On Friday Wall Street deflated with a mighty belch, as the Dow dropped over 500 points, the worst one-day loss since 2008. Overall there’s been a 10 percent drop from the May 19 peak, so it’s officially a “Market Correction.“
Why? Some blame it on the fears about the instability of China’s economy, others on the EU and Greece, or the Fed, or the low price of oil and other commodities, or the Zodiac.
The Fender Musical Instrument Corporation (FNDR) filed papers to trade stock on the NASDAQ exchange. Founded by Leo Fender in 1946, the firm manufactures the iconic Stratocaster and Telecaster electric guitars.
Congress is holding hearings about the May 6th stock market plunge, when share prices fell 1000 points in minutes. The SEC has summoned exchange officials to Washington to explain the event, the largest one-day drop in Wall Street history.
What caused the sudden sell-off? The Typo Theory holds that the panic started when a Citigroup trader typed a “B” instead of an “M” on his computer, selling $16 billion in P&G shares instead of a mere $16 million. The huge transaction triggered automated trading programs at all brokerages and made things much worse in minutes.
Unrelated world events were first said to have caused the drop and conspiracy theorists soon chimed in, but most sources believe that the initial data entry error caused the computer-driven, snowballing sell-off.
How can such catastrophes be avoided? Some authorities want to eliminate the automated “high-frequency trading” programs used by brokerages or put automatic blowout protectors (“trading curbs”) on them. We have a simpler solution: just move the “B” and “M” farther apart on stock brokers’ computer keyboards.
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
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Bonuses for employees of Wall Street financial firms were up at least 17 percent in 2009. You remember 2009 — TARP, unemployment, foreclosures and all that (so tiresome).
More:
Market Watch: “Wall St. bonuses climbed 17% to $20.3 billion in 2009.”
New York Times DealBook: “The Big Money’s Back in Town.”
Disgraced golfer Tiger Woods danced his “heavily-choreographed apology” for adultery on TV and the stock market rose, notes the Wall Street Journal.
While correlation is not causation and past results do not guarantee future performance, this is The Year of the Tiger.
Image (“Tiger Woods’ New Logo”) by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
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All you need to know about the current economic situation in the United States.
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
“Citi” and the Citi logo are registered trademarks of Citicorp, 40 percent of which is owned by U.S. taxpayers.
The United States government, currently the largest shareholder in the Citigroup family of financial companies, may increase its share of ownership to 25 or even 40 percent.
The importance of this is explained by a simple graphic (above).
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
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Time picked the “25 People to Blame for the Financial Crisis” and invites you to rank-order the most culpable meltdown miscreants. Number one to date is – no surprise – Texas Republican and Swiss banker Phil Gramm, PhD.
Here are the current poll standings for these polecats, and Time’s rationale for the feature.
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com
Comments are welcome if they are on-topic, substantive, concise, and not obscene. Comments may be edited for clarity and length.
Robert O’Harrow Jr. and Brady Dennis of the Washington Post penned a detailed account of how “credit default swaps” helped bring down the world economy. Monday’s installment deals with the genesis of the unholy instruments; Tuesday’s chapter covers the way AIG Financial Products applied them and undermined the global financial system.
Time’s Justin Fox puts part two in perspective. Highlights:
U.S. automakers saw their $14 billion loan deal skid off the road early this morning as Senate Republicans jammed on the brakes. This panic stop caused a chain collision on Asian and European stock markets, which report major damage. Wall Street is bracing for the impact.
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