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Island Investing

Riffs, rants, and the upside of investing from way off Wall Street


This Week’s Sign the Lunatics Are Running the Asylum

Two words: “flash crash.”

Good article today in the WSJ about what happened on May 6th.

“…the Dow Jones Industrial Average suffered its biggest, fastest decline ever, and hundreds of stocks momentarily lost nearly all their value. So many things went wrong, so quickly, that regulators haven’t yet pieced together precisely what happened.

A close examination of the market’s rapid-fire unraveling reveals some new details about what unfolded: Stock-price data from the New York Stock Exchange’s electronic-trading arm, Arca, were so slow that at least three other exchanges simply cut it off from trading. Pricing information became so erratic that at one point shares of Apple Inc. traded at nearly $100,000 apiece. And computer-driven trading models used by many big investors, apparently responding to the same market signals, rushed for the exits at the same time.”

Read it in its entirety here.

I have no idea what any of the above has to do with long-term investing, but it’s going to make one helluva cyborg movie.

Previous posts on High Frequency Trading include this one, and this video. Sadly, there will probably be more posts in the future.