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Home » Economy

What I Learned From The Near Stock Market Crash

Submitted by on May 7, 2010 – 12:03 amNo Comment | 2,811 views

The Roller Coaster

Yesterday we experienced a near stock market crash. Its one of the craziest half hours in stock exchange history; the Dow dropped nearly one thousand points, suffering what would have been it’s  worst fall in seventeen months, before rebounding to recoup nearly all its losses. According to the NY Times, shares in Proctor and Gamble, which began at about $62 fell to $39.37 before rebounding nicely to end the day at $630.75.

CNBC, citing multiple sources, reported that the drop may have been precipitated by a fat finger trader, who depressed the B button instead of its neighboring M button; flooding the market with Proctor and Gamble shares worth sixteen billion instead of sixteen million dollars and triggering the overall plunge.

It is too early to tell if these reports are factual and officials at city group, where the trade is alleged to have originated, asserted that they had no evidence of Citi’s involvement with erroneous trade action.

The good news is that everyone walked away from the biggest financial nail biter of the year. Now that the fast paced action has slacked off and the Monday morning quarterbacks enter the fray, we the couch rabbis can pick up the ball and spin off a few new sermons.

All About Action

Modern technology is amazingly sophisticated; nothing short of brilliant. But when all is said and done the machine is only as good as its human operator. If the allegations are true then this was not a case of computer trumps man, but of man redirecting a significant bundle of the world’s cash, by the inadvertent slip of the finger. Talk about giving us the slip…
The same holds true for spirituality. We have sophisticated theory, complex ideology, deep meditation and firm doctrine. But when all is said and done, these matter little because as a famous rabbi once said, we are a religion of deed, not creed.

When we return our souls to our maker He will ask how ethical was our behavior, not how sophisticated was our theory. He will want to know whether we dealt honestly, studied diligently and whether we exercised our hands and arms in the distribution of alms.

In the end it all boils down to action. One slip of the finger can make or break a lifetime.

Slow, But Steady

A second sermon I took from this near debacle is the importance of measured steps. Selling sixteen billions dollars worth of stock in one trade only serves to depress its value. A sale of such magnitude can be accomplished, but it is best approached with patience; shrewdly and slowly. Stock must be sold off in little bundles, only then is there hope for success.

The same holds true for religion. We cannot undertake a complete life style overhaul in a day. It is true that everything boils down to action and many are the Torah norms that govern Jewish behavior, but if we tried to take them all at once we would have bitten off more than we can possibly chew. The value of our efforts would soon deteriorate because we would burn out, lose heart and soon run out of steam.

Growing our levels of observance is a good idea, but the growth ought to be measured. We must move forward with conviction, but with little steps and a controlled pace. Only then is there hope for success.

Every Moment Counts

The third sermon is the importance of a single action. If the reports are correct it did not require a coordinated strategy to take down the markets; in a matter of minutes, a single trade managed to undermine the entire superstructure.

We often dismiss the little things. I call my mother every day; the world won’t end if I don’t call her today. I am on time to work every day; the world won’t end if I sleep in today. I feed the poor every day; the world won’t end if someone else has to take over for me today.

This event shows us that single actions do have consequences; sometimes more than we know. Never underestimate the importance of a moment. A single trade brought down the market and a single trade could propped it back up. A single moment can ruin your life and a single moment can recover it for you. Every moment, every decision, every action is precious.

They tell a story of a little boy, who walked along a breach strewn with star fish, throwing the fish back into the water. An old man called out, little boy, what are you doing, there are so many fish, your petty actions won’t make a difference. The boy knelt and threw another star fish into the water. When he straightened he replied, perhaps not sir, but to this fish I made all the difference in the world.

Never Too Late

The final sermon that I take from this episode is that even a terrible mistake is hardly ever fatal; there is always a second chance; there is always an opportunity to improve.

Rabbi Schneur Zalman of Liadi, founder of the Chabad Chassidic movement, is said to have engaged a young man in conversation about his large, swift horse. Tell me young man, said the Rebbe, why do you ride such a great horse? Well, replied the young man, the swifter the horse, the faster I arrive at my destination. What happens, rejoined the Rebbe, if you take a wrong return, will you not move quickly away from your destination? The man thought for a moment and replied, indeed, I would, but once I realize my mistake I can turn around and make even better headway in return.

The Rebbe was not talking about the horse, but about its rider. He was asking the young man why he chose to live in the fast lane. The young man explained that he liked to move quickly and enjoy life. The Rebbe asked, what happens if you make inappropriate life decisions. After reflecting for a moment the man replied that in that case he would indeed turn around and direct his youthful energy to repentance and return. Legend has it that the young man did indeed return to the path of Torah.

This story comes to mind when reflecting on the market’s quick recovery. Indeed, one trader made a mistake and even one mistake can cause untold damage. But once the market realized what had occurred it applied its unbounded energy and corrected itself.

Life is a long journey, but it is not over until it ends. Never should we imagine that we have reached a point of no return. There always be a tomorrow and the sun will always rise again. Take heart, for tomorrow you can make good on what went wrong today.

Better yet, make like the market and don’t wait for tomorrow. Get started today.