Ok, we could talk for hours about the craziness that went down in the stock markets yesterday. We can speculate this and that, but Kendall and I will just end up getting mad. The short of how we see what happened is that you had first one idiot, in control of a button attached to a computer, that had a preprogrammed trading scenario set up, that pushed said button when the Rolaids ran out. In addition, you have a whole lot of other idiots, in charge of other buttons that themselves lost all stomach strength when they saw the end of the world in the form of a falling market price.
So what did we have in abundance? We had high powered fast computers with fast programs, based on fast and tricky mathematics, and buttons. What did we lack that was so sorely needed? The answer is simple common sense.
Bill Gross’s Investment Outlooks are almost always great reads. It just so happens, his May 2010 Investment Outlook, in light of what happened yesterday, is extremely timely. Click the link below to read Mr. Gross’s Investment Outlook titled, “Lovin’ Spoonful” from PIMCO’s web site, and see how he explains the lack of a “Common Sense Quotient” in the investment community.
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