10 May 2010

Stock Market Shenanigans

Conspiracy 9 Comments

I felt like some old-school angry white man ranting and tuned in to Michael Savage on the way home from my lecture on banking. He said he couldn’t believe everyone had just accepted that there was a computer glitch and that’s why the stock market tanked (briefly) last week. Savage claimed that the circuit breakers are turned off in the last half hour of trading, and that the market started tanking precisely at 2:30pm.

Does anyone know if that’s true? This CNN FAQ is consistent with Savage’s claims, but not decisive.

9 Responses to “Stock Market Shenanigans”

  1. Blackadder says:

    I don’t understand the nature of the claimed conspiracy. What is it Savage claims really happened?

    • bobmurphy says:

      He is saying it was an orchestrated plot for some insiders to snatch up a bunch of stocks at depressed prices. He said something like, “If we had a real government in this country, rather than the scumbag socialists in bed with Wall Street, then there would be an investigation into which hedge funds made billions of dollars in that half hour.”

      So his point was, if it had just been a computer glitch, isn’t it a pretty big coincidence that it started exactly at the right time to evade the normal circuit breakers on the exchange.

      I’m not confirming his basic facts, that’s why I’m posting this. As RW notes, it looks like Savage botched one thing, by implying the market closed at 3pm Eastern.

      • Blackadder says:

        I see, so it’s kind of like what they did in the Pelham 123 remake, where you do something to make the market bottom out, then buy at a discount.

        It’s certainly a possibility, although since roughly 20% of market action occurs after 2:30 pm I don’t see the evidence as being all that compelling. If someone was trying to play the market it’s likely they didn’t do very well, as a lot of the trades between 2:40 and 3:00 ended up being cancelled by the exchange.

        My question would be whether there would actually be anything illegal about doing what Savage suggests happens. If you own some stock and sell it knowing that this will lead to a sell off and you and sweep in and buy everything back at a discount that might be a sleazy move, but I don’t see how it would be illegal.

    • Political Catechism says:

      The homosexual mafia colluded with the SEC to orchestrate a false-flag attack, so that the frightened mind of children would seek out gay muslims for recourse. We are witnessing the subversion of good old 50s America. It’s quite simple really.

  2. Robert Wenzel says:

    2:30 wouldn’t be the start of the last half hour. It would be the start of the last hour and a half of market trading. The only thing set to be turned off at that time was my microwave, which had popcorn in it.

    • bobmurphy says:

      Believe it or not, RW, I had wondered that myself. But I’m pretty sure I’m quoting Savage correctly.

      So the deal is, the circuit breakers don’t work on the last 90 minutes of trading?

  3. Aristos says:

    I ask the same as Blackadder.

  4. Jon O says:

    I was trading the S&P futures that day and the market didn’t just collapse at 2:30. It was selling off all day on heavy volume and had put in something of a crash pattern(heavy morning selling, big midday reversal(s) that fail(s) and then a stair-step down pattern that increases in momentum as the afternoon moves on). The selling didn’t get heavy until about 2:00 when we were around 1140 on the SnP futures, the market didn’t “collapse” until the 1195 level broke in the futures around 2:45 when everyone just stepped back from the market and liquidity disappeared. The order book which is usually very deep for S&P futures looked like swiss cheese. At that point we dropped about 30 pts in a blink.

    The market was in an overbought, complacent position from rallying for 1yr +, had just rolled over and was looking at a worsening situation in europe with spreads widening and the euro plunging. People were watching greek riots on tv and everyone was trimming positions. If you want to look at anything that can explain the crash look at the eur/jpy currency pair, something alot of people watch to assay the carry trade. As the euro was collapsing and people ran into the jpy a number of programs(and people) starting selling risk assets, technical levels got breached, stop orders got hit, and people pulled their bids…. thus a panic.

    The SnP futures got within a few handles of the downside limit and managed to rally hard off the low… the only suspicious thing in my mind is why we didn’t hit the limit after dropping 100 pts. When the market gets that close to a limit that level almost works like a magnet. Coincidence I guess