I agree with John's today's post and yours about the FUTURE crash. This is a REAL problem, but for when, tomorrow or within 20 years?? And that nobody knows.
vincecate wrote:Anyway, commercials talking about conditional trades may have helped set things up for a big crash.
John wrote:Wall Street investors today are in dreamland, thinking that they're protected from a similar crash.
* Some people think that NY Stock Exchange circuit breakers will protect them. But those circuit breakers will be no more effective in a panic than the Dhaka circuit breakers were.
In fact, it's much worse in NY than in Dhaka because of of the heavy use of computerized trading. When computers sense a panic, they're self-protection algorithms will kick into gear in nanoseconds, and they'll sell off, causing a panic much more rapid than if humans were doing everything. I'm always mindful of the old saying, "To err is human, but to really f--k things up takes a computer.
* A lot of people have stop orders on their portfolios, something like, "If the stock price falls 10%, then automatically sell immediately." But these stock orders have no more chance of surviving a panic than circuit breakers do.
There's an additional wrinkle about computerized trading that makes this situation even worse for the small investor. You know that when you visit a web site, it can take a few seconds to get a response to a click. Well, that's true of programs, sitting in some stock broker's office, that are supposed to execute your stop order. But those computers will have to wait several seconds to get a response. Meanwhile, the big Wall Street banks have direct network connections into the NY Stock Exchange, and their sell orders will be executed more quickly, by nanoseconds or even seconds. That means that your sell order won't even be processed until the panic has been going on for a while.
* A lot of people believe they're protected from big losses because they've hedged their investments by offsetting their stock investments with short sales. The problem is that in a full-scale panic, a lot of people will go bankrupt, and those shorts will not be paid.
The logic is perfect, this is a REAL problem, with all the derivative market, BUT when???
For example predictions of John for 2009 were completly wrong, even if the logic were good.
Bengladesh is NOT India, so the question are:
-a-will Bengladesh's panic moves to India, there is NO reason for that?
-b-WHEN will S&P crashes, with the derivatives market and the help of all the the banks in the world it could be in 20 years.
There is NO known reason to panic YET.
We ARE in a BULL market, there will be retracement, for sure, and with the remark of Higgenbotham it could perfectly be in march and a retracement of 400 points, Even so, it does NOT mean a full electronic panic without end (as it could happen tomorrow in Bengladesh which is a small market WITHOUT industry.
As written by Morgan you have to measure different PER for different markets, not 1 PER, and, even if John disagrees, the future PER is what people look at, before making a bet, BUT this not the only factor, and as described once by Michael Pettis, there are different kinds of punters on the "market"(which is NOT a market, but a Poker game, as I wrote before).
What make different countries differents is how many different types of punters you can find. (In Benglasdesh it looks like there is only one type of punters, this is no more the case in India)
In the main "markets", central banks can also buy future at night time to give the sensation that the "market" is going up.
So far, my observations are (just to write it down, we'll see):
- a major low was hit in march 2009 (see the volume of the Dow for that)
- as usual, after a main low, people stay pessimist and the first leg up is with low volume
- We should hit all time high very soon (the DAX before the others). Not an observation, but a thought.
- We have striclty no sign of retracement
so we should be close (this year or 2012) of a decisive trading point : or we go past all time highs and then we are on a track for a 10 years up market OR we are going to hit all time highs and then retrace to march 2009 lows.
Today people are much too pessimist ... so the market should go up, whatever the PER tells us..
A REAL panic has always precursor signs (these are NEVER panic signs, NEVER anxiety, but signs of degradation within an optimistic pattern): look at the Bengladesh, but, because of the size of market, extend the graph by a factor ten on the axis, this would be a sign for a crash.... may be in 20 years, today there is NO sign neither of optimism, neither of the typical parabolic curve you see on the Bengladesh market.
PANIC IS NOT FOR NOW, otherwise, please study what panic means and give me historical proofs. I think I experessed my logic, what is yours?
Inside a logic, TIME is everything, I can be right, but dead before being able to see it... (as said by someone I don't remember the name)