Friday, May 7, 2010

Black Thursday (1000pt down day)

While there were glitches on Thursday, I don't buy the trader error story to explain why Accenture traded at 1 cent or PG was down 37% intraday.

The Yen was up about 3 Yen vs the USD (and even more vs the Euro) before any crazy trading happened in New York.

There is a lack of liquidity as the huge government bond market seizes up, especially in Europe. In addition, the huge moves out of the Euro (I think bank runs are part of this) and into gold, USD and Yen, is also putting huge pressure on leveraged equity players and hedge funds.

The electronic trading and the few remaining players in the game are also adding to the volatility.

I believe that Black Thurdsday was not a fluke but a warning shot that systemic risk is very much alive. Listen to the market. It is not healthy at all.

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