Analogkid

[kevin21boston]

What do you make of this correction?

What happened yesterday reminds me of a day in August 2007 when we fell down hard but mostly recovered by the end of the day. Two months later we topped out. All of these European problems have finally caught up with the market. Greece, now Portugal, and who knows who is next.

My theory is that with all these problems that Europe is having it is going to force them to print up cash which will bring up the value of the dollar. The dollar has been shooting up the last couple of days. I made a post not too long ago detailing what would happen when the dollar started to appreciate. I'm going to try and dig it up.

[theanalogkid]

Well I certainly don't believe that 'fat finger' BS that CNBC was reporting. Consider that trades are entered in by shares not by dollar value, I don't think the 'fat finger' person would be hitting M either.

http://www.mediafire.com/?ng3mtaztmiv - Doesn't sound a fat finger or computer glitch to me.

The VIX is continuing to give bullish warnings which is bearish for equities. I think we are seeing the end of the March 09 rally.

Could be wrong though.


This article might also help to explain yesterday's crash (http://www.zerohedge.com/article/where-was-goldmans-supplementary-liquidity-provider-team-yesterday-recap-goldmans-program-tr)

Dollar is still falling vs Gold. It will come crashing down soon, history has shown fiat currencies don't last.

Euro was up today amid rumors that the ECB was going bail out 1,100 banks.

It's funny the Euro was suppose to be gold like with all these restrictions in place, now they are turning to Helicopter Ben's tactics. They've just kicked the can slightly further down the road with Greece, it will eventually default. Giving them a loan which is just more debt, isn't going to fix their debt problem, nor are their half assed austerity measures.

[Gtrght77]

I heard the crash was caused by a typo?


I saw this on google news.
http://www.resourceinvestor.com/News/2010/5/Pages/John-Williams-A-HyperInflationary-Great-Depression-Is-Coming.aspx

[kevin21boston]

I heard the crash was caused by a typo?

It's media bullsh1t...


1- Like Analog said, you enter trades in shares, not monetary value
2- If you were to make a mistake like that the trade would get rejected before going through

and most importantly

3- No single trader or transaction can cause a 1,000 point drop in the markets. What did they say the mistake was, $60B or something? That's pennies in the market. This is a multi trillion dollar machine we're dealing with. $60B isn't large enough to make a move.




What is happening is that the dollar is gaining value becaue the Euro is losing value. As the dollar gains value deflation will take over the market. Assets will lose their "inflation premium" as I call it.

Meaning - (all other things equal)- Let's say a stock was $50 before the stimulus. After the stimulus, which massacred the dollar, inflation boosted the price of the stock to $100. The company didn't do anything. Sales, Revenue, Profit...all stayed the same, but the stock price doubled. Why? Inflation. The dollar kept going down which inflated the price of everything denominated in US Dollars.

So now with the dollar recovering the market is going to readjust itself to where it should be.


No wealth was created in the market when it went from 6,000 to 11,000. It was merely the dollar getting molested and the market having to price itself accordingly.

Now the reverse is going to happen and it will once and for all prove that you can't throw money at an economy and expect results!!! Things like this happen! The trip back down to 7-8,000 is going to be very entertaining.





My honest prediction is a double dip world recession. Europe still has major problems and the US is not improving (despite media reports to the contrary).



-Housing is still garbage. Any improvement you see statistically is fudged. Example- my dad was buying a house in San Diego in March, assuming a bottom in the market. The realtor came to him and said that if he paid $100K more than the list price, they will give him $100K in cash right there. He laughed his azz off of course and realized what that the numbers coming out are jokes.

-Are people getting jobs? No. Take out census numbers and put the discouraged workers back into the equation and you still have a major problem with unemployment. Hell...keep them out and you still have a major problem. Last I checked we were at 9.9%. Way over that 8% we were promised...

[kevin21boston]

I heard the crash was caused by a typo?


