I just landed in LaGuardia from Dallas, and was surprised to see the Dow was down 1,000 points today.
To clarify the 100% cash position, that is in the long short aggressive accounts. We are far less aggressive in our asset allocation model, which typically is far less exposed to equities anyway.
More when I get settled in back at home.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Existing Home Sales in Jan totaled 4.57mm annualized, below expectations of 4.66mm and Dec was revised lower by 230k to 4.38mm. Taking the two months together and sales were 320k less than initially expected. However, because the number of homes for sale continues to shrink, to the lowest since May '05, months supply fell to 6.1 from 6.4 to the smallest since April '06. The median home price fell 2% y/o/y to $154,700, the cheapest since Nov '01. Distressed sales totaled 35% of the total (22% foreclosures, 13% short sales) vs 32% in Dec and 37% in Jan '11. Contract...
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May 6th, 2010 at 3:41 pm
Clearly, it pays to have some loooooooooow bids in place.
May 6th, 2010 at 3:43 pm
I put in a buy @ the market order for PM when it was at $38, and it was filled at $46. It was never -1000, IMO. I’m not too upset because $46 is still a bargain and this is my IRA, which I expect to cash in in about 40 years.
May 6th, 2010 at 3:44 pm
Oh, NOW you tell us….
It is scary how the market plunges right after you say you are all in cash.
May 6th, 2010 at 3:44 pm
Yes, BR. Heckuva cash call on your part. Nailed it head on.
May 6th, 2010 at 3:46 pm
Some music for Barry.
May 6th, 2010 at 3:50 pm
Franklin, I like that play a lot. I got in a while ago around 49 and am thinking about increasing my exposure.
May 6th, 2010 at 3:52 pm
Most everyone with a stop-loss in place must have gotten blown out their positions.
Lost of unhappy people.
Margin calls in the AM.
May 6th, 2010 at 3:54 pm
“Where are the regulators???!!!”
- Screeching anti-regulation harpy Maria Bartiromo, 2:50pm
May 6th, 2010 at 3:55 pm
Break out the Dow 10,000 hat when you get home.
May 6th, 2010 at 3:56 pm
Apologies if this is an obvious question; but when you say 100% cash do you mean:
a). 100% in cash (i.e. no positions)
b). Long and Short Positions, but with 0% net equity exposure (though obviously, you have exposure to other factor risks).
I only ask because there’s a subtle difference between the two (or perhaps, I’m easily confused).
~~~
BR: 100% Cash means precisely what it sounds like
Net 0 exposure — or market neutral — is something else.
May 6th, 2010 at 3:58 pm
Few more jitters like this, it will shake off the confidence.
May 6th, 2010 at 4:01 pm
Clearly – the short sellers caused this. Look for a senate hearing coming soon…
May 6th, 2010 at 4:01 pm
A bunch of my stops fired off today, but on the upside, some of my low-ball GTCs did too. All in all–stomach churning moments and all–pretty fun day. We’ll see what the reaction of the employment situation is tomorrow and if the EUR thing cleans up or gets worse over the weekend.
My favorite buys of the day were a bunch of ING preferred shares during one of the plunges. Now let’s just hope they don’t turn go under as a result of the sov debt crisis
May 6th, 2010 at 4:04 pm
Those hedgies got all of their algo’s going one way, down. Santelli is talking about how this was caused by HFT.
May 6th, 2010 at 4:06 pm
@gordo: I was saying the same thing earlier. How long before a universal ban on shorting all stocks? Heck, might as well ban any price decreases on all assets. Problem solved!
May 6th, 2010 at 4:09 pm
I see a sizeable rally tomorrow, then some tension over the weekend from Europe, followed by god-only-knows next week.
Affirmative on the margin calls tomorrow morning, possibly liquidating more positions. GOLD is a HOLD for right now.
May 6th, 2010 at 4:11 pm
Maybe, ash, but many online brokers were down today, so we could see some nervous retail selling happen tomorrow that would have happened today.
I also think we rally either tomorrow or Monday, but who knows?
May 6th, 2010 at 4:15 pm
Wasn’t there a day like this in March of 2000? Though, I don’t think anyone back then blamed it on a fat finger. Heh
May 6th, 2010 at 4:17 pm
@Alan: Well, there’s far more fat people in this country 10 years later. ;-)
May 6th, 2010 at 4:21 pm
Maria Bartiromo can XXXX XX-
where the fuck is she when the Fed allows the TBTF’s to game the market?
anything that causes the market to go up whether complete bullshit and lies is perfectly acceptable
May 6th, 2010 at 4:22 pm
Well it wasn’t me. I’ve been eating paleo for quite a while now. :)
May 6th, 2010 at 4:25 pm
The Show Has Ended – Now We go up, I closed my shorts and will sell S&P futures at 1155+
May 6th, 2010 at 4:25 pm
. . .and of course the excuse is “trader error”- you see it wasn’t your normal run of the mill crash- but just an error-
see folks everything is ok- it was just a mistake- carry on with your bullish ways-
of course- is it ever trader error that makes the market jump- OF COURSE NOT- those are wise investment decsions-
got it?
