Tuesday, December 17, 2019

Terminator

Originally published October 2008

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There is a sentence, which I have put in italics, in the following extract from an article in the Washington Post that reminds me of the film Terminator, when the machines took over. 
Stocks are on track for their worst year since 1937

By RENAE MERLE, MICHAEL A. FLETCHER and NEIL IRWIN Washington Post

Oct. 9, 2008, 11:33PM

Some attribute Thursday's market plunge to mutual funds' waiting until mid-afternoon to execute sell orders from a growing number of investors who are cutting their exposure or bailing out of the market altogether. Others say that hedge funds, which have leveraged returns in recent years by using borrowed money, are having to sell holdings to raise collateral against their borrowings.

Still others say that computerized trading, which has grown significantly in recent years, often kicks in later in the day, when certain thresholds are breached.

Short-selling


What happened on Thursday partly reflects the unintended consequences of regulators' attempts to bolster stock prices several weeks ago, when the Securities and Exchange Commission temporarily banned short-selling in nearly 1,000 stocks. That restriction was lifted at midnight on Wednesday. Short-selling is a practice in which investors sell shares they do not own in the hopes of buying them back later at a lower price. Many money managers use it to hedge their investments against future losses. Analysts said those investors were probably forced to sell shares short Thursday to protect themselves.

Robert Solow, who won a Nobel Prize in 1987 for his work on economic growth, said the "potential for instability was always there" but he is surprised at the magnitude of the problems. "I'm as puzzled as anyone else," he said. "I don't have any particular wisdom to sell."

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