Didn’t This Get Us In Trouble The First Time Around?

I was meaning to write this one up for the past two weeks. In case you’re wondering how some investment companies can post huge profits in the middle of the crisis, here’s part of the answer.

(author: Lisa Haney; source)

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

(source: NYT)

I don’t know about you, but this HFT seems wrong on a very fundamental level. Admittedly, I’ll have to see what this guru I know will say on the issue, but as things stand two things come to mind: Wasn’t computer-ran trading what caused the Black Monday of 1987? And secondly: wasn’t this kind of market tweaking by profit-hungry investment banks what got us in trouble in the first place?

Slightly OT: It seems that it is not economic changes that hit Slovenia with a couple of months’ delay. The same apparently goes for economic revelations as well. The Rolling Stone magazine article linked above which tells the tale of how theCredit Crunch began, was widely circulated in Slovene media… two weeks ago.

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Agent provocateur and an occasional scribe.

One thought on “Didn’t This Get Us In Trouble The First Time Around?”

  1. I wonder what the tax on profit is like on the relevant markets. If it is anything like in Slovenia, these operations have to be humongous to be worth the effort. This really is not my turf, but is speculative trading really what the stock market is all about? How about trusting the future of a certain company because of its resources and management, buying shares based on that? Way too naive? Never mind.

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