Dylan Ratigan's Explanation For The Crash

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Sat, 05/08/2010 - 18:16 | 338360 huggy_in_london
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So this guy finally found religion?  That said, he's got as much credibility in my book as Cramer, although he's right in this case on the high-frequency trading, but hardly a new story... 

Sat, 05/08/2010 - 18:36 | 338385 ConfederateH
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Huggy, I am still trying to digest the ZH outages on Thursday and Friday during the peak periods of NYSE flame out.  Tyler won't say anything about it, so at this point I have to assume that it wasn't anything as innocent as an overloaded server, a memory leak or a hardware error.

So my question is:  If TPTB can shut down ZH in the middle of a crisis, irregardless of the threats or bribes they used on Tyler,  could they not also force Tyler to change the tilt or even drop coverage of certain events?  And if this is true, how much credibility does ZH have?

Sat, 05/08/2010 - 18:45 | 338400 choob
choob's picture

Ha, that wasn't an 'outage'. Even a DoS attack would have had a bigger impact than what we had. I highly doubt anyone cares about shutting down a website.

Sat, 05/08/2010 - 18:48 | 338404 ZerOhead
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Surely you can't be serious! After all... we are all Tyler Durden... except Ty that is... he/she/them are clearly someone else...

Sat, 05/08/2010 - 21:13 | 338546 Missing_Link
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I AM SPARTACUS!!!

Sat, 05/08/2010 - 21:55 | 338583 faustian bargain
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I'm Brian...and so is my wife.

Sat, 05/08/2010 - 22:40 | 338635 Bananamerican
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for those who haven't seen it, this was Mish's take on "le crashe"


During yesterday's fast-moving midday market, NYSE specialists -- who oversee trading in individual stocks -- used their authority to call a momentary time out. The idea was to bring together buyers and sellers, and get their prices more in line with each other.

It happened in five Dow stocks, including 3M (MMM, Fortune 500) and Procter & Gamble (PG, Fortune 500), according to the NYSE, and in a good number of the listed stocks. The NYSE did not have a tally of exactly how many.

Years ago, when the NYSE dominated trading, such "time-outs" worked well at stabilizing stock prices.

But today, the NYSE accounts for only about 25% of the volume in its listed stocks. Much of the rest comes from computerized markets run by private companies -- and some of those systems did not take a time out yesterday.

So, as the NYSE paused for a minute or two at about 2:40 p.m. ET, the off-exchange computers kept searching to execute trades. They hit the best bids still standing, which in many cases were far below the prior price.

And in some cases, the off-exchange computers found no bids at all. When that happens, market-making computers see a zero bid, then offer a penny higher to capture the trade and collect a commission -- hence the trades of just one cent for several stocks, including Accenture (ACN), Boston Beer (SAM), Exelon (EXC, Fortune 500).

"Computers are looking for the best bids. The real best bids shut themselves down," one trader told CNNMoney.com.

"You had penny prints. The bid was zero. The algorithms were designed to penny the bids," said another trader.

The attempt to stabilize the market by timing out the human bidders made matters worse. The computers reacted by bidding $.01 when there were no other bids.

This was not a planned conspiracy. Rather, it was a natural occurrence after all the sell stops and buy stops executed, the NYSE paused, and the only game in town was computers bidding against computers finding no bids.

The only question is whether or not the computers did indeed in every case route orders to the best bid as required by NBBO National Best Bid and Offer rules.

I am continually amazed at how otherwise sensible people manage to come up with preposterous conspiracies when anything out of the norm happens.

Sat, 05/08/2010 - 23:38 | 338673 Clinteastwood
Clinteastwood's picture

Still......the point is that if there is so little liquidity (capital) in the market that no one wants 3M for more than a penny when everyone else is stopped out........not only is 3M stock only worth a penny.........it's game over for the stock market because almost everyone realized that it's an unsupported Ponzi scheme.  Nothing about this weekend's, or next week's artificial markets manipulations (by governments/central banks, etc.,) will change this perception.  Everyone will be heading for the exits.

