Wednesday July 8, 2015
1. Today the exchange is shut down due to a ‘computer glitch’ which is no doubt a cyber security issue but is this new?
Uh no, back in the early 1970s even a ten million share day swamped the ability of that era computers to handle the trading. Two days a week
the exchanges had shortened trading hours in an attempt to match off trades. The term DK stood for Don’t Know which meant we had a buyer but did not know who the seller was.
2. The purpose of a bear market is to start brush fires which weed out the unsustainable which became reality during the previous bull market. And so the 1973-74 meltdown took out many brokerage firms like White Weld , gobbled by Merrill, and Goodbody and Walston and Loeb Rhoads. In the 2008 meltdown we said good bye to Bear Sterns and Lehman and nearly to Merrill.
3. Social mood is highly negative. Then the press was after Nixon, now congress is completely polarized as is the President’s ratings as is the 5-4 split on every Supreme Court decision, yikes even the Court the third govt branch has become catatonic with polarized social mood residing in each justice. A mere one vote decides an issue and social issues all end up in court rather than on the ballot. Notably the first big social issue, Roe vs Wade, occurred January 22, 1973 on a 7-2 vote, just as the market was peaking over Dow 1,000. That at least was a near majority opinion. As Peggy Noonan noted in her column these one vote majority decisions on major issues like marriage are unsettling and simply stir the pot for the losing side.
4. Then one big city, New York, essentially missed some debt payments. The Comptroller for J C Penny spent a year in City Hall cleaning up the books. Today it we have multiple cities, Chicago, Baltimore, and yes even well to do San Antonio has an unworkable pension health care deal with the fire fighters and police that is growing nastier by the day. Add to that entire states like Illinois in trouble. But as we are at a wave higher degree, we have territories like Puerto Rico where the governor has declared the debt un payable. And in like fashion Aregentina and Greece have thumbed their indebted noses at their creditors. Which raises the ante for all debt holders in the Eurozone, what if Portugal, Spain, and Italy, much larger than Greece, decide to go the same route (see today’s editorial in the WSJ).
5. Then access to quotes was very restricted. With no internet and no CNBC, one had to go to a brokerage office to view quotes. And quotes were expensive, closely guarded by the exchanges. Amazingly it was possible to exhibit all the trades of the day for the NYSE with only ten million shares traded. Now however there is open access to quotes and trading goes on 24 hours around the world. There is now trading before and after the exchange opens and trading as much off the exchange as on it.
6. Back then one had to intern at a brokerage firm for six month, take the exam, before one could take an order. Orders had to go thru a broker, the broker took the order to the wire room, the wire room sent it by private wire to the NYSE floor, the floor broker took it to the trading post for that stock, the specialist matched up the order, and only then did the trade take place.
Now who needs, ala that famous line i Sierra Madre, a stinking' broker? Just log into your account. We are all brokers now.
So with the averages trading much higher the potential melt down stakes have also grown in similar proportion. Which is what the Wave Theory and fractals are all about.
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