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Longtime Stock Trader Says Record Drop Could Be Result Of Positive Economic News

Feb 5, 2018
Originally published on February 5, 2018 9:56 pm

NPR's Ari Shapiro speaks with Ted Weisberg, president of Seaport Securities about Monday's record stock point drop. Weisberg says the drop has multiple causes, one being fears that the positive economy could "overheat" and lead to inflation.

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ARI SHAPIRO, HOST:

Stocks took a big hit today. The Dow fell 1,175 points. That's more than 4 and a half percent. To talk about why this happened and what it could mean, we turn to Ted Weisberg. He's president of Seaport Securities and a 45-year veteran of the stock market. Hi, Ted.

TED WEISBERG: How are you?

SHAPIRO: I'm fine. You have seen a lot in your 45 years as a trader. How would you...

WEISBERG: Too much.

SHAPIRO: Too much - well, how does what happened today compare to what you've seen over those decades?

WEISBERG: Well, it's never fun when they go down. It's obviously always much more pleasant when they go up. And clearly we've been on a bit of a whirlwind adventure here certainly since the election. But you can even go back to many of the Obama years. I mean, the markets have not really had any kind of major correction. You could probably go back almost as far as March of '09 when the market started to improve after the financial crisis.

It's never fun, Ari. It's always painful, and everybody wishes they had sold yesterday. But unfortunately they don't ring a bell. They don't tell us when to do that. And that's part of - you know, it's just part of stock trading.

SHAPIRO: You describe this as a correction. The market had been going up pretty steadily over the last year. Why do you think this happened?

WEISBERG: Well, with the benefit of 20-20 hindsight, I think part of the reason could be actually the very positive economic news that we got out of the government last week and...

SHAPIRO: Friday's jobs report saying hundreds of thousands of jobs and wages had gone up, yeah.

WEISBERG: Exactly. And then you had some comments from an (unintelligible) Fed that they were - you know, that they thought the possibility we might even see 5 percent GDP growth. Well, the one thing that the stock market has ridden the back of over the last eight or nine years has been zero or very, very low interest rates. And anything that would even smell like interest rates are going to move up higher and faster than the Fed has already telegraphed to investors sent - clearly sent a very nervous shockwave through the markets.

And you saw the 10-year bonds start to sell off, and the interest rates went higher - 30 year. And, you know, with a market that's been on a bit of a tear and not had any kind of correction, clearly overbought - trees don't grow to the sky - all the cliches, you know, there's always something.

SHAPIRO: Yeah.

WEISBERG: And it's never what one expects. But there you are. I think that's as good a reason as any.

SHAPIRO: You know, Ted, you've been a trader since before computers were the ones doing all the trading. Do you think that makes a difference in a day like today?

WEISBERG: Well, yeah, I do. I mean, listen; I remember the crash of '87. We were down 22 percent in one day - quite dramatic certainly compared to today's selloff.

SHAPIRO: Make today's 4.5 look not quite so bad.

WEISBERG: Right, right, not quite so bad, exactly. And the reason with the benefit of hindsight then was portfolio insurance, which is a fancy word for computer trading. And the markets have changed dramatically over the last 8 to 10 years. The markets have become more opaque, more volatility, more computer trading than ever, algorithms driving the train. I mean, if you look at the screen today - I'm looking at the screen as we speak. I mean, every stock on there is down between 2.5 and 5.5, some even 6 percent.

SHAPIRO: Wow.

WEISBERG: Every one with no exception.

SHAPIRO: That's the market. We're going to have to leave it there. Ted Weisberg of Seaport Securities, thanks so much for joining us.

WEISBERG: Bye-bye. Transcript provided by NPR, Copyright NPR.