May 6th, 2010 at 4:26 pm
Not me either, Alan.
May 6th, 2010 at 4:27 pm
Nice work again, Mr. Ritholtz… you jumped from the burning building just in time.
I am going to miss Cognos – after his quant fund probably flamed out this afternoon.
Really have no call on the near term trade, but I think we have now seen the top for 2010.
ECRI pointing to a slowdown and financial reform means we see Deleveraging, PART DEUX.
Actually found today rather frightening, despite making money, more scary than 2008.
Where will this all end? In a true bear market bottom, one hopes.
May 6th, 2010 at 4:31 pm
I love the modern world. We just had a computerized ’87 crash and rally in 15 minutes.
The Algo’s are now drinking beers at virtual bars and trading HFT war stories….
May 6th, 2010 at 4:33 pm
@ahab,
Tell us how you really feel!
May 6th, 2010 at 4:35 pm
come on fellas….. give me a break… Stay cool….. this is tech buziness…. back in 04 or 05 i was long gold at about 440….. i woke up checked the market and it was unchanged, went to the bathroom did the 3 S’s came back out and prices were up 73 dollars on the mini… i couldn’t get my fingers to move fast enough and by the time i sold i think that i made a buck, if that…………. It’s not the fat finger or the error…. it’s simply that we can not react fast enough…. my lesson did not go unlearned…… these days i place limit orders in the extreme and today was the best year that i’ve ever had…. let’s just all give a big hand to NNT (Taleb)….. Bet the pennies to make the dollars and not the other way around…. sooner or later and i’m not talking about geological time, you’re going to get lucky……. today i’m a hero, tomorrow I’ll be a zero…. who gives a shit….?
Best regards,
Econolicious
May 6th, 2010 at 4:38 pm
“Most everyone with a stop-loss in place must have gotten blown out their positions”
Yes talk about milking the stop-loss crowd. Lots of happy Wall Street banksters and lots of unhappy main street investors. They never run out of “financial innovation” do they ;-(
May 6th, 2010 at 4:38 pm
Lefty: you think his top hat is floating down the East River?
BTW, anyone see the story on the CNBC site that a trader error caused a big plunge near the last hour. What resilient, failsafe system we have.
http://www.cnbc.com/id/36999483
May 6th, 2010 at 4:41 pm
I agree w/ scharfy TOTALLY!
The LAST THING the banks are gonna cop to in the HFT desk. “Oh……..some fat-ass hit a B instead of an M”?
Are you fucking kidding me?
This has HFT written all over it.
Small wonder this happened 15 min after trading curbs were lifted for the day????
You wanna know exchange rules, in all their glorious minutia? Ask the programmer for an HFT desk.
This was 87.
The good thing is communication is sooooo much better. Once the algo traders realized what was happening……….they turned them off………..that still left about 2 minutes of orders executing…
I’m a agnostic on HFT………still am. Would’ve hated to be one of those moms or pops who had an “emergency” sell stop in PG @ $55…………can you imagine that fill?!
May 6th, 2010 at 4:42 pm
ding ding ding ding ding-
Scharfy get’s the prize for making the most astute observation today!!! Got a chuckle out of me too :D
dss-
good thing I sugar coated it- lol
May 6th, 2010 at 4:45 pm
it’s all your fault, Barry! word got out that you were ONE HUNDRED PERCENT CASH and everyone went running for the hills. NOW you clarify??? ;-)
May 6th, 2010 at 4:49 pm
“Down how much?” were I paranoid, I’d dare think that the stuff’s been (briefly) down enough to screw up most long Stop Loss, and also down enough to suck in a fair enough pack of bearz.
May 6th, 2010 at 4:53 pm
And that my friends… is why you DONT USE STOPS.
Somebody “stopped” themselves into a -20% day.
Hope somebody here got some AAPL at 199. Wow! Free money.
May 6th, 2010 at 4:54 pm
Barry proved that some of this game is luck.
Check the daily on PG. Some genius over at Citi allegedly pushed through a sell order on the Nasdaq for a billion shares instead of a million. Oops. That explains the 600 points of this.
Now the questions are:
1) Does this failure of a Citi employee now qualify them to be on the Board?
2) Was the person responsible of Greek heritage?
3) Was Vikram Pandit even aware that Citi still has trading desks?
May 6th, 2010 at 5:00 pm
Blame someone!
http://www.bostonwealth.net/2010/05/06/blame-someone/
May 6th, 2010 at 5:02 pm
gee- what happens when somebody buys a billion of something- I wonder if the price goes up?
and also- that’s what it’s all about- right cognos?
free money-
you should be very proud of the Fed who has led the way with that philosophy
May 6th, 2010 at 5:04 pm
Leaving aside the amusing sideshow known as the US stock market, the credit markets are showing renewed signs of stress, especially in regard to Europe and in the banking industry. The FX and bond markets usually stay closer to reality, and demand for dollars and Treasuries has been picking up for weeks now.
