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Follower ○○

So...Why Not Just Stop Trading...?

Okay, this probably 100% a dumb and silly question...but in light of recent um..events. And the utterly catastrophic waste that's being laid upon in the markets...Why isn't all trading just stopped? I mean is there something preventing this? What would happen if all of the Indexes just agreed to say 'screw it, let's stop for the time being'? I mean it can't do more damage right? The stock market has closed due to big events like 9/11...so why not just halt everything for a few weeks to cool off?

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Valued Contributor

Re: So...Why Not Just Stop Trading...?

From   https://community.morningstar.com/t5/Market-Insights/Futures-are-down-again-BIG/m-p/686685#M3323

Shutting the market also shuts access to money-market funds at brokerages and fund families. Basically, all investment accounts [taxable, tax-deferred/free] become out of reach. That will create more problems.

Markets can be shut by nature or Presidential order. See some examples    https://www.dividend.com/dividend-education/7-events-that-closed-the-nyse/

On the day of 1987 crash, NYSE Chairman Phelan called WH hoping that market can be shut by Presidential directive but his call wasn't even taken by anybody important at Reagan WH.

YBB
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Participant ○○

Re: So...Why Not Just Stop Trading...?

Trading was stopped for a few days after 9/11 due to physical damage to the trading infrastructure, not because of fear of lower prices.

I we shut the markets now, it is an expression of no confidence in our leadership and the country's future.

As long as you aren't leveraged or up to your elbows in complicated options trades, make sure you have enough cash to get by and ride it out.  

As Charlie Munger has said, if you aren't prepared to watch the quoted prices of your stocks go down by say 50% peak to trough 3 times a century, then you should avoid stocks and you will deserve the lousy investment results you are likely to earn.  

Times like these are when investors learn important lessons about risk that no book can teach.  Good luck to us all.

 

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Follower ○○

Re: So...Why Not Just Stop Trading...?

Thanks! That's a pretty funny story with Phelon...interesting.. and good point think that if the market was shut, all the investments couldn't be touched either, so basically it'd be frozen..I mean still it sounds like something that could be used to prevent a literal economic collapse lol

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Participant ○○

Re: So...Why Not Just Stop Trading...?


@Bizman wrote:

As long as you aren't leveraged or up to your elbows in complicated options trades, make sure you have enough cash to get by and ride it out.  

As Charlie Munger has said, if you aren't prepared to watch the quoted prices of your stocks go down by say 50% peak to trough 3 times a century, then you should avoid stocks and you will deserve the lousy investment results you are likely to earn.  


It has nothing to do with being in leverage or not. 

This is an unprecedented time where shutting the schools, colleges, universities, cities, states, businesses, etc. all make sense. But, not the markets.

Got it!

PS: Yes, they didn't shut the markets during 2008 crisis, but they banned short selling, reinstated uptick rule, etc. to reduce the fear. But, it didn't help and markets lost more than 50%. 

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Re: So...Why Not Just Stop Trading...?

If you aren't leveraged, why not just avert your eyes?  Assuming you think we will eventually recover.  Perhaps we should shut the market every time it's down 30% peak to trough?

The real concern is the real economy.  As long as that bounces back without huge long term damage, the market will take care of itself.  

Or maybe we should just do away with free markets altogether and just mandate a stair step increase in indexes like bank cd's?

As far as I'm concerned, the job of the Fed and the gov't is to make sure the financial system and the real economy don't completely collapse and to try to keep the population from mass casualties and starvation if possible.  Their job is not to regulate stock prices.

We made it through the 30's, 1987 and 2008-09.  Again, if you aren't leveraged and have enough cash, what difference does it make how crazy the quotes are that Mr. Market spews out for a while?  

If only closing the market could solve the coronavirus, rather than just shield us from the truth.  Closing ones eyes would seem to be about as successful and would't involve coercion on everyone else.

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