I saw this on google news.
http://www.resourceinvestor.com/News/2010/5/Pages/John-Williams-A-HyperInflationary-Great-Depression-Is-Coming.aspx


I think inflation is going to be a gigantic problem over the next 5-10-20 years but in the short term (3 months-1year) there is going to be major deflation.

But like I said above, you can't print up $800B and not expect anything to happen.

[RicoVacilon]

The rumor is the dude DID enter the B instead of M in shares, not dollars.

The market is overbought. Look how on edge everyone was when an 80 second pause in trading caused them to go bats*&$ crazy.

Inflation won't be a problem. Kevin don't drink Analog's Kool aid. :)

Downtrend started last week. We'll get down to 9k on average and a several months before bulls come back. That last part is my opinion only.

[RicoVacilon]

1- Like Analog said, you enter trades in shares, not monetary value
2- If you were to make a mistake like that the trade would get rejected before going through

Where do you get the info for either of these assumptions? You can't make analogies between your etrade account and being a trader for C. Maybe their interface DOES trade in dollars? Who knows. I doubt it but it's possible. And why do you think it would get rejected? Rejected by whom?


3- No single trader or transaction can cause a 1,000 point drop in the markets.

DJIA was already down 300 so technically the error only caused a 600 point drop. And why couldn't it? I think you aren't giving algo trading its due.


Meaning - (all other things equal)- Let's say a stock was $50 before the stimulus. After the stimulus, which massacred the dollar, inflation boosted the price of the stock to $100. The company didn't do anything. Sales, Revenue, Profit...all stayed the same, but the stock price doubled. Why? Inflation.

I think this is a pretty bad explanation for the bull market since the stimulus package. First of all, sales, revenue, and profit HAVE changed. They've all gone up (market wide). Secondly, Occam's razor dude.

Does that mean I think prices are "correct"? No. I think a correction and downtrend are already here. But your blaming it all on stimulus, deflation, and then inflation again is reaching a bit.


No wealth was created in the market when it went from 6,000 to 11,000. It was merely the dollar getting molested and the market having to price itself accordingly.

That would imply that the inflation rate was -100% since you are only attributing the bull market to deflation. Obviously, there's got to be more to it than that.

[RicoVacilon]

But like I said above, you can't print up $800B and not expect anything to happen.

You're right. But we DID expect something to happen. We expected the economy to improve due to spending those 800B. And it did. :P

[theanalogkid]

Inflation won't be a problem. Kevin don't drink Analog's Kool aid. :)

Famous words. Too bad rising prices are already occurring. Been to the supermarket lately? How about the gas station?

Don't bother to quote me some doctored government inflation number, we know it's understated to make it look better.


Maybe their interface DOES trade in dollars?

Lets put on the common sense hat for a second. Since prices dynamic but 1 share is always equal to one share. Which do you think they would trade in. Secondly, they have to use the standards that the clearing house sets. Thirdly, no one holds a billion shares of a single company.


And why do you think it would get rejected? Rejected by whom?

The Nasdaq was canceling trades on Thursday, why do you think trades couldn't be rejected?

[kevin21boston]

Rico...sorry but you have no idea what you are talking about.




What he supposedly did is just impossible to do on any trading platform. I don't know what else to say.

[RicoVacilon]

Famous words. Too bad rising prices are already occurring. Been to the supermarket lately? How about the gas station?

I remember when gas was $5/gallon. So that would mean that there's about a -66% rate of inflation. :)

Implying that you should look at just the price of gasoline to find the inflation rate is silly.


Don't bother to quote me some doctored government inflation number, we know it's understated to make it look better.

2.31%


The Nasdaq was canceling trades on Thursday, why do you think trades couldn't be rejected?

Who said they couldn't be rejected? Certainly not me.

[RicoVacilon]

Rico...sorry but you have no idea what you are talking about.

If by that you mean "Rico has no idea what he's talking about in relation to traders that work for C and have millions of dollars to play around with" then you're right. And neither do you. If you mean that I have no idea what I'm talking about when it comes to economics and trading, then you're incorrect.


What he supposedly did is just impossible to do on any trading platform. I don't know what else to say.

