Do you remember the “flash crash” of May 6, 2010?
If you’re a markets nerd like me, you do. It was an epic phenomenon that shocked markets with its speed and violence. I remember hearing about it live on Bloomberg radio, jumping onto the Chicago Mercantile Exchange website, and watching hundreds of billions of dollars of value rocket around in a way I thought was impossible.
If you remember the crash itself, you probably can’t remember all the complications, details and developments that followed the flash crash.
It led to congressional and regulatory hearings and investigations in the United States, culminating in a police raid on a modest family home in the Hounslow area of London, England, where an odd fellow working on a computer in his bedroom turned out to have sparked the whole thing.
It’s a gripping story and a mostly forgotten history well told in Liam Vaughan’s book Flash Crash — A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History.
Derivatives markets have undergone incredible expansion, development and transformation in the past 20 years.
Farmers have had front-row seats as exchanges founded more than a century ago to allow farmers, grain merchants and food companies to hedge their financial exposure have transformed into enormous global marketplaces. New exchanges have appeared, new forms of derivatives have proliferated and futures and options marketplaces have come to play a central role in the world’s financial industry and economy. Even more complex development has occurred in the over-the-counter (OTC) derivatives markets, where uncountable ways of hedging, managing and speculating upon financial risk have also proliferated in a grey and opaque world.
It hasn’t all been a cheery success story. OTC contracts have been fingered as a central, perhaps the central, trigger for the 2008 financial crisis and meltdown. And other crises have followed, encouraging suspicions that the world’s markets can be and often are manipulated by scammers and white-collar thieves.
Since the 2008 meltdown, we’ve also had multiple economic and financial crises, like the eurozone dramas, most of which many of us have almost forgotten about. It was a bewildering decade in futures markets and the global economy.
That’s why Vaughan’s book is such a delight. He walks us through this dramatic but arcane history in a way that makes it accessible, gripping, educational and entertaining. That’s tough to do with something like derivatives trading.
If you have any free time this summer, I recommend you get and read this book. It’s a great way to reacquaint yourself with a complicated but enthralling recent history of the markets that farmers rely upon, as well as a bizarre story about a little guy called Navinder Sarao who ended up becoming an infamous financial crook, or a libertarian Robin Hood, depending upon how you look at it.
Do farmers take summer holidays and have lists of books for summer holidays reading? According to a Twitter poll I popped up as I began writing this column, of 167 of you who responded, 25 percent claim to take summer holidays, while 22 percent admit to taking long weekends.
If you like reading and have the time, here are some other recommendations:
- Risk: The Science and Politics of Fear by Dan Gardner. It’s a great primer on why so much of our society and world is driven by a “culture of fear.” Gardner spoke at a Canola Council of Canada convention a few years ago and I’ve followed him since. He’s an expert on risk and if you’re reading this column, that’s probably something you’re interested in.
- The True Believer: Thoughts on the Nature of Mass Movements, by Eric Hoffer. I haven’t read this, but in a North America filled with mobs of protesters and reactionaries in so many things, I think it’ll be a good primer on what the heck is going on out there. (Written in 1951.) I haven’t read it yet.
- The Medium is the Massage, by Marshall McLuhan. To understand what social media is doing to us today, I recommend this 1967 visual-intellectualizing classic.
- I’m keen to get into Hidden Hand: How the Chinese Communist Party is Reshaping the World, by Clive Hamilton and Mareike Ohlberg. With the question of how to deal with China becoming one of the central questions of Canadian existence these days, I think it should fill my mental hopper with enough dough to loaf out ample supplies of brain bread for the summer.
I haven’t read all of these yet, but I will, and I hope some of you do as well. If you do, poke me on Twitter and we can chat about it. I don’t join book clubs, but I blather a bunch on Twitter, so perhaps we can operate an impromptu book club there.
Let’s get reading and get chatting. And for those of you too busy, chained to the tractor, sprayer or truck cab, or otherwise farm-bound, you can get some of these in audiobook form, so download a couple, listen and chat with me about it.
(Looking for holiday book friends.)