Marc Faber algorithmic trading pilots caused the Crash of the DOW

Marc Faber on BNN Canada 07 May 2010 : Dr. Doom on the Economy

Marc Faber : basically what is happening is the following we have 70% of the trading volume that is algorithmic trading which is computer program driven , now most computer programs are structured according to momentum , in other words they are trends following models and they work like an auto pilot in a plane , so if there is pressure from the upside the auto pilot will push up the plane , if there is pressure from the right hand side the auto pilot will pressure it to the right and so forth ...to find an equilibrium point , and the auto pilot in the algorithmic trading they change at some point when you go through resistance or support levels , so then suddenly you go from long positions to net short and that then aggravates market moves , in other words yesterday as the markets opened they were still programmed on the buy side but when the market fell to a certain limit it all turned into sell orders that's why you got this big sell-off in one day ...in the 87 crash , we crashed by 21% in one day and from the peak in august 87 to the low on October 20th 1987 the market had dropped 40% , so very near term as of today on a daily basis we are over sold but we are still only moderately lower than we were at the peak on April 25th 2010 "
"The danger is that the Federal Reserve has encouraged a casino and today the financial sector is simply disproportionately large compared to the real economy , in other words if you look at Foreign Exchange Trading FOREX it is may be a hundred or a thousands time larger than the trade volumes , if you look at the Future market activity it is much larger than the physical trading volume and so we have this huge casino in the world from which the financial sector benefits , the profits of the financial sector as close to records highs at the present time but that all has been encouraged essentially by loose monetary policies especially in the United States"
"It is going to be a very volatile environement for the next five to ten years until the final crisis will REBOOT , like when your computer crashes then it is finished , then you have to reboot , what will happen The whole financial system in the world will be RESET and the centrasl banks will essentially be WIPED OUT "
"The Greek government has defaulted about as many times as Argentina in the last 200 years , and they will continue to defauly except now they have a rich uncle called the EU "
"In general the problem worldwide in the western world and I specify here not in emerging economies but in the western world , the US in particular and western european countries are the unfunded liabilities that will come about in the next few years as a result of the aging of the population and as a result essentially of medicare medicaid social security payments and the governments simply do not have the money to pay all this even if they increase taxation it won't be enough and so in my opinion before they all default they'll print money"