Wednesday, March 17, 2010

Bursting Financial Bubbles - Science News


Even when they inflate and collapse in milliseconds, the same rules apply

PORTLAND, Ore. — Statistically speaking, size doesn’t matter when a financial bubble bursts.

The big crashes may hurt a lot more, but new analyses of “microbubbles” presented March 15 at a meeting of the American Physical Society find that the same mathematical laws underlying massive economic crises are also at work in tiny fluctuations that occur on the order of milliseconds.

The new understanding of economic fluctuations both big and small doesn’t predict when the next economic meltdown will wreak havoc on retirement accounts, said study coauthor H. Eugene Stanley of Boston University. But the results help describe complex financial fluctuations and reinforce the idea that governments ought to have a contingency plan in place for the calamitous collapses that his research describes as inevitable, Stanley said.

The results are intriguing “because what is causing these big bubbles to collapse are some instabilities that start at the local level of the millisecond time scale of traders,” Stanley said in his presentation.

The distributions of both trading speed and share volume remained the same regardless of bubble size, the team found. This means that one mathematical law describes events that occur over 10 orders of magnitude — from milliseconds to hundreds of days, Stanley said. The same is true of earthquakes: There is a mathematical relationship between size and frequency that encompasses everything from imperceptible daily tremors to massive once-in-a-lifetime catastrophes.

Although the researchers don’t yet understand the details of bubble formation and bursting, the work shows that large financial collapses, although infrequent, are bound to happen, said Stanley. The results “tell us that the really big crashes or bubbles that burst have something to do with the medium-sized and the small-sized ones,” he said. “Had this law been known earlier and appreciated by governments, governments would have probably taken steps to make plans for what to do if one of these big shocks occurs.”


Full article


t said...

Stock Update for march 17

The only one on my radar screen to fall so far

HGSI dropped today after announcing their lung cancer drug failed to show any positive results.

Everything else I'm looking at has opened up and happy in this beautiful blue sky engineered magical new normal rigged game

I love my magical plunge protection team. they work so hard to make us happy sheeple.

Anonymous said...

Don't fret kids.

COUNTRYWIDE CHRIS is in charge of financial reform in America.


t said...

Just gonna watch my biotech stocks today and see if any of em correct into a buy zone.

NNVC 1.20-1.30 ish
If exhaustion of 5 waves up at 1.55 area turns around and dips 38-62%

BTIM ... to (yikes) 7.00 ? 6.50 area? who can say when a stock success story gets hot...its testing the 7 area now,down from a big sell off late afternoon yesterday from 8.20. bounced at 6.90 . bouncing now at 7. 6.50-6.70 looks possible.below that is 6.30 area.6.70 - 6.90 is the 50% fib zone .

ISCO retesting its latest tops,the bottom zone for buying dips is 1.20-1.40

AVXL... a correction to the 2.70-2.80 zone is my buy target .not currently moving in that direction any time today by the looks.

GNVC fiddling in its wave 4 zone now,could pop into the wave 5 up to a higher high ,or drop to complete a wave abc correction,if it breaks below the last low at 2.64, could see the abc drop to the 2.20-2.40 for my nice buy zone.

TPI ... (its on my list) china pharma,seems worth watching... has shown strength in upward movement from 3.00,inbetween highs and lows now, would complete an abc correction if it retests the 3.00 area(3 to 3.30 ish)...not happening today ,needs time.

STXS...its a biotech,unique medical technology that enhances surgical proceedures. the chart looked like a great set up to pop a month ago when it was at 4...and so it did pop there. I bot it,gloated,and sold way too early,because I'm stupid. Maybe it will return to 4.70 area.
Its not like an NNVC or BTIM story. its just a nice biotech to own a piece of.

GERN ....looks most interesting to watch ,in many respects,from a chartist outlook. RSI and Stoch are at key pivot areas,price point between 5 and 6.50 is critical with this stock,going back a long time,200and 50 MA's are critical with current price now.trendline tops are in play now for resistance,as is a bottom to hold in the 5.75 area. cup and handle ,shape of chart looks good for a new movement UP IF 5.70 area holds as support and 6.50 can be broken thru.6.00-6.20 is such a strong pivot point magnet. All this is happening in the current moment.GERN wants and needs to do something in the coming week. key MA's involve 6.50 area,6.20 area,5.90 area,5.75 area, critical bottoms bounced and held several times at 5.10-5.20 area in the last few months.

CYTX ...plunged down into the 5.00 buy zone the other day.I dont know why. but I bot some there.

t said...

....and right now for intra day watching...BTIM looks to be the one to watch ,if one wants to buy at a good dip....for now that looks like 6.70-6.80 area.IF it makes one more subwave down to get there. its currently holding along the 7 line,failing to go up,just made a movement down ,any break below the 7 line now, could get into the zone,what would be the 62 % fib, the completion of 5 waves down...this would be the buy zone for the correction.
as I see it

Anonymous said...

T,Great post,again. Thanks, and keep 'em coming. Doug

Anonymous said...

Somehow appropriate that the bubble article comes right after the NNVC chart.

Anonymous said...

from the article...."had this law been known earlier and appreciated by governments(...huh?)
governments would have probably taken steps to make plans (mmm..wha?!)
for what to do if one of these big shocks occurs"

uhnh,oh,um... is he trying to say, that these market collapses,just ...'happen' all by themselves? like ... you know, theyre just "bound to happen",just from the first little dominoes tipping over, and such... well,of course there is the existence of fractal geometry in everything...but it sounds like hes not considering the concept that maybe these things could actually happen by design,triggered by the forces of governmental power pulling the levers, or at least having some input in the process of actually 'pushing Humpty Dumpty '

"governments ought to have a contingency plan in place"....ugh yeah, wouldnt that be great??
What is it that makes this article sound so .... ignorant... of what goes on in the chambers of power behind the curtain.
Its like they went to the trouble of identifying Fractal geometry in market movement? thats basic mandelbrot 101.

Let them do the kind of study that folks like Tyler Durden have done,and see how it all adds up. they might conclude that humpty was pushed.

and maybe we are seeing that in fact they have the ability to also put humpty back together again. maybe thats what They are doing now.
Its all so magical.

Anonymous said...

Who IS IT this anonymous poster who STILL fails to understand NNVC ?
please help me(us) understand by what basis now you believe NNVC is not real.
I promise I will believe you if you can convince me. I will sell my NNVc if you just show me its not real.
I just got slammed by the fda disapproval of CYTX from the other day. the stock collapsed,the way you'd expect it to upon such news. Where were you about CYTX. you should have warned us that their stuff wasnt good enough for the fda.