Post Time

 

“Fear and Greed move the stock market up and down.”

 

It is unclear who originally said this but it is very true. This was classically illustrated on December 3^rd,1984 when a tragedy happened in Bhopal, India at the Union Carbide India Limited plant, a subsidiary of the American Chemical Company. This disaster occurred due to poor maintenance of six fail-safe systems that were all inoperable at the time, incompetent management and a general disregard for the lives of the people who worked at the plant or lived in the surrounding area. Over 500,000 people were exposed to Methyl Isocyanate gas in the slums that surrounded the factory.

 

Union Carbide stock was traded on the New York Stock Exchange and Union Carbide stock options were traded on the American Stock Exchange where I worked as a specialist clerk.

 

Dennis, my broker, came on to the post now, not with the composure of a normal person but with the panicked excitement of a madman, words blasting and sputtering out of his mouth like a machine gun. He was 130 lbs., about 35 years old, clean, neat and trim in his three piece suit with tight curly short hair and thick coke bottle glasses. Dennis was precise and wound up like a clock ready to spring into action at a moment’s notice. Teetering on the fine edge between genius and insanity his razor sharp mind flew through equations, mathematical probabilities, percentages and standard deviations from the mean. Although a diet of raisin bagels with cream cheese, an unending supply of strong black coffee, unfiltered cigarettes and rumored cocaine use would not be considered healthy in most circles; Dennis flourished on it.

 

“Jim, what’s up with the market falling out of bed?” Dennis queried, going on and on repeating himself.

 

The bullet words were forcing themselves into my ears, trying to push themselves ahead of each other, not willing to take their time and wait their turn to make cohesive sentences. The abrasive, scraping, scratching, torturous litany coursed into my brain like gravel engulfing a storm drain with the intonation that somehow it was my fault that he was late and his position is not prepared for this situation. Shards of verbal broken glass cut through my composure as I quickly gave him a quick summary of the situation in this time before the internet and instantaneous information, when news was supplied by the Dow Jones News Retrieval System.

 

“The bulls are panicking, running for cover, getting mauled by the bears. A UK plant blew up in India, the stock opened at 50 and is already at 46 ¼ ! The Dow and the S& P are off big time, and we’re long, “ I explained in one breath. “You need to open the Options fast!”

 

Dennis called over the reporter and quickly rattled off opening bids and offers, screaming into the man’s ear. Dennis was a specialist broker and it was his responsibility to keep the market fair and equitable for the benefit of the public. When prices ran across the ticker, it was the specialist at his trading post that determined this price. He collected and sorted through all the bids and offers to make sure that they were treated fairly and executed in the order that they arrived relative to their price constraints, and were time stamped in case of any conflicts. In similar fashion to a fireman that runs towards danger while others are running away, the responsibility of the specialist was to run towards financial danger and shore up the market when all bidders have retreated or conversely to sell when others felt that their positions are worth more. This inevitably causes a conflict in the short term, but eventually financial opinions would shift and  the specialist would have an inventory to trade with as the fickle market changed course.

 

We were in for a harried day as the pit’s crowd swelled and additional brokers and clerks were brought in to handle the different strike prices. It was a rough day on Wall Street where UK opened at 50 and ended the day at 35, with  the 50 puts going from 3/16 to 17 1/4 and the 50 calls becoming worthless, but  a much rougher day in Bhopal India, for the unfortunate victims of this tragedy.

 

Jim

Sep 2020