Fat finger Freddie freed from fault

All it took was a trillion dollars worth of Euros. We said it would happen…this time. It happened…this time. The bailout will likely bring about 10 years of relative peace, or call it 3 election cycles. During this period we will find out if the close call put the fear of God in the minds of European voters or if they will continue with their socialistically modified form of capitalism.

On May 7th we wrote regarding the market gyrations, “the word is, that someone at Citigroup placed an order to sell Proctor and Gamble and hit the B key instead of the M key”. Indeed, that was the word at the time. The fat finger theory has faded, to be replaced by a big question mark. Nobody knows, so let’s speculate.

It was an act of inhumanity. Once upon a time human beings decided which stocks to buy or sell and at what price. This is no longer the practice except by a few elderly people who probably don’t have cell phones yet either. Today humans set strategy, and then delegate the details to computers to carry out the strategy. To paraphrase a well known cliché, “computers do, or crash and die, but never reason why”. Computerization, which I am calling inhumanity, is rampant on both sides of the street as well as in the middle of the pavement itself. By that I mean the buying community, the selling community and the exchange are all programmed to leave it to an Intel processor to handle the actual trading.

There was a great deal of nervousness milling about, stocks had run up too fast, Greece was scaring everyone, etc. So the strategists drew lines in the sand and told their computers to take immediate action if the lines were crossed. Normal procedure, but this time there was more uniformity of opinion among the players as to where to put the line and it was a tight line. Triggers triggered triggers and down she went, faster than humans could figure out why.

That’s my speculation. It remains, as usual, for Congress to investigate and deliver the final word so that we need speculate no more.

Bob B

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