Sun, 05/09/2010 - 04:11 | 338833 i.knoknot
i.knoknot's picture

exactly.

effectively, NOBODY on any of the non-NYSE market-making brokerages had ANY limit-buy orders waiting in the queue. at any price. and now we have proof. NOBODY was even fishing for deals with GTC orders. NOBODY but the top tier (prolly HFTs) are even in the game.

to me, this is bigger than the so-called conspiracy cited above. this is THE REAL nightmare any company owner who might be *needing* to raise more capital would consider the ultimate death-nell. there was no capital looking for deals. there was no capital at all.

the market is so broken, that nobody (auditably) was making their capital available to sellers. this isn't a theory.

once could argue that smart money now puts a couple of really low-ball orders on every stock in the dow/s&p, in case it happens again... but you could still lose money. this is not investment advice.

go ahead and buy low next week. dow 36000... here we come.

Sun, 05/09/2010 - 09:53 | 339070 downwiththebanks
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Spot on.

Sun, 05/09/2010 - 11:37 | 339213 WaterWings
WaterWings's picture

Scary. A very stunning take.

Sun, 05/09/2010 - 11:59 | 339244 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

It may be the proof we were looking for, but we already knew this anyway didn't we? Surely volume speaks for itself.

 

I still suffer Sara Connor syndrome. we still have the same problem: boobus americanus is still blind. Waiting for the new Simon Cowell show this Fall maybe?

 

Oh well Wake up the Sheeple, Save the World?

Sun, 05/09/2010 - 00:04 | 338693 Fraud-Esq
Fraud-Esq's picture

But, how could the NYSE not know that would happen? Like you said, they knew they only covered 25%, so they knew trading would continue and matters would get worse. Why pause 25% of the trading or the most efficient market and let the orders run around your system? I don't get it. If it's predictable, why did they do it? These people should KNOW this. This is what they do, 24/7. You can't tell me they don't run scenarios and tests. How could "what happens when we pause 25% of knife falling market" not be one? 

I don't buy that they paused not knowing. If so, they're incompetent. If not, you have to ask why. Perhaps they want to centralize things. They were out the same day blaming other exchanges, after all and seeking rule changes. I'd bet the devil is in the detail on this. Perhaps some people want some specific change. I don't believe they didn't know the effect of their pause.

Sun, 05/09/2010 - 15:46 | 339635 ZerOhead
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PRECISELY!

"I am continually amazed at how otherwise sensible people manage to come up with preposterous conspiracies when anything out of the norm happens."

Personally I'm continually amazed when people ascribe "innocent causation" to multiple-sigma events that had the potential to handsomely profit those in "the know".

Just sayin'...

Sun, 05/09/2010 - 18:02 | 339915 Pat Hand
Pat Hand's picture

I'm with the non-conspiracy camp.  The NYSE only has control over their floor.  The SEC in its infinite wisdom has allowed massive fragmentation in the guise of supporting "competition".  NYSE worked, but BATS (to use an example) did not.  Call auctions work great in these situations IF all flow gets funnelled into them.

The market is broken, though, and I don't blame people for exiting.  I've just spent the weekend redistributing assets to make sure that most survive the meltdown. 

Europe has no credibility - bailout of greece will fail.

all currencies are bad, so the dollar (and yen for technical reasons) will absorb the flight from euro and sterling.  swissies are probably toast as well.

Massive asset selloff on the way.  Stay liquid, safe and nimble.  Hint: 10Y UST are only going to be "safe" for a few months at most

Sat, 05/08/2010 - 18:52 | 338418 doggis
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do you know of another site that questions the system 'corrupt' that is in place - more than ZH? ZH is greater than just TD - it includes all the readers and commentators too. if TD was failing the community in anyway, this community would detect it, and this community would voice it. i find this community, ZH, and TD to be very credible.

Sat, 05/08/2010 - 22:32 | 338627 citizen2084
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+1000

Sun, 05/09/2010 - 18:04 | 339920 Pat Hand
Pat Hand's picture

Exposing a conspiracy where none exists is not credibility building.