Don’t for one moment think that this was a one-off “phat phinger” event, or that happy days are here again.
May 6th, 2010 at 5:07 pm
“Don’t for one moment think that this was a one-off “phat phinger” event” lb, above
Totally, that story is B*******.
May 6th, 2010 at 5:12 pm
“Phatt phingers” are better excuse than traders watching pornos?
May 6th, 2010 at 5:15 pm
I declare that May 6th shall forevermore be known as
Barry Ritholtz’s “Straight Cash, Homies” Day
May 6th, 2010 at 5:18 pm
The CNBC video with Cramer, et. al. watching P&G drop and rise 30% in real time and calling trades is kind of awesome:
http://www.cnbc.com/id/15840232/?video=1487022682&play=1
May 6th, 2010 at 5:26 pm
I guess the new STOP-LOSS orders will include a 1-4 hour “below the limit” requirement before they are executed. Fool me once shame on you – fool me twice …………..ehhh…….hehe………I can’t be fooled again.
May 6th, 2010 at 5:29 pm
+2……..
“fat fingers” happens every god damn day! how many traders are there in the world? Of course they hit a wrong key every now and then……….
Are you really telling me that a major U.S. financial institution doesn’t ITSELF have an internal software “backtsop”?
If you really want to execute a $16 Billion order………..what is 3 seconds to answer a confirmation box “Click YES if you really meant SELL $16 Billion”………..?
Retail has it………But, the prop desks at Citi are too sophisticated?
I can’t even believe CNBC actually reported that.
I’d be embarrassed to be a producer there.
May 6th, 2010 at 5:35 pm
If you ask me, the market tanked BECAUSE Barry went into all cash. ;)
May 6th, 2010 at 5:49 pm
@Jonathan
Barry killed the recovery!
May 6th, 2010 at 5:50 pm
BR – Thanks for the nudge. I have been scaling out of a closed end position that reached NAV parity. Saw your comment and finished the job first thing this morning – and I won three bucks playing golf today!
May 6th, 2010 at 5:56 pm
Battle of the computers – stops getting hit got it down below the Jan highs – short/sell algos kick in – get down to the Feb lows and cover/ buy algos kick in. Add a little panic to speed it up on the way down and you get some record making moves. All in day’s fun.
WAG on my part but my guess is the Jan highs will now prove to be solid resistance and we will see more downside in the days/weeks ahead.
May 6th, 2010 at 5:56 pm
Dear Friends,
this is the beginning of the great unraveling. For the nbetter part of two years, the Fed and the Treasury have been rtying to pull over our eyes telling us about how things are getting better while we have had an artificial “rally” all based on light volume and on the theory that we could print our way out of the problem.
Today, the chickens have come home to roost. Anyone who honestly belives that today’s drop was caused by computer “errors” (as opposed to the al;gorithm-based programs of the bug banks) is welcome to make an offer on the bridge I have for sale here in Brooklyn.
Just watch what the Nikkei does when it opens tonight in Tokyo just the way I watched it last night to see what was going to happen here today. Tokyo is one place where blowing smoke is not quite as easy to do to a not quite as gullible a public as it is here in the good old US of A.
May 6th, 2010 at 5:57 pm
Close out your positions, Barry is getting on a plane!
May 6th, 2010 at 6:03 pm
bah….computers. Inventions of Lucifer.
too many people sitting long for dreadfully too long.
the sharp fellows are looking for an excuse to buy a summer cottage in Atlantic City.
The Greeks and the China property bubble will surely provide them with the means for a Packard or two.
Heed the early warnings when the fat cats are already cashing in today’s winnings because there’s more to come boys.
May 6th, 2010 at 6:04 pm
Regardless of any “trading malfunction,” the market has just given up 70% of the gains form this year in a couple of weeks…
And it makes sense. The market has gotten way ahead of the fundamentals. Bottom line is we have high unemployment for foreseeable future and a housing market that will likely decline further and certainly has not rebounded (price-level wise). You can not have a real recovery without those. GDP is still lower than before the recession. We are likely in for not great returns for the next year or two…. There is no free lunch. And now that the government has stepped back, there truly is no free lunch.
May 6th, 2010 at 6:06 pm
This is what happens when the market goes up on low volume and hasn’t a good trading base. Just think, all the funds have the stocks. But if no one wants to buy them they have to fall hard due to no bid. Then the funds start to panic that there’s no bid and sell off and away you go.
May 6th, 2010 at 6:19 pm
Will be interested to see your wrap up and TA perspectives tomorrow, Barry. Well done!
May 6th, 2010 at 6:25 pm
Anybody notice gold? Up nearly three percent today — thirty-four bucks an ounce on the futures, GLD volume off the charts.
Fat finger my @#$@#…
May 6th, 2010 at 6:25 pm
It did get pretty hairy there for a few. I kept taking snap shots of charts that were so grossly oversold yet couldn’t catch a bid. Its indeed plausible an error caused the market to dive so precipitously but at the same time, its not as if the market wasn’t highly risk adverse to begin with.
