After some investigation, now we are hearing that last week’s sharp and quick sell off (the “black hole” as I call it) was not due to a “Fat finger” error.
I never thought it was due to that either. In fact, I mentioned this in my reports as well. In my opinion this was a ridiculous explanation. The fact is, we can’t find any one single event to pin the cause on (the so called smoking gun). But there is always a “cause and effect” relationship. So what was the cause?
As I was saying my recent reports, computers and computer programs do exactly as programmed, and that’s all they do. In this case, these same systems that we all rely on were in my opinion the main culprit (cause) of last week’s sudden sell off (into a black hole as I have used as an analogy). The black hole itself occurred due to multiple and unusual economic sensitive events.
The electronic systems and computers did not steer the market around the black hole however, rather they steered directly into the heart of the back hole!
And that’s why the markets sold off as they did.
Computers and computer programs can not think or reason like a real person, and sometimes you need a real person that can reason through an unusual event or condition. I believe this is the main thing we will learn from this. That is, you can not always depend on computers (electronic exchanges and electronic trading programs). Sometimes a person or persons with knowledge and understanding is needed. Just like in airplanes. Autopilot can’t do everything. If something extremely unusual occurs, the pilot will have to take over and manually fly the aircraft.