Sat, 05/08/2010 - 19:00 | 338430 Selah
Selah's picture

Irrespective or regardless of any hypothetical threats on "Tyler", I suggest that you read the manifesto:

http://www.zerohedge.com/about

I don't think that these folks are going to roll over easily.

Sat, 05/08/2010 - 19:00 | 338433 Tyler Durden
Tyler Durden's picture

May we refer you to our Full Disclosure notice:

You should assume that at all times
we are so totally just talking our book it would shock and awe you like
the unexpected, early-morning arrival of a cluster of BGM-109C
Tomahawks (were you a believer in the importance of "optics" that is).

If
we
make a off-hand remark about New Zealand sheep herders it's because
we are long New Zealand West Island Cold Kut (NZ-WICK) Wool futures and
Kiwi brand Condoms ("For it's pleasure").  If we are joking around
about Cliff Asness, it's because we have developed a synthetic short of
ARQ.  If we jest about Joe Sixpack, it's because we are trying to hype
our cheap-American-beer holdings so we can exit quickly.  Basically, we
are telling you about a position we believe in strongly enough to
invest in.

We've
always wondered this: Why would you want to read about a position so
uncompelling that the author doesn't have the stones to put their money
where their keyboard is?  Even if you elected to read such material for
entertainment value (what else is there anymore?) why on earth would
you ever consider it "more credible."

The
reality is, critical readers should read analytic posts and the rest of
Zero Hedge with the blanket assumption that the author is totally
"conflicted."  (Phrased more logically, that the author stands to
benefit from being right- imagine that).  This turns the conversation
to the content, and away from
the author, the author's biography and the contents of their IRA
account / blind trust.  This (the content) is, of course, where the
focus should be.  If you think otherwise you might be one of those
people who thinks it was a good idea for a news program hosted by Dan
Rather, and where viewers spend 66% of the non-commercial time watching
his mug, to be in HDTV.  If you still get something out of our writing
with the assumption that we are invested in our position and stand to
gain personally from you believing us, well, we've done our job.  If
not, then our being
"unconflicted" isn't going to change the fact that we have a weak
argument or poorly reasoned prose.  At least, if you're not one of the
"optics" idiots.

People, you don't test a safe under
ideal conditions for the safe and call it good.  You test it with all
the advantages to the burglar.  And then you let the burglar cheat.  If it still remains closed after that, then it's
secure.

Plus,
we just aren't going to spend the time checking to see if the third
largest vendor of XYZ, Corporation might employ someone we once had
martinis with.  (Again: Full disclosure... isn't).  We are effectively
guaranteed to have missed something else even if we discover such a
relationship and, frankly, we've had far too many martinis over the
years for this kind of search to be non-trivial.

 

...

As for the site outage, there is nothing sinister about hittng half a million page views per day when our server is supposed to have a radioactive melt down at half that number. We hope to boost our server redundancy soon. Something tells us the market will be very volatile in the coming days and years.

Sat, 05/08/2010 - 19:12 | 338442 Miles Kendig
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:)

Sat, 05/08/2010 - 19:43 | 338462 WaterWings
WaterWings's picture

If you could summarize the intention of the founding fathers that possessed the highest levels integrity it would be this paragraph:

People, you don't test a safe under ideal conditions for the safe and call it good.  You test it with all the advantages to the burglar.  And then you let the burglar cheat.  If it still remains closed after that, then it's secure.

The average consumer won't believe anything until it's tearing out their throat:

http://www.youtube.com/watch?v=XcxKIJTb3Hg

My attempt to elucidate Fs and Fy is: "Look at the bones!"

Sat, 05/08/2010 - 20:19 | 338491 ZerOhead
ZerOhead's picture

Classic Python! :)

Sat, 05/08/2010 - 21:12 | 338545 Crab Cake
Crab Cake's picture

Here's a cautionary tale for "investors" these days...