Regardless, if you had the stomach for a bid’less trade, one could have done very nicely. There must be 100 or so charts with this similar structure
http://www.screencast.com/users/BalaB50/folders/Jing/media/1a3f9f1d-4dc7-44b0-90b2-59474b7bf204
May 6th, 2010 at 6:29 pm
I placed a fair amount of buy orders for a $7 stock at 2:42 pm, hoping that things might get low enough that I could pick up some a bit under $7. So I spread the buy orders across 6.90, 6.70 and 6.50 (which I really did not expect to get filled, perhaps none of them would, but you never know …). Looked at a couple of other things, and clicked for a quick price check before I returned to mowing the lawn. $5 and falling. ‘Bout had the Big One. Frantically started looking for WHY???!!!!, did they cut the dividend, did the price of oil plummet, what was going on?
Absolutely no news, and then the Schwab and Fidelity web order servers died. But by that time it had dawned on me that this wasn’t just my little corner of the market, it was everything.
And then 5 minutes later, everything had returned to “normal”, and I was sporting a profit. In the best of impossible worlds, I could have (in theory) picked up the shares south of 4.25, but I am more than happy with my 6.70 aggregate cost for a stock that closed at 7.23.
While it would be mildly interesting to know exactly what happened (almost certainly a software spasm, given the speed with which things plummeted and then recovered), I think the lesson to draw from this is that these markets are really quite fragile, and susceptible to stampedes with any given thunderclap (real or imagined).
I’ll bet a lotta folks with stop-loss orders got taken out and then had the prices jump back above their exit point before they could do anything about it. Almost certainly Barry has a lotta company that is in 100% cash right now. That could make for a brief rally, perhaps taking us into June before the next thunderclap.
Chaos, it’s a wunnerful thing.
May 6th, 2010 at 6:31 pm
And here’s a query to the technical analysis folks:
What did this mean, in a TA sort of way? Are we now poised for a great rally, or poised on the brink of collapse?
May 6th, 2010 at 6:32 pm
Hope this doesn’t get you put on the NO FLY list.
May 6th, 2010 at 6:38 pm
Give me a f*****g break! TRADING ERROR?!?! Anyone has read ‘The Quants’ has a pretty good idea what happened today.
May an asteroid crash into the CNBC studios tonight and wipe this scourge from our earth.
May 6th, 2010 at 6:44 pm
Indeed a good day for a gold bug.
I fully expect more of these spikes in gold prices, followed by sell-off, then to the higher floor ($1200 is the next floor). IMHO, gold is the currency with no constituents it has to please, ie. the ultimate reserve currency… it is my “cash” position.
May 6th, 2010 at 6:47 pm
Great call, luck is happpy with you.
May 6th, 2010 at 6:54 pm
As a trader at a wall street investment bank, I will tell you that the capability is there to have checks in place to avoid making those mistakes….BUT, every trader disables them because every second counts in a fast moving market, and those checks cost you seconds. I would say its possible a fat finger “contributed” to the sell off, but I highly doubt it.
May 6th, 2010 at 6:57 pm
precipitated by GIIPS
exacerbated by HFT
concatenated by WTF
May 6th, 2010 at 6:58 pm
“Trust” in our trading platforms may evaporate tomorrow.
Hard to find the proper words for the cliff, the edge of which we are on.
May 6th, 2010 at 7:05 pm
cognos Says:
May 6th, 2010 at 4:53 pm
Hope somebody here got some AAPL at 199. Wow! Free money.
And I hope someone here didn’t buy AAPL at 277 a few days ago. Wow! Free loss of 12%!
May 6th, 2010 at 7:06 pm
Barry,
Any word on what this week’s lottery numbers will be?
Also, what is the date and time for when I will die?
May 6th, 2010 at 7:11 pm
“I just landed in LaGuardia from Dallas, and was surprised to see the Dow was down 1,000 points today.”
Yes, it was a multi-undergarment day!
May 6th, 2010 at 7:15 pm
just read on wsj.com that the Chicago Mercantile Exchange reviewed trades executed by Citigroup and saw nothing to lead them to believe there was an error. Way to break the story Fartiromo.
May 6th, 2010 at 7:22 pm
Where was the Plunge Protection Team when we needed them? The Dow was rocketing toward -1000 when there was a miraculous rebound.
Now if there is a PPT wouldn’t you want them to act BEFORE the Dow broke -1000? The PPT should also have a cover story or two to calm rattled nerves.
And if the TBTF banks anticipate hairy times as the Greek drama plays out they’d want to load up on cash.
May 6th, 2010 at 7:26 pm
i’m curious about the TA too – longest tail ever…
May 6th, 2010 at 7:39 pm
rktbrkr, what do you think, “fat fingers,” and “computer hackers,” are?
May 6th, 2010 at 7:40 pm
No matter the cause, today’s plunge shows how fragile the markets are, and how quickly bag-holders can be created.