So Kevin, you've seen every trading platform? I'd be surprised if you've seen more than 2 or 3 trading platforms to be honest. And I'd be surprised if you've seen even one trading platform used by Citigroup.

I'm not saying the M/B excuse makes sense or actually happened. I'm saying no one here has any clue if that would actually be possible or not. Not you, Analog, or me.

And Kevin, you haven't addressed the holes I shot in your "deflation/inflation" explanation of the bull trend. Are you just ignoring it hoping it will go away? :)

[RicoVacilon]

Where do you get the info for either of these assumptions? You can't make analogies between your etrade account and being a trader for C. Maybe their interface DOES trade in dollars? Who knows. I doubt it but it's possible. And why do you think it would get rejected? Rejected by whom?



DJIA was already down 300 so technically the error only caused a 600 point drop. And why couldn't it? I think you aren't giving algo trading its due.



I think this is a pretty bad explanation for the bull market since the stimulus package. First of all, sales, revenue, and profit HAVE changed. They've all gone up (market wide). Secondly, Occam's razor dude.

Does that mean I think prices are "correct"? No. I think a correction and downtrend are already here. But your blaming it all on stimulus, deflation, and then inflation again is reaching a bit.



That would imply that the inflation rate was -100% since you are only attributing the bull market to deflation. Obviously, there's got to be more to it than that.

This entire post is still waiting for a response, Kevin. :)

[kevin21boston]

So Kevin, you've seen every trading platform? I'd be surprised if you've seen more than 2 or 3 trading platforms to be honest. And I'd be surprised if you've seen even one trading platform used by Citigroup.

I've seen 20-30 different ones and used 4 of them myself and NONE of them trade in dollars. I don't know every platform but the ones that I've seen at Piper Jaffray, Sabre, and Waddell use shares.


I'm not saying the M/B excuse makes sense or actually happened. I'm saying no one here has any clue if that would actually be possible or not. Not you, Analog, or me.

Actually we do...you learn after years what is and isn't possible.


And Kevin, you haven't addressed the holes I shot in your "deflation/inflation" explanation of the bull trend. Are you just ignoring it hoping it will go away? :)


If you think that I meant that inflation was the sole reason why we almost double in a year then I don't know what to tell you. If course other factors as at play. What I'm saying is that inflation was the underlying reason.





Rico, the Dow 30 is worth roughly $3.5T in market value. A $60B trade is worth 1.7% of JUST the Dow 30. The NYSE in December of 2008 (when the market was crashing mind you, so this number is VERY low) was $16.8T.

It's not enough to move the market 600 points, or over 5%. Obviously this isn't apples to apples, but no comparison is. You are failing to realize how much money it takes to crash a market.



To the real story at hand:


The story goes that the guy entered in 16B instead of 16M. That is THREE ZEROES any way you look at it. How is this an error?

16,000,000,000 = 16B
16,000,000 = 16M

That's not an error. Share or dollar denomination does not matter. The difference is three zeroes.

[theanalogkid]

2.31%


Really, how about the producer price index

Over the past 12 mo

Finished Goods Excluding Food - 8.8% rise
Finished Consumer Goods - 8.2%
Finished Energy Goods - 20%

You don't think those increases will eventually spill over to consumer prices?

[TheRealist]

I might consider limping in around 10000 just because there seems to be some heavy support for it there/that's where the trend is at.

I do have to say, it's funny how the media paints this story about the failure of Greek overspending (10-15% deficit) without acknowledging that we're in the exact same boat (10% deficit) with over 100 trillion in unfunded liabilities not even factored in for state programs.

I've been shorting a Euro ETF in my practice account since February. With Portugal and Spain still in the balance, and knowledge that Europe is following the Keynesian playbook page by page, I'm ready to finally put some real money up. There is also a lot of pressure on China to appreciate their currency, if traders jump on that like they have done with the Euro and rouble, then I'm sure they'll be able to get it done. (it's just not top priority right now)

When the elections start getting picked up, that's when I'll be ready to re-enter. Republicans taking back the House is going to raise expectations in the short run. However, who the hell knows what kind of malinvestment the past 2 years has caused with interest rates at 0%. We could just be experiencing another bubble/paper over like 2001.

