Yep, the La Cosa Nostra, or should I say Wall Street, had a hiccup in their trading algorithms (which should be illegal) which for a very brief period of time gave retail investors an advantage. Shame I was at work.

Nice pickup.

The typo story about someone hitting a ‘b’ instead of an ‘m’ is complete crap and I’m shocked that CNBC and others are running with this story with no verification of it. The idea that a trader can accidentally hit a typo and unload billions of shares is such a joke. I’ve spoken to a former Wall st. trader and he told me you’d have to make a minimum of 3-4 phone calls to execute a trade like that.

What if he would have hit a ‘t’ instead of an ‘m’ would he have unloaded trillions??? The whole world would have ended!!

Laughable

Via some GTC limit orders, I also scored some additional shares at 20-25% discounts, a couple of high-yielders around 9% (one financial preferred, and one sleepy telecom). I am also very pleased that I don’t use stop loss orders.

One other comment: I noticed that my muni bond CEF holdings didn’t blip much at all during the 1445 EDT action.

This is exactly why I would never use “sell stop” orders on long-term investments.

Diversification did work however. While stocks were tanking, my bonds were rising in value. Furthermore not all of my stocks fell as much as PG intraday top to bottom. A sleepy savings institution ticker HIFS moved down 18 cents(or less than 1/2 percent).

I agree that the “fat finger” rumor is fun… and probably false. I heard it was shares of P&G. Whatever it was, everyone panicked at once and even shares of small caps (in Canada) were affected. Dennis Gartman stated that, according to statistics, it was a 12 sigma event “if that even exists”. Then he (wrongly) implied that a 12 sigma even should only happen every thousand years. In fact, a 7 sigma event shouldn’t happen in a billion years. Yet the last time this happened was in 1987. This proves, in my mind, that gaussian statistics don’t describe stock market volatility.

Since gaussian statistics are the basis of Modern Portfolio Theory, including correlation, diversification, optimization and the Sharpe ratio, none of it’s worth the paper it’s printed on. Beware diversification.

You were luck to be able to complete a trade. I tried to trade but my broker’s web site went down at that point so I missed it.

People worry too much about market volatility. I don’t have any data to back it up but I think everyone’s access to internet trading is making it easier to make money “if” you are rational. You can observe “investors” doing all sorts of irrational trades in small caps. This includes dumping a good company for no good reason, which provides good buying opportunities. Then they will bid up the market value of some company on some rumor far beyond any value supported by the company’s fundamentals. It’s all fun anyway.

Efficient market theory? I don’t think so!

As an example, T dropped 9% for this week and the dividend, if you buy now, yields about 6.7%.

Was T really overvalued by 9% last week and we’re only now coming to a correct valuation? Or was T really valued correctly last week and the market gone wonky this week?

There certainly hasn’t been any news this week that directly bears on the company’s stock, so there’s no concrete reason the value should shift so dramatically.

Reversion to the mean? Nope, T was trading around the 50-day moving average last week (that’s a mean, isn’t it?) and just dropped well below the 200-day moving average (ooo, there’s another mean!).

@Robert: You’re in good company. Benoit Mandelbrot, father of fractals and pioneer in applying rigorous mathematics to capital markets, also doesn’t believe market behaviour is gaussian. If you can get past the pompous “I’m the renegade free-thinking genius who has it right and everyone else is dumb or dishonest” attitude in his book, you might enjoy it.

@Jacob: What are you claiming this event demonstrated exactly? That diversification doesn’t work? While stocks took their nosedive, bonds hit their 52-week high. If anything, it demonstrates why stop-loss orders are a terrible idea.

@Jeremy – I always try to keep commissions around 1%. The best way to solve this is to only buy every 6 months.