May 6th, 2010 at 7:40 pm
Regardless of whether it was a fat thumb or someone leaned on the keyboard while having a conversation–the market righted itself and ended in the general area it was heading to before whatever the heck happened. I can tell you cash would’ve been nice. I haven’t experience that fast of a market since the LTCM debacle…
Those expecting a bounce rally on a Friday….really?! Art Cashin used to always say on our squak that in down markets rallies are not born on Fridays. The best thing would be to try and kill it again w/o the billion share error (or whatever) and leave it on the floor for people to ponder over the weekend. Then a small lift on Monday with a late killing, followed by a “Turn Around Tuesday”…
A rally on Friday would be pointless, and a flat to slightly positive market will mean more to chew on. People are confused about Europe’s mess and “why does it matter to me”–which means either you didn’t have macro-econ, or didn’t pass…
I think this will be solved in time for the World Cup, or there are going to be many Euro-politicians canceling their plans to go to the games…. not kidding…
May 6th, 2010 at 7:43 pm
Who was the guy complaining that your market calls were too nuanced and there was no money to be made reading this blog?
Wonder what he’s doing today . . .
May 6th, 2010 at 7:46 pm
Barry knew the “recovery” was fraud.
May 6th, 2010 at 7:48 pm
Who is talking about stops and flops on P&G and AAPL. The real cataclysmic trades were in some ETF’s. Look at the 1 minute charts on IVE, IVW, RSP. These are SP 500 Growth, SP 500 Value, and Equal Weight SP 500. My co-worker got stopped out on IVW and filled at $1. I am serious, $1 or down 98%. I looked at individual trades before I could bring myself to enter buy orders. The vacuum down to zero trade only lasted about 2 minutes. I could not enter my trades fast enough. Got filled on a buy of IVW at $32 off yesterdays $52.
I am proclaiming HFT to be a threat to national security! Where were the short sale limits on these stocks down 95%? The DOW printed down 1,000 points, but the SP ETF’s printed like the DOW was down 10,000 points.
May 6th, 2010 at 7:48 pm
Business Insider blows you a nice kiss:
http://www.businessinsider.com/barry-ritholtz-has-gone-100-out-of-stocks-and-into-cash-2010-5
May 6th, 2010 at 7:49 pm
LOL
May 6th, 2010 at 7:50 pm
Little bit of the HFT gone berserk. Good call Barry, and good “Heads up!”.
May 6th, 2010 at 7:54 pm
I have a basic/dumb question on institutional orders – do people really type out the word million (or, as happened today erroneously – billion), as in “Sell 1 million shares”?
Why don’t they just type the number 1,000,000 ?
May 6th, 2010 at 8:02 pm
TODAY…WHILE BARRY WAS AWAY….Is WHAT HAPPENED! Ended up GOOD for some……BAD for others…We shall see how it all plays out:
———
leftback Says:
May 6th, 2010 at 5:04 pm
Leaving aside the amusing sideshow known as the US stock market, the credit markets are showing renewed signs of stress, especially in regard to Europe and in the banking industry. The FX and bond markets usually stay closer to reality, and demand for dollars and Treasuries has been picking up for weeks now.
Don’t for one moment think that this was a one-off “phat phinger” event, or that happy days are here again.
—————-
DeDude Says:
May 6th, 2010 at 5:26 pm
I guess the new STOP-LOSS orders will include a 1-4 hour “below the limit” requirement before they are executed. Fool me once shame on you – fool me twice …………..ehhh…….hehe………I can’t be fooled again.
—————-
Mr.E. Says:
May 6th, 2010 at 5:56 pm
Battle of the computers – stops getting hit got it down below the Jan highs – short/sell algos kick in – get down to the Feb lows and cover/ buy algos kick in. Add a little panic to speed it up on the way down and you get some record making moves. All in day’s fun.
WAG on my part but my guess is the Jan highs will now prove to be solid resistance and we will see more downside in the days/weeks ahead.
———–
Livermore Shimervore Says:
May 6th, 2010 at 6:03 pm
bah….computers. Inventions of Lucifer.
too many people sitting long for dreadfully too long.
the sharp fellows are looking for an excuse to buy a summer cottage in Atlantic City.
The Greeks and the China property bubble will surely provide them with the means for a Packard or two.
Heed the early warnings when the fat cats are already cashing in today’s winnings because there’s more to come boys.
—————–
constantnormal Says:
May 6th, 2010 at 6:29 pm
I placed a fair amount of buy orders for a $7 stock at 2:42 pm, hoping that things might get low enough that I could pick up some a bit under $7. So I spread the buy orders across 6.90, 6.70 and 6.50 (which I really did not expect to get filled, perhaps none of them would, but you never know …). Looked at a couple of other things, and clicked for a quick price check before I returned to mowing the lawn. $5 and falling. ‘Bout had the Big One. Frantically started looking for WHY???!!!!, did they cut the dividend, did the price of oil plummet, what was going on?