If I was trading the market, I'd be selling the Euro and U.S. Treasury 10 Yr. (betting on interest rates going UP) while buying yuan and real. I'm also trying to get a play in on Goldman once all of this crap is over since the case against them (from the hours of hearings I've heard) is weaksauce. Ethic violation...borderline. Breach of law...would be a huge stretch. Again...all in my opinion of course.

[RicoVacilon]

If you think that I meant that inflation was the sole reason why we almost double in a year then I don't know what to tell you. If course other factors as at play. What I'm saying is that inflation was the underlying reason.

When it comes to what you believe, Kevin, I have nothing to go on except what you tell me. That's why I was waiting for a response. Now that you made clear that you believe inflation to be ONE OF the causes of the market's collapse last week, let me follow up with another question: is it inflation or the future fear of inflation?


Rico, the Dow 30 is worth roughly $3.5T in market value. A $60B trade is worth 1.7% of JUST the Dow 30. The NYSE in December of 2008 (when the market was crashing mind you, so this number is VERY low) was $16.8T.

It's not enough to move the market 600 points, or over 5%. Obviously this isn't apples to apples, but no comparison is. You are failing to realize how much money it takes to crash a market.

Hey man, I'm not saying it actually happened that way. I'm just saying none of us is in a position to say it's impossible. AFAIK, no one on these boards is an investment banked/trader on Wall Street.


To the real story at hand:

The real story at hand is algo trading.

We'll get to the bottom of it though. It'll just take forensic accountants to comb through everything with ms time stamps and find out if it was an error or some algo gone wrong. Then analog will take those results and start a conspiracy theory out of it. :D

[RicoVacilon]

Really, how about the producer price index

Over the past 12 mo

Finished Goods Excluding Food - 8.8% rise
Finished Consumer Goods - 8.2%
Finished Energy Goods - 20%

You don't think those increases will eventually spill over to consumer prices?

So you talk about the inflation rate, then when you see how low it is you start talking about other rates. . . . fail.

[RicoVacilon]

I do have to say, it's funny how the media paints this story about the failure of Greek overspending (10-15% deficit) without acknowledging that we're in the exact same boat (10% deficit) with over 100 trillion in unfunded liabilities not even factored in for state programs.

I think that's exactly the reason why everything is so volatile. Wall St sees what's going on in Greece and then for 80 seconds on Thurs goes all bat%$#@ crazy. The media isn't connecting the dots for us yet, but at least hey're implying it now.


I've been shorting a Euro ETF in my practice account since February. With Portugal and Spain still in the balance, and knowledge that Europe is following the Keynesian playbook page by page, I'm ready to finally put some real money up. There is also a lot of pressure on China to appreciate their currency, if traders jump on that like they have done with the Euro and rouble, then I'm sure they'll be able to get it done. (it's just not top priority right now)

Europe will be bear for a good deal of time. Asia looks bear as well but possibly not for quite as long. Get some of that real electronic money in those babies!

[theanalogkid]

So you talk about the inflation rate, then when you see how low it is you start talking about other rates. . . . fail.

Right because the prices producers pays for inputs has no relation to consumer prices. I think you are the failure here.

Perhaps you should stop thinking in the short term.

[RicoVacilon]

Right because the prices producers pays for inputs has no relation to consumer prices. I think you are the failure here.

Strawman. I never said they weren't related. I was pointing out that you said inflation was high. I pointed it out it wasn't. So you pointed to other stats. That's either a red herring or you simply didn't put much thought into your first assertion.

[theanalogkid]

Strawman. I never said they weren't related. I was pointing out that you said inflation was high. I pointed it out it wasn't. So you pointed to other stats. That's either a red herring or you simply didn't put much thought into your first assertion.

