The problem with blaming the computers for the crash

By   /   February 7, 2018  /   5 Comments

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Blame the computers all you like, but also acknowledge that the 10 years of distorted markets due to trillions spent on quantitive easing has created a perfect storm where the AI of the computers becomes ruthless with the greed of the humans. 

There has been a big attempt by the media to portray the stock market plunge as all the fault of computers.

This is as problematic as claiming the ‘market fundamentals‘ are somehow a touchstone against any wider issues.

There is truth in blaming the computers for their nano second trading that exacerbated the sell off because the majority of trading is now done at this millisecond speed, the problem is that because the majority of sell or buy bids are automatic algorithms, once these events take off they can’t stop, and these events will continue to occur as the treasuries market and interest rates being offered continue to offer better returns than the grossly over inflated stock exchange.

Blame the computers all you like, but also acknowledge that the 10 years of distorted markets due to trillions spent on quantitive easing has created a perfect storm where the AI of the computers becomes ruthless with the greed of the humans.

This is only going to continue to happen.

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5 Comments

  1. Sam Sam says:

    There’s a lot of noise and a lot of misinformation in the markets and probably more so in the FOREX (currency) markets more so than any other asset class or market out there and theses specific reasons why this is the case and it’s because the FOREX market is very heavily traded. And a lot of people with conflict of interest, who are incentivised to push people in a certain direction, to do the wrong thing. Or they just talk a whole lot of bullshit in order to get payed.

    To do the opposite you have to have no agenda behind and to just explain how to do things properly. A lot of the guys in the markets are people who haven’t had exposure to financial instruments or have had exposure and have limited success or have lost a lot of money. They are not alone!!! The vast majority of people who trade financial instruments lose a lot of money!!! But it’s nothing to feel bad about and there are specific reasons why. One is people are taught by charlatans to do the opposite so charlatans make money and the another reasons is the vast majority lack the education to make money properly and it’s very difficult to avoid any of this.

    But the most important thing is and this is where the algorithms come in is to reduce to zero any emotional barriers to making or losing money. And that’s all about inputting the right numbers into a buy order and knowing before hand how much risk/money your will to put on the line and how much you’re willing to lose. You could be a bloody idiot but so long as you cut positions that turn on you really quick you can still keep a far whack of the profits and make a little bit of money. Actually probably just by reading this you’re probably already starting to avoid it and are better prepared to identify better pathways to making it in life.

  2. Alan Armstrong says:

    One commentator had it in a nutshell: GDP went up 3%, The market went up 10%. Go figure.

  3. Samwise says:

    We don’t need machines to overthrow us and take over. All they need do is wait. Human stupidity an greed will do the rest.

  4. Afewknowthetruth says:

    I take my old bike to a cycle shop and use it as a deposit on a new bike. I take the new bike to a motorcycle shop and use it as a deposit on a motorbike. I take the motorbike to a car yard and use the motorbike as a deposit on a car. I take the car registration papers to a bank and use the car as a deposit on a house.

    That is roughly how the derivatives market works.

    And what is more sickening is that slick traders can make bets on failure (as happened with the sub-prime mortgage meltdown), and then collect a dividend for the failure they knew would occur.

    Of course central banks can keep delaying the day of reckoning by printing money to pay the interest (creating out of thin air in the form of computer digits), digging an ever-deeper hole for everyone. And they will continue to do so until they can’t.