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Do you think the markets are safer in the wake of the 'flash crash?'

On May 6, The Dow Jones industrial average lost nearly 1,000 points in a matter of minutes and then quickly rebounded in an event that is known as the 'flash crash.' Now, an investigation by the SEC and CFTC has determined that the crash occurred when a mutual fund company executed a computer trading algorithm to rapidly sell billions of dollars of financial contracts. In response to the episode, the SEC and the major U.S. exchanges agreed on a six-month pilot program that briefly halts trading of some stocks that mark big price swings.

By Jodi Westrick  |  October 1, 2010; 4:55 PM ET  | Category:  National Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
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No, they are not and never will be. They are getting worse and worse. No matter what the regulators come up with to make things safer, the Wall Street idiot gamblers will come up with another version that is more dangerous to the investor and more profitable and bonus-producing for Wall Street.

Remember the crash of 1987? It was based on something called "portfolio insurance". An investor who bought some magic combination of futures and options (now called "derivatives") could be insulated from the ups and downs of the market. The whole thing was implemented by something called "program trading".

The mortgage market bust was portfolio insurance on steriods. The credit default swaps were the same kinds of crazy derivatives shenanigans that caused the 1987 crash. To feed the Wall Street gambling casino they pushed predatory mortgages to unsuspecting borrowers, many of whom could qualify for prudent and safe mortgages. The mortgage originators/servicers lied in the process of originating the predatory mortgages and they are now lying to foreclose on the borrowers they screwed with those mortgages.

The flash crash was program trading on steroids combined with the serious adverse effects of derivatives gambling on real markets. Wall Street isn't a place for investment anymore. It is a gambling casino. Real investment can be as exciting as watching grass grow. Real investment isn't computerized gambling on momentary price changes.

Want to make the markets safer? Get rid of the gambling.

Posted by: StanKlein | October 1, 2010 8:22 PM

As long as we borrow trillions and spend them fighting endless counterproductive wars there is no chance for a sustained recovery of the stock market, nor for our economy, consumer confidence, joblessness and foreclosures.
No tinkering by the Fed, printing money or stimulus packages will work. Period!

Posted by: qualquan | October 4, 2010 2:24 AM

The stock market in large part does not represent what is happening on Main Street or the US economy which they have abandoned, in time of war and national distress for which they are responsible. Wall Street does not invest in our communities or create jobs here any longer or has any plans to do so but is mainly investing off-shore in Communist China, India, Mexico, Brazil and elsewhere.
Milken's Junk Bond Scam, the Savings and Loan Scam and now the Subprime Mortgages Scam, and should there be any wealth left in the hands of the middle class or our Republic you can bet the farm that they are at this very moment working 24-7 on another conspiracy to get it...with the help and acquiescence of thier cadre of career politcians. Is the market safe for Main Street investors...what do you all think after the three largest thefts of wealth in world history by Wall Street, vermin, thieves, filth and traitors...what they have done is in time of war and national distress which is treason. That alone shows that they are capable of anything.

Posted by: 123Njord | October 4, 2010 8:56 AM

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