Re: [Geege] It takes one nanosecond to sell stock, btfw.
Sun, 9 May 1999 09:08:11 EDT

In a message dated 5/8/99 8:48:27 PM Eastern Daylight Time,

<< >NeoGeege: Conventional thinking in 1929: Banks margined accounts up to
>(the stock buyer only had to have 10% of the money s/he borrowed). That
>doesn't happen today. Also, we have minor corrections. Anyone following
>stock prices over the last few years has seen this "phenomenum" repeated
>and over again throughout this bull market. Chart Dell.

ROHITish: Wow. I'm going to be really glad I have this nugget of wisdom in my
(1929+70) archives. Everyone who traded through that day is dead
(literally). The few left who traded through October 19, 1987's 22%
drop are now 35 years old. The circuit breakers are not going to save
anyone when the market implodes. In fact, since trading halts are now
indexed it would take a fall of almost 3,000 points in the Dow to
take a breather -- and the entire Internet sector could be gone
within an hour. And a nanosecond, Geege, is only one foot -- the time
it takes light to travel one foot. Sell orders will melt down. The
number of savvy investors who have limit sell orders pre-cached in
the trading network are only going to accelerate downward movement.

NeoNeoG: Couple of arguments:
Wave theory (yours) Fact is - and people who do statitical control know this
(there's a guy named Woody Brock, I think, who argues this persuasively) that
when you increase the rate at which a system fluctuates, the lower the waves.
The slower the cycles and higher and lower the spikes.

Quantum theory (mine and LeBaron's): So, something happens tomorrow that
could not be predicted today. So what? A butterfly flaps its wings, and an
ill wind blows you a $100 bill - so what?

As chaos theory tells us, and the work of the Santa Fe institute
demonstrates. complex adaptive systems are prone to sudden nonlinear events.
They crash, for exmaple. Or they boom. Essentially it is a distontinuous,
nonlinear, quantum event.

But a crash need not be a crash - think of a swarm of bees. Suddenly they
all disrupt themselves and move to another hive. So what?


>Adam: The capitalist in me wants to think this is the coolest thing ever.
> Capital is now truly frictionless, and can wander to wherever needs
> it next.
> But there's a problem people don't talk about, and that is that money
> has no real place to go, and that's why it gets all this attention
> deficit and keeps shifting from place to place. If there was a good
> place for money, it wouldn't *have* to be so mobile.
>NeoGeege: You lost me here. I understand "liquidity" - are you talking
>about something else?

ROHITish: No, this is not about "liquidity", as it's so charmingly quoted.
some people have forgotten is that money is *invested*: used to
convert raw materials A into widgets X on the theory that X is worth
more than A. All this attention-deficit is a sign of *how few*
opportunities there are to go into new A->X businesses these days. I
give money so you can marginally expand your business; how many years
will it take for the expected additional *profit* under *balanced*
visions of the future to meet the Net Present Value of your bid

All of a sudden property in Asia isn't a good X. Nor are Japanese
robotic pets. Does that really make US manicurists and pack-n-ship
business more profitable, better investments? Or is it the 'Roaring
2000s' argument upside down: excess boomer savings foolishly sloshing
around the equity markets, bidding up the ENTIRE market level --
because not that many US business are triple and quadruple the
profitability they were ten years ago. Why? not that many US
*citizens* are double and triple the profitability. We have met the
owners and they is us -- if the 'new economy' is such a profit
spinner, why is the average wage flat? Why are personal savings
negative? (and trust me, savings accounts are a good susceptible to
the 'wealth effect' just as yachts are).

NeoNeoG: One man's foolish slosh is another's wise investment. For every $
invested in an E-Bay, $ trillions are invested in the REST of the S&P 5000.

Personal savings - please define. Do you mean passbook savings accounts?
They are down because there are better options. Or are you saying that
participation in 401k's and other retirement options is down? I have heard
just the opposite.

>Adam: This could very real ramifications for those among us planning on
> starting companies any time in the near future.
>NeoGeege: Well, it sounds like you're creating very illusionary
>ramifications to me.

ROHITish: Well Geege, I suspect they will remain illusory to those who aren't
planning to start companies, won't they?

VC money is doing crazy-insane things right now -- this is exactly
like 1983 in the PC market. Then, 1984 happened, consumer backlash
set in, and by 1985 tales of coke-snortin' Ferrari-dealin Ashton-Tate
executives were long gone. CS enrollment plunged, taking almost ten
years to recover, and VC money became damned scarce again. Theses
days, no one seams to give a sh*t if the founder's sweat equity is
$50,000, $500,000, or five cases of beans and rice... when dentists
pull their money back out of VC funds, every dime will seem like a
glass of water.


And according to my friend, Tom Stewart ("Intellectual Capital", board editor
of Fortune) there is no scarcity of capital.

ROHITish: At least if you're trying to build *your* firm, rather than your
VC's dreams...
NeoNeoG: I'm sure you're not saying that your VC dream of profitibility is
out of line.

>Adam: Caution isn't always a bad thing.
>NeoGeege (to no one in particular): Caution is one thing, sour grapes
>another thing altogether . . .

ROHITish: You're right, it's not to anyone in particular. Adam and I have
had our ups and downs (mostly ups of late), but 'retreating' to 60/40
allocations isn't sour grapes. It isn't even a word of wisdom. It's
just an observation at a moment in time...

NeoNeoG: . . . so long as you don't confuse volatility with instability.

ROHITish: ... which is what FoRK-archive is about.
NeoNeoG: Thanks for reminding me. :)

Rohit Khare