Absolutely no news, and then the Schwab and Fidelity web order servers died. But by that time it had dawned on me that this wasn’t just my little corner of the market, it was everything.
And then 5 minutes later, everything had returned to “normal”, and I was sporting a profit. In the best of impossible worlds, I could have (in theory) picked up the shares south of 4.25, but I am more than happy with my 6.70 aggregate cost for a stock that closed at 7.23.
While it would be mildly interesting to know exactly what happened (almost certainly a software spasm, given the speed with which things plummeted and then recovered), I think the lesson to draw from this is that these markets are really quite fragile, and susceptible to stampedes with any given thunderclap (real or imagined).
I’ll bet a lotta folks with stop-loss orders got taken out and then had the prices jump back above their exit point before they could do anything about it. Almost certainly Barry has a lotta company that is in 100% cash right now. That could make for a brief rally, perhaps taking us into June before the next thunderclap.
Chaos, it’s a wunnerful thing.
May 6th, 2010 at 8:03 pm
The Dow dropped 1,000 points before strorming back to close down 350 on news that Barry Ritholtz was at 100% cash………….
May 6th, 2010 at 8:24 pm
jeffg Says:
May 6th, 2010 at 8:03 pm
The Dow dropped 1,000 points before strorming back to close down 350 on news that Barry Ritholtz was at 100% cash………….
——
BR did a Caveat…..He’s only in CASH in the things that matter to his Blog Readers. I hope he was safe today in the rest of what he owned. It was an ugly, ugly day.
May 6th, 2010 at 8:32 pm
NYSE’s Leibowitz blames computers not the large black swan under his desk
Housing prices can never go down and Spain etc can never default. Hello?
May 6th, 2010 at 8:37 pm
goddammit BR-
you edited my 4:21 post- Shocker!!!!
I most definitely did not say XXXX XX-
WTF? and I meant it in a nice way- LOL
I mean really- she’s definitely on my list for those kind of services :D
May 6th, 2010 at 8:43 pm
Barry
Thanks for your response about your reasoning for going to cash in a previous thread.
Being 75% short and 25% cash made it a nice day for me. Tomorrow is another day. We shall see.
May 6th, 2010 at 8:46 pm
BTW…I give Credit to the “Fast Money Folks” on CNBC (the only trash I watch there.) There folks were onboard for having some “time outs” on the “Black Box, Dark Pools, etc. FAST HFT schemes that are out there.
I can’t stand CNBC…but the “Fast Money Crowd” did a good job tonight…..REGULATE THE HFT…by putting some “stops” on the “unfair advantage to the retail buyer.”
I realize that without us “Retail Buyers” their “Trading” suffers so their views are really just taking care of their own….but still…I’m OK with honest traders…but as they pointed out…”THEY with their Bloomburg Terminals and other add ons are at an ADVANTAGE to the the average Joe and Jane Retail investor out there.
I thought it was a fair and honest consensus amongst the “Fast Money Crowd.” So I’ll give a Kudo’s to CNBC for them.
May 6th, 2010 at 9:00 pm
Phat Phingers up theirs – this was the invention of the Stop-Loss squeeze ;-)
May 6th, 2010 at 9:08 pm
@ahab: what about those XXXX XX? hangman time?
alright then my guess is K..? S..? and huh M ?
What?? ahab? KxSS Mx xSS ?
er.. Z..JVWX? no sry don’t know really.
May 6th, 2010 at 9:23 pm
this is gonna upset a number of applecarts … scramble the lawyers
http://www.reuters.com/article/idUSN0614132620100506
May 6th, 2010 at 9:24 pm
Anyone interested in the Ahab edit, here is a very appropriate video that will be of interest and will shed some light on the XXXX XX combo. ;-)
http://www.youtube.com/watch?v=DggnpdhPEnA
May 6th, 2010 at 9:31 pm
Can you say “banana republic”? Thank you Masters of the Universe, thank you.
May 6th, 2010 at 9:36 pm
@constantnormal:
What a freaking disgrace. It’s an “orderly markets” thing so they can get away with it.
May 6th, 2010 at 9:39 pm
How long before all trust and confidence in the markets is lost? Anyone?
May 6th, 2010 at 9:39 pm
Meaning the legitimacy of the markets…..
May 6th, 2010 at 9:44 pm
FWIW, Nikkei down 3.77% an hour+ into trading.
May 6th, 2010 at 9:46 pm
Who is winning and who is losing in these proposed 20 minutes worth cancellations on the 60% gaps by the nyse and nas? Swing traders winning, scalpers losing?
May 6th, 2010 at 9:47 pm
@Manny(I’m here also yeah:p) : maybe question this time is: “after having somewhat regained confidence in the markets after2008/begin09 crash, how would people react in the face of another huge selloff”?
Now selloff is not here yet. But question still remains.
May 6th, 2010 at 9:50 pm
@Wolfie: Not well, I’m guessing. On many levels.
