.. yeah... it is very untrustworthy.
    20 Sep 2012, 09:26 PM Reply Like
  • mike8599
    , contributor
    Comments (592) | Send Message
     
    Do you think the puffed up market will puff up more when the inflation bubble starts to blow as a result of the QEs, or do you prefer the bank at 1% interest (if you are lucky) ?
    20 Sep 2012, 09:45 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    "Do you think the puffed up market will puff up more when the inflation bubble starts to blow as a result of the QEs, or do you prefer the bank at 1% interest (if you are lucky) ?"

     

    If those were the only choices, we'd be way past 2000 by now. Thankfully for those of us who need savings, they aren't.
    20 Sep 2012, 11:31 PM Reply Like
  • k2caliguy
    , contributor
    Comments (59) | Send Message
     
    the total opposite is true, a flash crash is what a retail investor preys upon. Always have cash on the side line so your ready to buy at the right time you see value. Part of the real issue is the baby boomers with most the retail wealth are more and more retired then 5 to 10 years ago and are looking to average out spending their portfolio for their end years not invest in the market.
    20 Sep 2012, 09:46 PM Reply Like
  • surfnspy
    , contributor
    Comments (415) | Send Message
     
    "the total opposite is true, a flash crash is what a retail investor preys upon"

     

    Yep.
    20 Sep 2012, 11:13 PM Reply Like
  • mike mohr
    , contributor
    Comments (452) | Send Message
     
    Flash crash was a symptoms of FED manipulation of the markets. The returns from the market is as fake as it can get. Destroying $ doesn't fix things or create jobs.
    At the end everyone has realized the house always win.
    20 Sep 2012, 10:30 PM Reply Like
  • rambler1
    , contributor
    Comments (477) | Send Message
     
    Just bring back some kind of spread and this b.s. would stop in an instant from being a concern.
    20 Sep 2012, 11:00 PM Reply Like
  • rick flair
    , contributor
    Comments (369) | Send Message
     
    all you need to know is this. anyone with the name 'david' and 'lauer' cares NOTHING about the argument or the topic. ALL they care about is people printing and repeating thier name. tommorow, a different topic, and some more goyim to hoodwink with his 'opinions'...
    20 Sep 2012, 11:56 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    I like flash crashes and hope for one pretty much everyday.

     

    Stink bids to buy, and limit orders to sell, and I fail to see the downside.

     

    If some machine wants to sell me something for 15% off, I'll take it.

     

    When the machine wants to buy something from me for 10% more than it's worth, I'll take the money too.

     

    It's all good.
    21 Sep 2012, 12:06 AM Reply Like
  • pollyserial
    , contributor
    Comments (1093) | Send Message
     
    That's all good and well, buying dips, etc., but what about the flash crash that creates deeper systemic turmoil? Some folks think that the Knight situation, if it hadn't been handled as well as it was, could have created problems bigger than a quick crash and rebound. Is there a point at which the HFT's have their Lehman moment? It's possible.
    21 Sep 2012, 12:13 AM Reply Like
  • rick flair
    , contributor
    Comments (369) | Send Message
     
    why do people think that 'stock markets' are a public service? i've never understood that. they are private business whose sole purpose, repeat SOLE PURPOSE is to make money for the shareholders .....PERIODDDDDDD......if that means fleecing the goyim thru HFT, then so be it, if that means authorizing /looking the other way while primary dealers lend out 50 times more shares than exist , then so be it....when will the dumb goyim get it? some people are starting too, and then they go off topic, and complain the gov't should do something...wow.....
    21 Sep 2012, 12:20 AM Reply Like
  • Nolesince87
    , contributor
    Comments (258) | Send Message
     
    The fear is definitely palpable out there.... case in point, while getting robbed at gunpoint the other day I tried to reason with the assailant, only to hear him retort something to do the effect of "aye yo' dawg, eff da stock ma'ket"

     

    go figure.
    21 Sep 2012, 12:32 AM Reply Like
  • Ripit
    , contributor
    Comments (63) | Send Message
     
    You're all dumb
    21 Sep 2012, 12:41 AM Reply Like
  • Pinocchio1
    , contributor
    Comments (206) | Send Message
     
    Every day there is another doom prophet with his 5 minutes on stage.
    The only way to get your moment on stage is by saying "we have 100% chance of a double recession this Summer"
    well dummy... if it's 100% why not bet your house, wife and kids on it?
    Or find someone with a brain to explain to you what 100% means.

     

    The number of idiots crossing our screens is amazing...
    21 Sep 2012, 07:15 AM Reply Like
  • Ted Bear
    , contributor
    Comments (607) | Send Message
     
    It is sort of interesting that we accept electronic speed in all facets of our lives, except somehow believe that it is not applicable to the stock market.

     

    It is a pain in the ass some days, and some days it really works to one's benefit. Some day it will cause an otherwise orderly sell-off, which otherwise might take place over a period of weeks or months, to take place in a matter of seconds or minutes (again).

     

    But it doesn't change things that would fundamentally happen without the existence of very high speed trading.Live by the sword; dies by the sword. How many of these guys have been squeezed out of the market already because there are too many folks trying to pick the same fruit? And has anyone looked at the volume recently? Somebody is missing, and it isn't mom and pop with their few hundred share orders that is reflected in paltry volumes.
    21 Sep 2012, 07:15 AM Reply Like
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