Market Crash

Now that we’re all honorary members of the “Halfway To Hell Club”, a group of nineteen men who seemingly fell to their deaths while constructing the Golden Gate Bridge only to be saved by a crude and rudimentary net halfway down, I present this entirely fictional account of last Thursday’s market crash. Only the names were changed to protect the guilty.

Computerized trading platforms and various algos are entering the biggest frenzy over assorted technological gimmicks since the October 1987 crash. And the public demands their blood. Or as the case may be, Lithium Hydride. Alas, the agency that is supposed to protect investors from abuses of HFT and various other newfangled technologies is woefully stupid to be able to deal with this great issue. Nonetheless, Senators Ted Kaufman (D-DE) and Mark Warner (D-VA) on Friday proposed an addition to the Senate’s Wall Street reform bill that would direct the Securities and Exchange Commission and the Commodity Futures Trading Commission to report to Congress on several key issues surrounding the May 6, 2010 market meltdown, which sent the Dow Jones Industrial Average tumbling dramatically in minutes. High-frequency-trading algorithms have been the initial focus of questions concerning the collapse. We hope Kaufman is successful. On the other hand, the most likely product of the SEC's work product will be a 1 million page printout of all the jpegs in www.underagetransvestitesforregulators.com, better known in SEC circles as due diligence output. As usual, we hope we are wrong. As usual, we suspect we aren't.

George Soros, speaking at a meeting organized by The Economist, warns all those who are throwing their money into the equity pit, that "the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis." Advice from Soros or from CNBC. You decide. Reuters reports that Soros said "the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned." We hope all those who are buying stocks have very tight stop loss triggers.

Could a prolonged high unemployment rate, typified by the much touted "Jobless Recovery", cause a market crash in the not so distant future?