“Today’s market was neither orderly nor efficient nor trustworthy. It was just a bunch of computers making ugly, messy love with each other. And your money hung in the balance.”, Evan Newman, WSJ
If it were September 2008 not many eyebrows would have frowned on the matter of the Dow dropping 1000 (998 to be fair) points. But one and a half years has made us and the VIX extremely complacent, so it was no wonder that the world went into a collective bellyache at what happened at Wall Street last night (night, yes, I am based in India and was blissfully sleeping when the psychedelic financial histrionics were happening in downtown Manhattan). So what happened exactly?
Stocks had started selling off at around 1430 hours and at around 1440 two large blocks of P&G shares (possibly sell orders) were put on for trade. P&G tanked by some $14 (on a base of $62) and it is entirely likely that algorithms took over and compounded the problem
Unlikely question at a quiz competition: What is common to the following stocks? Exelon Corp, Boston Beer, Accenture, CenterPoint Energy, TransMontaigne Partners, Impax Labs. Answer: All these stocks traded at $0 for a while (microscopic while, but still) yesterday. Penny stocks took a new and eerie definition on Wall Street
Some quarters believed that a possible stalemate from the UK Elections contributed to the sell-off. This is yet another instance of fitting facts to an outcome. Then there was Sothebey’s (BID) stock that opened trade at $33, pushed up to – hold your breath – $100,000, before closing at $33. Nice return for a day – if your trades do not get canceled!
Rumors have it that someone in Citigroup, with fat fingers (or weak hearing, or both) entered a trade to sell $16 billion of Dow Futures instead of $16 million. Here is a problem that I have often faced with the million-billion phonetics. Without a very clear diction and the 100 Hz frequency set to the correct slot in your vocal equalizer, it is quite possible to mis-utter (and consequently have it mis-head) the denomination. It is an easy trap to fall into – this business of coining rhyming denominations – but if you were a trader on Wall Street yesterday you would know the pain. Note to whoever-it-may-concern: Zetabyte, petabyte and such are fine to make my friend’s two year old giggle, but just keep in mind this day. Interestingly, this is least likely to happen in India with its lakhs (ten to the power of five) and Crores (ten to the power of seven) convention of value, which are phonetically as far away as Mahmoud Ajamadinejad is from Hilary Clinton are on matters of foreign policy
Coming to India – in another few hours, a Supreme Court bench will pronounce judgment on the natural gas supply issue that is plaguing two large industrial groups – interestingly owned by two warring brothers (Mukesh Ambani controlled RIL, which is stalling gas supply to the Anil Ambani controlled RNRL, citing low prices). Obviously the market has made its call – it expects the verdict to go against RNRL (blue line in chart), which would be quite a shame
Image courtesy: Ghetty Images
Charts and Quotes: Yahoo! Finance