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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#581

Post by jfengel »

bumby wrote: post #283
sjg007 wrote: post #224

Earlier quoted context omitted.

Why was or is the market in need of a correction? What is your evidence for that statement?

Take this with a train of salt because I’m not an economist, but one of the most often touted general points of the need for a correction is the cyclically adjusted price to earnings ratio being elevated [1]. In other words, stocks are more “expensive” and thus ripe for a correction https://www.multpl.com/shiller-pe

Note that that's the Shiller P/E ratio, which (even after today) is still at 26, which is quite high. The regular P/E is still only around 20, which is at the upper limit of reasonable.

The whole point of the Shiller ratio is that it's supposed to do a better job predicting overheated markets, and it may well be doing that here. The regular ratio is based on recent earnings, which will be uncharacteristically high during a bull economy.

That's not to say it's incorrect. I was just noting that your link indicated a higher value than I was expecting, and that's why. (It implies that the market could easily fall another 25% before reaching reasonable territory.)

Re: Trading halted as U.S. stocks plummet

#582

Post by forkexec »

jahlove wrote: post #415
bluGill wrote: post #330

Earlier quoted context omitted.

They have existed since the crash of 1929. There were no algorithms in place then. The goal was just to force human traders caught up in the moment to take a break and stop panicking. I assume they have been tweaked since 1929, but they started with the crash back then. Edit: someone else is claiming 1987 as the start. My memory says 1929. If this matters do your own research.

> In 1933, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities. https://en.wikipedia.org/wiki/1933_Banking_Act

It was repealed in 1999.

https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the...

Re: Trading halted as U.S. stocks plummet

#583

Post by odyssey7 »

twic wrote: post #523
bo1024 wrote: post #437

Earlier quoted context omitted.

You would think, by the same arguments, that the stock market could always just trade at 15-minute intervals. Why not? But people go crazy when researchers (e.g. Eric Budish at U. Chicago) suggest lowering the frequency to milliseconds, let alone seconds or minutes.

There are different, additional, objections to that. For example, it would make life rather difficult for market makers, which would mean a lot of the liquidity would dry up, which means the spread would widen out, which means trading would be more expensive. I think there is scope for designing market mechanisms which have the volatility-reduction effects of periodic auctions, but which still allow market makers to…

And then there are questions like: Should trading be convenient? Inexpensive?

Re: Trading halted as U.S. stocks plummet

#584

Post by phs318u »

twic wrote: post #523
bo1024 wrote: post #437

Earlier quoted context omitted.

You would think, by the same arguments, that the stock market could always just trade at 15-minute intervals. Why not? But people go crazy when researchers (e.g. Eric Budish at U. Chicago) suggest lowering the frequency to milliseconds, let alone seconds or minutes.

There are different, additional, objections to that. For example, it would make life rather difficult for market makers, which would mean a lot of the liquidity would dry up, which means the spread would widen out, which means trading would be more expensive. I think there is scope for designing market mechanisms which have the volatility-reduction effects of periodic auctions, but which still allow market makers to…

> which means trading would be more expensive

And how is that a bad thing in and of itself? It would presumably knock out some of the ultra-low-margin HFT but so what? If it would have the effect of turning the stock market into less of a roulette table, with fewer gamblers compared to bona fide investors - isn’t that a good thing?

Re: Trading halted as U.S. stocks plummet

#585

Post by tialaramex »

bluGill wrote: post #353
allovernow wrote: post #314

Earlier quoted context omitted.

How do you sell stock if no one is buying? If people are selling, others are buying.

Market makers are buying - their job is to always buy or sell stock from everybody. They (generally computers, but humans traditionally) will always buy your stocks, or sell you stocks. Their algorithm is simple: buy for $.10 (or some other tiny number) less than you sell - if the amount of stock owned is too low raise the price, if the amount is too much lower the price. They pretty much always make money in the lon…

For agreeing to do this (and having the capital to do it) the Market Maker for a stock typically secures certain benefits from the market in respect of that stock.

For a very popular stock on a typical day the market maker isn't really necessary. Your trades would absolutely execute immediately based on positions other people wanted.

When your stock is more thinly traded, or when things are a bit frantic the market maker is your saviour. When everybody and their dog is selling, the market maker will buy anyway.

Under some circumstances market makers can signal they intended to cease to make a market for specific stocks. When the market makers exit, all hobbyists should make sure they are gone too. Once there is no market maker for the stock you're holding, you will need somebody else to actually take the other side of your trades. "Prices" without a market maker are just a guess, there may be nobody actually promising to take your stock at any price, even if the last trade was for $1.40 your stock might be not sell even at 14¢. This makes for an exciting space in which to gamble with money you can afford to lose if you really know what you're doing, otherwise it's just a way to throw money away.