May 6th, 2010 at 9:52 pm
Anyone read Charles Gave in Mauldin’s Outside the Box today? Cliff Notes version: This phase of the ongoing global financial crisis is all about an age-old “Roman” vs. “Christian” (aka barbarian) conception of Europe — and the fucking unwillingness of big banks everywhere to mark their goddam “assets” to market. Until somone forces them to do so, iBanksters will continue to reap huge ill-begotten gains, and the rest of us suckers will pick up the tab.
May 6th, 2010 at 9:57 pm
Seriously, after reading this, I am all in. No one will ever, ever be allowed to lose money in the stock market again. (A rising market is the only thing between us and the revolution.)
http://finance.yahoo.com/news/Obama-briefed-on-Greece-and-apf-4098393791.html?x=0&sec=topStories&pos=1&asset=2f19cb736df5796eab7b3adcb1a26a13&ccode=1
May 6th, 2010 at 10:02 pm
@Manny:people worldwide are getting ever more “educated”, or at least a minimum aware of what’s going on. Therefore it seems quite sure that if markets crash anytime soon, it will take a long time before they (we) ever trust these investements again…
May 6th, 2010 at 10:12 pm
Looks like all the HFT algos that supposedly “supply liquidity” flipped their bits from 1 to 0 and decided to provide jack-sh!t. They must be all programmed by the brokers in the ’87 crash who wouldn’t answer their phones. Now we can have supplemental liquidity providers do the electronic equivalent. And remember, they are all making the market better and safer and a more level playing field.
May 6th, 2010 at 10:24 pm
Simple fail safe for the markets and HFT: require every computerized trading platform to have a hard wired cap at $500 million for one trade. Like o governor on your car that stops you from driving over 120 MPH. If you want to sell $5 billion, you have to enter 10 different trades. This will put a hard size cap on those fat finger Bas&$*&^. The fine should be $1 million for an SEC inspection which shows that the firm does not have a hard trade size cap built into the trading platform. The the fine should be $100 million for any idiot who triggers the next $billion fat finger trade, or maybe “Restitution”
Do you think we will get a real investigation of what happened?
My guess is that if it was a bank prop trading desk it will come out in the fight to end bank prop trading. It cannot be that hard to find out who did $1 billion in trades between 2:40 and 2:45.
May 6th, 2010 at 10:35 pm
There’s never just one lie.Now the trader error with Proctor& Gamble has become a “glitch” that impacted 180 stocks that are having trades cancelled – over 60% – where did that number come from? Did program trading cause these glitches, have they caused other glitches and will they require seat of the pants adjustments ever big (down) day?
May 6th, 2010 at 10:36 pm
What @cynic-fa said. It cannot be that hard. But I wouldn’t lay any money on Geithner, Bernanke or Dodd to push for an investigation. And the president? Methinks he is owned like the others.
May 6th, 2010 at 10:38 pm
Think the exchanges would cancel transactions on a spike up?
Maybe the program trading works OK on low volume days but goes mesugganah on high volume days?
May 6th, 2010 at 10:45 pm
Before I guess what will happen tomorrow, keep the big picture in mind. The reason the world markets are in turmoil is DEBT. Pure and simple. The ruling elite will try to distract you from the truth with bullshit and propaganda. Every government in Europe has accumulated humungous amounts of debt in order to fullfill the socialist agenda they promised their people. Socialism is a failure. You eventually run out of other people’s money. The United States has $12.5 trillion of debt. Obama plans to double that by 2020. The markets will not let us get to that point. Our financial system will collpse. The markets are starting to vomit on the debts of the world.
Here are my guesses for tomorrow:
Asian markets will tank overnight. China is a house of cards. This will lead to Europe opening down tomorrow morning.
US futures will be down overnight.
I can guarantee you that Timmy Geithner and Bennie Bernanke are having conference calls with Lloyd, Vikrim, Jamie, and the rest of the banking cartel tonight planning to use their traders to prop up the market tomorrow morning.
Mutual funds only have 3% cash. There is no money on the sidelines to rush in and buy.
The damage done behind the scenes is what you should really worry about. The idiots who operate on Wall Street were sure the markets were going up. These fools likely bought stocks on margin. The margin calls are happening tonight. These morons will have to raise cash at the open to meet their margin calls.
Now we get to the interesting part. Remember the CDOs that almost brought down the system in 2008? These derivatives are still completely unregulated. Whose bets have gone bad? No one knows. These weapons of mass destruction are exploding as I type this. Hedge funds are self destructing.
Employment will show an increase of 250,000 jobs (100,000 Census, 100,000 from the fake birth/death model, and 50,000 real jobs). CNBC will spin this as fantastic news.
The market will open down. The big banks will try to stem the tide. The market will go into positive territory.
There will be wild swings all day. It is likely that it will finish down modestly – 50 points or so.
If the market gets more bad news and goes down 200 or more points, we could be in for another Black Monday. Before the 1987 crash, the market already went down hard on Thursday and Friday before the big collapse on that Monday.
Caution is the watchword. Keep in mind that this Crisis is only just beginning. The MSM will keep looking for a bottom and a new uptrend. That is at least 10 years off.