Monty Python Tale of Sir Robin

http://www.youtube.com/watch?v=BZwuTo7zKM8


 

Sun, 05/09/2010 - 08:22 | 338966 Rusty Shorts
Sun, 05/09/2010 - 09:17 | 339032 FEDbuster
FEDbuster's picture

Falling Bankster Swaps (FBS) now there is something to bet on.

http://www.youtube.com/watch?v=yge311sFhC8

Sun, 05/09/2010 - 03:16 | 338800 Miles Kendig
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Wings - Every Ranger knows to set a place at the table for Murphy.  I am sure this holds true for Tyler, Pilots, financial observers extraordinaire and British comedians as well.  Batter up!

Sun, 05/09/2010 - 11:46 | 339226 WaterWings
WaterWings's picture

Incoming fire has the right of way.

Sun, 05/09/2010 - 15:52 | 339641 Miles Kendig
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And the radio battery will fail just when fire support is desperately needed.

Sat, 05/08/2010 - 19:30 | 338456 AccreditedEYE
AccreditedEYE's picture

If we make a off-hand remark about New Zealand sheep herders it's because we are long New Zealand West Island Cold Kut (NZ-WICK) Wool futures and Kiwi brand Condoms ("For it's pleasure"). 

LMAO!!!!!! Oh God, I f-ing LOVE this site! LOL!!

Sun, 05/09/2010 - 13:22 | 339434 Hephasteus
Hephasteus's picture

I know that was the funniest thing I've read in ages.

Sat, 05/08/2010 - 20:29 | 338501 msjimmied
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Half a million page views a day. Wow. I remember when there were at most 5 to 6 comments on an article. Maybe something is right with the world, when people still gravitate towards excellence. Please, don't ever change!

Sat, 05/08/2010 - 21:07 | 338542 WaterWings
WaterWings's picture

There are also those (a la Sunstein) that would employ methods in the blogosphere to reduce serious comment sections to "meaningless chatter".

Sun, 05/09/2010 - 02:36 | 338801 merehuman
merehuman's picture

WaterWings, thats why i am being quiet from now on. Learned a hard lesson about context and how easy it is to be misunderstood. Reckon this is my last sound off to let you know why. Subleties get missed. Village Idiot made me to look like a hater and i am certainly not one. I am back to being a lurker.Bye

Sun, 05/09/2010 - 03:05 | 338818 Miles Kendig
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I have found translation to be one of my greatest hurdles as well. Don't stay too far away.

Sun, 05/09/2010 - 04:51 | 338839 i.knoknot
i.knoknot's picture

hell mh, just grab another nick/avatar and come back later.

i'll concede that you do get a big part of your life back by lurking, but your contributions will be missed.

put on some racing leathers and come back when life allows. don't let them troll you out.

cheers.

Sun, 05/09/2010 - 11:28 | 339197 merehuman
merehuman's picture

i.Knoknot, thank you for your support. Only thing i am against is Banksters and other liars.

Sun, 05/09/2010 - 11:50 | 339229 WaterWings
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merehuman,

Hope your eyeballs always stay with us! Loved the story about waking up wet; catching trains. Keep us all updated on coastal conditions. :-)

Sun, 05/09/2010 - 03:21 | 338815 Miles Kendig
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Cas Sunstein.  A name dark in treachery to free people everywhere.  If there ever were efforts of an individual to despise, Sunstein's certainly rank.  Mr Judicial Exclusion himself and as Tyler illustrates, a keen observer of optics.

Sat, 05/08/2010 - 22:28 | 338587 jdrose1985
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Or are you so impressed with authority that you give respect and credence to all that claim it? Do you read everything you’re supposed to read? Do you think every thing you’re supposed to think? Buy what you’re told to want?

-Tyler Durden

Sat, 05/08/2010 - 22:12 | 338605 jedwards
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Tyler, I love you guys, but you have got to realize you were offline for the entire time period what was supposed to be the culmination of EVERYTHING you have been talking about for the last year.  EVERYTHING you have been preaching about came to a head on Thursday and you weren't active.