Re: Trading halted as U.S. stocks plummet

#586

Post by wbl »

allovernow wrote: post #395
mumblemumble wrote: post #305

Earlier quoted context omitted.

Having worked for one of the (smaller) big firms, and had a chance to watch from the sidelines and seen how days like this work: No, these circuit breakers don't screw the regular guys. They discourage the regular guys from screwing themselves. There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doin…

> They discourage the regular guys from screwing themselves. If you're a little guy who believes that, say, 2019ncov is about to tear the world a new asshole, that's probably a decision you'd like to make for yourself. I don't doubt what you're saying, but it's a matter of perspective. Sometimes the "panic" is the correct reaction. We're sitting on top of a perfect storm which is shaping up to be a massive potential…

You can take that position after we all wait 15 min and take a breath.

Re: Trading halted as U.S. stocks plummet

#587

Post by notJim »

badfrog wrote: post #492
virgilp wrote: post #412

Earlier quoted context omitted.

2% (maybe more actually) is the mortality rate of those infected. But so far infection rate was 0.001% ; it would need to be 3 full orders of magnitude worse to even approach an infection rate of 2%....

For reference, there have been 3,000 deaths out of 11,000,000 people in Wuhan. That's 0.03% of the population dead and the number of new deaths per day is declining. If the rest of the world comes even close to being as good at quarantine as Wuhan, we'll be way under 2%. Source: https://en.wikipedia.org/wiki/2019%E2%80%9320_coronavirus_ou...

Meanwhile in the US, the CDC appears to be resisting testing people, and as far as I can tell, quarantines are barely even being considered. Washington state is in the top 3 of cases in the country, but 30k people attended a soccer game on Saturday. I hate to contribute to the panic and tinfoil-hat conspiracies, but I'm really concerned about the US response so far.

Re: Trading halted as U.S. stocks plummet

#588

Post by ncallaway »

arcticbull wrote: post #538
ncallaway wrote: post #516

Earlier quoted context omitted.

0.5% is still well over 5x as bad as typical flu. SK is closer to 0.7%. SK also has a far lower recovery percentage (SK total cases: 7478, total recoveries: 118; 1.5% of cases have recovered, 0.5% of cases have died). Compare to the worldwide CFR and recovery rate, which has a much higher CFR (3.5%). total cases 113,432, total recovered 62,494, 55% of world-wide cases have recovered. That means SK is catching their c…

The reason their numbers are lower than elsewhere is the widespread testing is catching the low-grade infections, the asymptomatic and the so on. Those cases are not reflected in, for instance, US numbers as there hasn't been any wide-scale testing. In a huge quantity of people you wind up with sniffles, a cough or mild flu-like symptoms. They don't go in, they don't get tested, so they're left out of the denominator…

That is one factor in the low CFR, but it's far too early to say it is the only factor. It totally fails to be responsive to the low percentage of resolved cases in the South Korean numbers.

If the only explanation was that they were catching far more low-grade symptoms, then we should see a lower CFR with the resolved cases rising rapidly.

I hope that what you state is the case, and their CFR remains where it is while the number of recovered grows. But it's still an unknown, and we won't actually know until more data comes in.

Re: Trading halted as U.S. stocks plummet

#589

Post by [deleted] »

mensetmanusman wrote: post #390
cletus wrote: post #376

Earlier quoted context omitted.

I didn't think this could still be true but apparently you are correct [1]. Wow. That being said, there are factors to contribute to this: - Essentially zero population growth [2] - A government and a system that propped up an insolvent banking system that likely extended the downturn significantly [3] - A massive asset bubble that we really haven't seen the likes of, not even in the subprime era. [1]: https://www.ma…

Yep, over half of GDP growth is tied to population growth. If 2% of humanity is about to die...

[deleted]

Re: Trading halted as U.S. stocks plummet

#590

Post by leetcrew »

rwmj wrote: post #444
HolyLampshade wrote: post #239

Earlier quoted context omitted.

Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. The concept was introduced in US equities after the ‘87 crash, but was only consistently implemented for NYSE-listed stocks. In ‘13 these were made consistent and market wide (thus MWCB), set against a widely published value of the S&P (so that the control was predictable; thus how it executed today). FYI, there are also bidirectiona…

> Mass sell offs tend to create unorderly markets, which is not beneficial for anyone. It's beneficial for people who want to buy stocks cheaply or if we truly believe that markets are about price discovery.

> we truly believe that markets are about price discovery.

this is not incompatible with the believe that prices over a single day (or hour) can be dangerously noisy.

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