That inflation number is false anyway, like I said understated. I can't believe that number since the government is deciding what counts as inflation and what does not. Even the PPI is likely understated. High price inflation is coming down the road.

[RicoVacilon]

That inflation number is false anyway, like I said understated. I can't believe that number since the government is deciding what counts as inflation and what does not. Even the PPI is likely understated. High price inflation is coming down the road.

So what is the "true" number then? I love when people say "X is high" and then when someone else says "but X is only ____" then they say "well your X is wrong."

I will admit you said from the beginning that you wouldn't believe the gov't's number (which is weird since the "gov't number" is just figured by basic math--not much to disbelieve), but that doesn't make your argument any less fallacious.

[kevin21boston]

Methinks Rico has been watching too much CNBC lately...you will soon realize that a joke of a network it is.

[RicoVacilon]

Methinks Rico has been watching too much CNBC lately...you will soon realize that a joke of a network it is.

Nah, I don't watch it at all. I don't watch any of the financial networks actually. In fact, I don't watch any of the NEWS channels. I get my news online.

I think you two have been watching too much GLEN BECK! :p

[543 Double Play]

I just saw a statistic somewhere, everyone is talking about inflation and its going to kill us. As of right now, inflation is lower than historical averages. What do you think of this Kev and Analogue? Also, you speak of Hyper Inflation, how is this different then what has happened in the past? Even before this, we have always had inflation? Just so you know, I am not trying to argue, I am just trying to be better informed, and you guys seem to know what your talking about...along with Rico.

[RicoVacilon]

I just saw a statistic somewhere, everyone is talking about inflation and its going to kill us. As of right now, inflation is lower than historical averages. What do you think of this Kev and Analogue?

I'm going to guess that they'll say the inflation number you're referring to is a cacamaney number the government wants you to believe. :)

[theanalogkid]

I just saw a statistic somewhere, everyone is talking about inflation and its going to kill us. As of right now, inflation is lower than historical averages. What do you think of this Kev and Analogue? Also, you speak of Hyper Inflation, how is this different then what has happened in the past? Even before this, we have always had inflation? Just so you know, I am not trying to argue, I am just trying to be better informed, and you guys seem to know what your talking about...along with Rico.

Hyperinflation is caused by a loss of faith in the currency, which is definitely different than what has occurred in the past.

I also don't talk about inflation now, I'm talking about inflation down the road.
It's pretty naive to think that with all the money being created that price inflation isn't going to occur. The Fed is going to bailout Europe both directly and through the IMF. I doubt the dollar can support the world.

PPI measurements are already rising, they will spill over into consumer prices.

[RicoVacilon]

Famous words. Too bad rising prices are already occurring. Been to the supermarket lately? How about the gas station?

Oh wait. . . I thought you just said one post above that you weren't talking about inflation NOW but down the road. Hate to make you a liar but. . .

By the way, gas prices are supposed to be going down for the summer. . .

[theanalogkid]

Oh wait. . . I thought you just said one post above that you weren't talking about inflation NOW but down the road. Hate to make you a liar but. . .

By the way, gas prices are supposed to be going down for the summer. . .

My point was I was pointing out there are beginnings of rising prices already occurring. A lot lag behind though but those prices too will eventually rise.


Maybe I should take that bet with you Gold hit another record high today. Nah, I will enjoy reading your posts after it does go to $2000. Maybe we will see Dow 30,000 in a few years too.

[RicoVacilon]

My point was I was pointing out there are beginnings of rising prices already occurring. A lot lag behind though but those prices too will eventually rise.

Except prices aren't rising. . . that's what I don't get. You make empirical statements but the data don't back them up. :confused:

Even looking just at CPI it's not even showing anything to worry about.



Maybe I should take that bet with you Gold hit another record high today. Nah, I will enjoy reading your posts after it does go to $2000. Maybe we will see Dow 30,000 in a few years too.

If you're too chicken to make the bet how is it you're going to enjoy my side of it? You can't make a bet "only if I win." Grow a pair and make the bet. ;)

[theanalogkid]

Except prices aren't rising. . . that's what I don't get. You make empirical statements but the data don't back them up. :confused:

Even looking just at CPI it's not even showing anything to worry about.


