Just before 3 PM, I turned on Fox news and saw the Dow was -995. The commentators were talking about about the sell-off being caused by the financial problems in Greece and/or the collapse of the European currency the Euro. Apparently I had turned the TV on at the bottom of the slide the market slid 700 points in about 20 minutes before it regained its composure and the Dow closed around -350.
In all, Proctor & Gamble lost $60 billion in market capitalization on one trade. According to the company, the Securities and Exchange Commission is looking into the trade
Program trading has been the subject of massive controversy in recent years as many traders and analysts feel it creates dangerous volatility in the market. Such trading began in the 1970s as trades were manually walked around to specialists’ posts. But sophisticated computer systems now allow traders to place trades directly into the exchange computer, increasing the speed of trading exponentially.
There also is a growing sense that any collapse of Greece could trigger a wave of defaults across Europe and even the world.
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“We’ve seen a crisis start in a country—Greece—become regional, impact the whole of the Euro zone and is on the verge of truly going global,” El-Erian, CEO of the world’s biggest bond fund, told CNBC shortly before the selloff began.
The euro fell further against the dollar, hitting a new 14-month low. The euro has tumbled against the dollar since last fall as faith in Europe’s shared currency dwindles. Greece’s debt crunch is widely seen as a test of Europe’s ability to restore fiscal discipline to the weak economies in its union and keep the decade-old currency viable.
“It’s going to drop further,” Tim Speiss, chairman of the personal wealth advisers practice at Eisner LLP in New York, said of the euro.
As a wise man once said, to Err is Human, but to really screw things up you need a computer.