The 2 Culprits Behind Thursday’s 1,000-Point Collapse
“Yesterday, we had duel manmade financial fiascos,” Cramer during Friday's Mad Money. “It was embarrassing. It was unbecoming. And most of all, it was outrageous. And the most infuriating part is that the same people who did nothing to control the damage yesterday will continue to do just that – nothing.”
The first fiasco came courtesy of Jean-Claude Trichet. Cramer attributed 350 of the near 1,000 points the Dow lost yesterday to the European Central Bank president’s disappearance right when the world needed his leadership. Trichet either should have announced the EU’s intention to cordon off the debt woes of Greece, Spain and Portugal or thrown the government’s full support behind them. That would have lent some stability to the markets.
“Instead ... we got nothing,” Cramer said.
Culprit number two behind the second fiasco, or the remaining 650 or so points in that 1,000-point fall, were the institutions that stood by as the machines broke down, Cramer said. They didn’t stop trading to figure out why some stocks dropped to zero. They didn’t issue warning bulletins, telling traders to be careful. Not did they call the networks covering Wall Street to explain in near real time that something had gone wrong.
No, “They just stick their head in the sand,” Cramer said, “just like Trichet.”
Maybe it’s because the exchanges only seem to care about trading volume, and the fees that come along with it. Cramer thinks they’re willing to risk anything to get that volume, too, including the circuit breakers that could have prevented yesterday’s decline.
What’s worse is that nothing will be done to improve things, Cramer said. There’s no central regulator, someone who could have been watching CNBC when this all went down and halted trading. And there’s no one in Europe as strong as Federal Reserve Chairman Ben Bernanke.
But who’s the real loser in all of this?
You. The machine breakdown yesterday “happened entirely in the name of institutional greed and profit,” Cramer said. And it seems like the only time the government is interested in protecting anyone is when a wrong takes place at the institutional level. Remember, the whole case against Goldman Sachs is that it failed to protect a major German bank.
So individual investors are crushed by greed between 2000 and 2003. Then they’re hurt again between 2007 and 2009. And on Thursday we found out that the whole system can be brought down in a matter minutes.
“No wonder people would rather own low-yielding CDs than stocks,” Cramer said.
Cramer's charitable trust owns Goldman Sachs.
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