I used the percentage changes of the PPI to show prices are rising, even if they aren't totally accurate.



If you're too chicken to make the bet how is it you're going to enjoy my side of it? You can't make a bet "only if I win." Grow a pair and make the bet. ;)

Really? I win either way by not taking the bet. If it doesn't, I still post, if it does, then you're Keynesian BS that you spout will be dismissed right out of hand anyway.

[kevin21boston]

Rico, I'm being serious here, but are you aware that it is an indisputable fact that if you flood the market with money then inflation will occur?

There should be no denying this.


And to the poster who asked about current inflation:

-We're going through one of the deepest recessions in American history. There shouldn't be any inflation at all. There should be deflation. So yes, we technically have relatively low inflation, but the problem is that it is occurring when we should be having pretty significant deflation.


When the unemployment rate doubles and consumer prices rise, you have a problem. And for some reason Rico, you do not seem to be comprehending this.

[RicoVacilon]

I used the percentage changes of the PPI to show prices are rising, even if they aren't totally accurate.

If by "rising" you mean 2-3% then yes, they are rising. :)

[RicoVacilon]

Rico, I'm being serious here, but are you aware that it is an indisputable fact that if you flood the market with money then inflation will occur?

Over time, yes. Which is why I think we need to keep an eye on what the gov't does from here on out. I don't think deficit spending is inherently a problem. I think deficit spending with no plan to get out of it is. The smaller the organization, the less deficit for the shorter time frame, but it's a proven tool. Heck I chose deficit spending to buy a house. If the gov't doesn't have a plan for how to get out of it, though, it can be extremely dangerous--like we are seeing in the PIGS right now. I suppose the axiom would be "deficit spending and fiscal responsibility are not necessarily mutually exclusive."


-We're going through one of the deepest recessions in American history. There shouldn't be any inflation at all. There should be deflation.

But we DID have deflation. That's my huge problem with your arguments--you make assertions that can be empirically verifiable. . . and end up being wrong. Then you talk circles around them instead of just admitting a mistake and rewording your argument. For 8 months in 2009 there was deflation!

And both you and analog can stop with the straw man that "rico thinks everything is peachy" because I've never said anything similar.

[theanalogkid]

If by "rising" you mean 2-3% then yes, they are rising.

No I pointed to he 20% YTD of one index, and a 8% rise in another. Companies can hedge prices in the short term, but hedging doesn't work in the long run. Consumers will be paying a lot more eventually.


Over time, yes. Which is why I think we need to keep an eye on what the gov't does from here on out. I don't think deficit spending is inherently a problem. I think deficit spending with no plan to get out of it is. The smaller the organization, the less deficit for the shorter time frame, but it's a proven tool. Heck I chose deficit spending to buy a house. If the gov't doesn't have a plan for how to get out of it, though, it can be extremely dangerous--like we are seeing in the PIGS right now. I suppose the axiom would be "deficit spending and fiscal responsibility are not necessarily mutually exclusive."

Do you really thing the idiots in Congress have a well thought out plan to reduce the deficit? Some of them think the dollar is still backed by gold, not to mention they work for the special interests rather than the people who elected them. That much is clear in the financial bill.



But we DID have deflation. That's my huge problem with your arguments--you make assertions that can be empirically verifiable. . . and end up being wrong. Then you talk circles around them instead of just admitting a mistake and rewording your argument. For 8 months in 2009 there was deflation!

True, Bernanke quick tried to put a stop to that by creating huge sums of money. That was a mistake. Prices were too high for a lot of things, like houses number 1. The market was signaling that there were too many houses, but they inflated the currency to "stabilize" housing prices. They is a mirage though, the price of a house may be higher, by the value of the dollars are less. Does he really know better than the market? I really doubt that.



And both you and analog can stop with the straw man that "rico thinks everything is peachy" because I've never said anything similar.

That's a strawman because I never claimed you thought everything was great.