Apr 14, 2020
Chaos Theory – Flash Crash and Machines Running Wall St
w/ Denver Nowicz - BRT S 01 EP10 4-12-2020
Guest: Denver Nowicz, President - Wealth For Life
https://www.linkedin.com/in/denvernowicz/
https://twitter.com/DenverNowicz
Denver is an advisor with nearly 20 years experience working with clients in investments and insurance, designing retirement plans with a combo of both. He takes us through different strategies for clients to get the best allocations for their money over the long term. It is the Combo Strategy of both Offense and Defense, the synergy of the mix, not ‘All or Nothing’.
Notes:
Tax Protection
Selling a Business
3 to 1 Lender Match
Chaos theory is a complicated mathematical theory that seeks to explain the effect of seemingly insignificant factors. Chaos Theory is considered by some to explain chaotic or random occurrences, and the theory is often applied to financial markets as well as other complex systems such as predicting the weather. Chaotic systems are predictable for a while and then appear to become random.
Flash Crash of 2010
Flash Crash 5/2010 – computer selling, 998 DOW loss / 9%
Background - per Wikipedia
On May 6, 2010, U.S. stock markets opened and the Dow was down, and trended that way for most of the day on worries about the debt crisis in Greece. At 2:42 p.m., with the Dow down more than 300 points for the day, the equity market began to fall rapidly, dropping an additional 600 points in 5 minutes for a loss of nearly 1,000 points for the day by 2:47 p.m. Twenty minutes later, by 3:07 p.m., the market had regained most of the 600-point drop.[13]: 1
At the time of the flash crash, in May 2010, high-frequency traders were taking advantage of unintended consequences of the consolidation of the U.S. financial regulations into Regulation NMS,[4][14] designed to modernize and strengthen the United States National Market System for equity securities.[15]: 641 The Reg NMS, promulgated and described by the United States Securities and Exchange Commission, was intended to assure that investors received the best price executions for their orders by encouraging competition in the marketplace, created attractive new opportunities for high-frequency-traders. Activities such as spoofing, layering and front running were banned by 2015.[16] This rule was designed to give investors the best possible price when dealing in stocks, even if that price was not on the exchange that received the order.[17]: 171
More: https://en.wikipedia.org/wiki/2010_flash_crash
MB on Covid 19 as a Possible Black Swan Event, & Mean Reversion
Black Swan Events – virus scare 2020, financial crisis / housing crash 2008, Dot Com bubble
Chaos Theory – Jurassic Park quote from Dr. Ian Malcolm ‘life finds a way’
Mean Reversion - Things do not stay good forever, stocks do not just keep going up, things are not bad forever
Chinese Farmer by Alan Watts -
https://wellsbaum.blog/alan-watts-story-of-the-chinese-farmer/
Notes:
The concept of black swan events was popularized by the writer Nassim Nicholas Taleb in his book, The Black Swan: The Impact Of The Highly Improbable (Penguin, 2008). The essence of his work is the world is severely affected by events that are rare and difficult to predict. The implications for markets and investments are compelling and need to be taken seriously.
A black swan event in the stock market is often a market crash that exceeds six standard deviations, making it exceedingly rare from a probabilistic standpoint. Some have argued that stock prices are "fat-tailed" and that such events are, in reality, more frequent than the statistics would let on.
The crash of the U.S. housing market during the 2008 financial crisis is one of the most recent and well-known black swan events. The effect of the crash was catastrophic and global, and only a few outliers were able to predict it happening.
Others are the: DotCom Bubble of 2001, 9/11, and the Fall of the Hedge Fund, LTCM in 1998 because of the failures of the Russian Government.
Mean Reversion is a financial theory positing that asset prices and historical returns eventually revert to their long-term mean or average level.
More on Machines Running Wall St. -
https://www.youtube.com/watch?v=uff9vqpcok4
13 Stock Market Realities Exposed By Coronavirus Market Crash Fears
Mar 12, 2020
3 Stock Market Realities Exposed By Coronavirus market crash fears focuses on the new world stock market that's driven by the fastest technology ever.
Wealth Specialist John Duncan shares how the Coronavirus has exposed huge stock market realities that have been under the radar until this buying and selling stock market frenzy began. Magic of how to protect your money from a stock market crash is understanding how the stock market has changed.
Here are the list of 13 Stock Market Realities covered in video:
- The market is now basically run by supercomputers - Causing crazy opening and closing bell sessions - Algorithms are triggering buys and sells -Sheer volume of transactions is off the charts
- Margin calls are behind many of the end of day sell offs
Machines are driving Wall Street's wild ride, not humans
by Chris Isidore @CNNMoneyInvest February 6, 2018
https://money.cnn.com/2018/02/06/investing/wall-street-computers-program-trading/index.html
Wall Street's recent wild ride isn't driven by nervous portfolio managers, retirees looking at their 401(k) statements or any other human traders. Instead, machines are making the trading decisions.
Computer programs execute buy and sell orders based on complex algorithms and formulas, without a human involved in the process.
On a typical trading day, computers account for 50% to 60% of market trades, according to Art Hogan, chief market strategist for B. Riley FBR. When the markets are extremely volatile, they can make up 90% of trades.
* some Notes & info c/o of Investopedia
Link to Taxes Show on 10/31/2021 w/ Denver: Here
Link to Offense / Defense Show on 6/6/2021 w/ Denver: Here
Link to Shows, Denver was a Guest: Here
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Investing Topic: https://brt-show.libsyn.com/category/Investing-Stocks-Bonds-Retirement
More 'Best of Investing': Here
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