May 6th, 2010 at 10:59 pm
Interesting day. Profits taken, new puts locked and loaded, bring it on.
May 6th, 2010 at 11:13 pm
Put sell stops on and the market crashes, viola you are 100% in cash. But, great trades only if you buy in at lower prices. You can’t be half right; its got to be round trip right. I’m sure BR will let us know about the buys at lower prices.
May 6th, 2010 at 11:22 pm
I was teaching an American Literature class to my junior students, had them in groups reviewing for an upcoming test on The Great Gatsby. Went to my desk to peek at my volatility play and saw the graph rocket to the top of the of the chart. It wasn’t even a graph, really. Just a verticle line. I wasn’t even sure it was going up or going down.
For a split second, I considered breaking the news to my class. I thought a bomb had gone off somewhere.
May 6th, 2010 at 11:23 pm
Jesus, Barry, were you just trying to prove Alacra’s theory about how influential your blog is? … kinda scary how sharp your calls have been. I guess I read your blog every day for a reason :)
May 7th, 2010 at 12:11 am
This is just too much:
http://www.nyse.com/events/1273053647643.html
5/7/2010
The Procter & Gamble Company Celebrates Mother’s Day at the NYSE
May 7th, 2010 at 12:59 am
Torpedo sank South Korea ship:
“Investigators probing the deadly sinking of a South Korean navy ship in March near the North have concluded that a torpedo was the source of an explosion that destroyed the vessel”
http://www.reuters.com/article/idUSTRE6460FC20100507
Meanwhile…
“Kim Jong-il said he remains committed to the “denuclearisation” of the Korean peninsula”
Oh boy…
May 7th, 2010 at 1:38 am
I guess you did kick over that first domino Barry. Just remember this quote from Patton:
For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph – a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.
Great call BTW :)
It looks like sell in May and go away just added a few more stanzas to the ryhme.
I am happy to report that the VXX performed admirably in the firefight. I definitely think it’s a keeper
May 7th, 2010 at 2:16 am
Was surprised to read the comments by readers who are happy with themselves for buying stocks yesterday. Can’t imagine anybody wanting to hold stocks over the weekend. And I say that being bullish on several individual stocks.
May 7th, 2010 at 3:27 am
Wow, even if it was 100% cash in a subset of the accounts, and reducing stock exposure to very conservative levels in others, what an amazing call!!! Congrats!!!
Some of the media caught on to the systemic problems exposed today, but many just parrot the BS fat-finger excuse. Only a couple have identified the systemic breakdowns due to high frequency trading, a preponderance of momentum algorithms rather than value algorithms among hedge funds and traders, stop losses being mechanically triggered , high leverage on sub 1% money, no human market makers to smooth the insanity, multiple market makers whose effects feed into each other in sub-second time, …
The system is broken. 600 trillion of derivatives written on a world GWP of 43 trillion. Nearly free money from the worlds governments flooding into financial games raising asset prices, like stocks, instead of it being able to be directed into productive uses that create jobs.
People in the financial community do not understand the ANGER among regular people who have been screwed over twice in the last decade by standard financial advise of “Buy and Hold, it’ll be alright.” While people are trying to make a honest, hardworking living and having their industries and communities obliterated and outsourced overseas. And while the insanely well paid financial people play their computer and high risk leverage games that provide virtually no benefit to the real economy.
I like what DeDude said in the other thread, “How did we allow a simple function as allocating capital to where it is needed, to not only take over a third of the economy, but even with that much of the economy poured into it – it still does not work.” It has done far more harm than good to the economy.
Congress needs to substantially strengthen the financial regulation bill going through now. They would have incredible political support for doing so, Americans are PO’ed at the financial shenanigans, such as today’s, that are going on. The whole system needs a total reset towards money and rewards going to those that actually produce things that people want and need, rather than to upper corporate management and financial game players. Hey, that’s the way most Americans see it.
May 7th, 2010 at 5:15 am
I’m impressed big time, thank you for still being very frank, outspoken, and as honest as the mass media will allow you to be.
Always enjoy reading your post, please keep it up, and SLOW down. Tickets can get expensive as I have found out lately.
May 7th, 2010 at 7:56 am
@Transor Z 12:11 AM
The Procter & Gamble Company Celebrates Mother’s Day at the NYSE… yesterday Procter & Gamble Company celebrated “MOTHERF*CKER!!!” Day.
I have a theory. Corner food cart guy finds out his 54 year old brother back home got whacked in the head pretty bad by a cop while protesting his government telling him he can’t retire next year with 100% of his salary for the rest of his life. Distraught food cart guy is distracted when he makes gyro for fat fingered trader, the daily gyro FFT has come to rely on. FFT, dizzy from food poisoning/lack of that familiar gyro taste hits b instead of m/holds his fat dizzy finger on 0 for too long.
Contagion.
May 7th, 2010 at 11:33 am
@EAR: Procter & Gamble Company celebrated “MOTHERF*CKER!!!” Day. LOL