That is a bloody shame.

I know it's expensive to run servers and what not, but you have to go talk to your angel investors or whoever has deep pockets, and get some more computing resources.  You may never have as good an opportunity as last Thursday.  Or you may, if things get worse. 

Seriously, plaster even more ads, whatever it takes to get the money you need.  I will be click on ads every time I log in, which is about once ever half hour.  If you need more money, have a fund raiser, we'll donate money if you give us a breakdown of your costs so that we know how much you need.

But for fuck's sake, having your servers down on 5/6/2010 is like Rocky falling asleep before the title shot with Apollo Creed and missing the entire bout.

Sat, 05/08/2010 - 22:17 | 338613 jdrose1985
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You can donate to ZH thru the shopping cart, you sound like a prime candidate Jedwards.

Sat, 05/08/2010 - 22:41 | 338637 jedwards
jedwards's picture

Yes, as I've already said, I've bought one of their T-shirts, and I'm hoping they give figures on how much they need so that I can figure out how much to give.  If they make enough money from ads, then I don't feel the need to donate to them, I'll just keep clicking on their ads.

Also, I'm hoping they have an anonymous way to donate so that my name isn't associated with donating money to them.  I'll mail them an envelope with money if need be.

Now, will you donate to them?

Sat, 05/08/2010 - 22:57 | 338647 jdrose1985
jdrose1985's picture

Now, will you donate to them?

Absolutely, I consider it a privelege to donate to ZH. I have also been clicking a lot of ads for the last couple of months. Any idea on how much they get every time we click one?

Tyler & Co have knocked the cover off the ball with this site, I really don't think anything like this has ever been accomplished. This site even gives simple, uneducated people like me a chance to learn about our system to protect myself and others. The most important parts are that it's free and relies heavily on users to keep the site structure honest and totally branch out on every aspect of every topic presented here for discourse.

Will definitely be donating more although I have limited means compared to most here, I reckon.

Sun, 05/09/2010 - 00:31 | 338715 Tapeworm
Tapeworm's picture

Will it kill you to kick in fifty bucks for something that you find so valuable? How about twenty cents per day for the news and entertainment?

Sun, 05/09/2010 - 01:06 | 338743 polizeros
polizeros's picture

Even Bloomberg was having trouble keeping up during the meltdown. When a zillion people hit a site at once, it's going to slow down

Sun, 05/09/2010 - 11:46 | 339224 seventree
seventree's picture

This obviously is not on the same scale, but on the morning of 9/11 most web news sites were timing out for me, including CNN and NYT. However NYT soon became available when the replaced html with a page of plain ascii text, decreasing the per-request server load. But it is impractical for any system to be scaled to handle the maximum imaginable peak load. Even emergency call centers acknowledge this.

Sun, 05/09/2010 - 02:55 | 338812 kote
kote's picture

Call me selfish, but I refuse to donate to anything that isn't nonprofit - especially when it's run by (temporarily ex-) bankers.  Give me an audited financial statement and nonprofit incorporation and I'll consider donating.  The ads on this site are already borderline ridiculous.

Per the ZH disclosure page, this site makes plenty of money and Tyler blows it all on hookers.  Anything not spent on hookers is used for travel to network with bank buddies so he can get back in the business and leave the site behind.

Sun, 05/09/2010 - 04:18 | 338835 i.knoknot
i.knoknot's picture

parasites are are part of the equation.

you and half the GS staff when they get home each night

Sun, 05/09/2010 - 11:52 | 339234 jedwards
jedwards's picture

I have no problems with donating money if they need the money, I don't care if they're a non-profit or not.  I just don't know if they are making hand-over-fist from their ads.  If they are, then that's cool, I will click on more ads for them.  If they are struggling and need money, I will donate money.  I would just like some sort of statement from them letting us know their financial situation.

 

Like I said, I would prefer an anonymous way to donate, I don't want the Feds investigating me because I'm supporting a cause that is directly against their best efforts to defraud us.

Do NOT follow this link or you will be banned from the site!