When Stocks Glitch | Podcast Episode #428

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Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance.

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Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

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You can succeed at the stock market and I’m ready to show you how. Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market.

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And today’s episode we’re going to talk about when stocks glitch. So I have a long time listener here. He wrote to the show here and he’s written the show before in the past, and I’m always appreciative for his thoughtful questions.

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And this one pertains to some recent current events regarding the stock glitch that happened with Berkshire Hathaway back in early June of last month.

1:00
So for this episode today, give them a good Florida red nickname of Boogie. And you wonder, why do I use Florida redneck names to conceal people’s identities?

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Because I’m from Florida, part redneck, and people probably don’t necessarily want their names floating around there.

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And it also creates the opportunity for them to be honest in their dialogue, knowing that I’m the only person that reads these emails.

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So with that being said, Boogie writes Hey Ryan, longtime listener, I might be late to the party, but what exactly happened to Berkshire Hathaway’s stock with the trading glitch on June 3rd, 2024?

1:32
Was it hackers? How often does this actually happen in the history of the stock market?

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And would it have been at all possible to theoretically profit from this insane drop and rally? What happened to those traders who were short on Berkshire Hathaway?

1:44
Don’t ask me who would be, but it would certainly have been some kind of a profit there. The screenshot of the article I posted below shows that the stock dropped from $622,000 down to $185 a share before trading was halted.

1:56
It then soared as high as $741,941.00 within a few minutes of the trading session reopening.

2:04
Did Warren Buffett have anything to say on this matter and did he even care or did it even affect him at all?

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Super interested in this recent piece of recent stock market history. Keep up the good work and God bless.

2:16
Thank you boogie. OK, so Boogie brings up a pretty interesting question. It’s not something that you see happen a lot in terms of like a major company glitching like Berkshire Hathaway did and it wasn’t even really Berkshire Hathaway’s fault.

2:30
It was essentially. According to NYSE New York Stock Exchange spokesman said that there was a technical issue with the industry wide price bands that triggered trading halts on up to 40 list of symbols on the NYSE group exchanges.

2:42
I remember it wasn’t just Berkshire Hathaway, there was a number of others too that got affected by this. NYSE noted that those price bans are published by the Consolidated Tape Association’s CTA Security Information Processor, also known as SIP.

2:56
SIPCTA, an industry group, is responsible for publishing real time trade and quote data. CTA said it experienced an issue that may have been related to a new software release.

3:06
To fix the issue, the industry said it relied on secondary data center operating on the older version of the software.

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Dozens of stocks were paused earlier in the day, indication they traded outside of those so-called limit up and limit down bans.

3:18
According to the NYSE website. That list included Chipotle and Berkshire Hathaway.

3:24
So a couple of questions to answer here. He asked was it caused by hackers?

3:27
No, it wasn’t caused by hackers. It sounds like right here, according to this article by CNN Business, that it was from a software glitz from CTA.

3:36
What would happen to those traders if they were short on Berkshire Hathaway? I mean, for the moment, they would have showed a profit.

3:40
What happens a lot of times when you get those crazy moves in the market, they do what they call a break of it. They’ll break those trades and the N the NYSE will do it.

3:51
And essentially what it does is it cancels all of the trades during a specific period of time like they never happened.

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It’s kind of like right now I’m recording this podcast when the stock market’s not open, There’s no trades taking place.

4:04
When they’re breaking the trades, essentially that’s what they’re doing. They’re just canceling the trades as if the stock market wasn’t even open during that time period.

4:11
But then you do have people who actually got their orders filled on it and for good and bad, some people got really good fills, some people got really bad fills.

4:20
Now for the good fills, yeah, it was nice to have, especially let’s say you bought like 20 or 30 shares of that stuff.

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Man, you’re sitting on, you know, 10s of millions of dollars at that point. Cause Berkshire Hathaway trading at that time was like around $620,000 a share.

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So if you’re picking it up at like 189 or $900 a share or even like a couple $1000 a share, you’re gonna clean up once that stock price goes back up to its original old value.

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And so that’s what happened for a lot of people. The problem is, is when they break the trades, those trades never happened.

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They returned the capital to your account as if you had never made that trade in the 1st place. So a lot of people were doing it.

4:54
I remember seeing on social media, people are like, oh, are you trying to buy them? Like, no, I’m not trying to buy it ’cause I knew what’s gonna happen.

5:00
They’re not going to honor that stuff. God forbid a rich person loses a few bucks, right?

5:04
But I don’t know, maybe it’s like kind of like with guns. You always hear about people saying that, you know, if they ever get their guns outlawed, that they’re gonna say that they lost their guns in a boating accident.

5:11
I wonder if it’s the same thing for stocks. You could say I would love to give those shares back, but I lost my shares in a boating accident.

5:15
I mean, of course that’s a joke, but I mean, what if you bought and sold them at the same time?

5:23
I still think they would have cancelled them. I don’t, I don’t think it would have mattered at all.

5:27
I mean, that’s what I would have done. If I would have gone and filled on it, I would have waited for it to go right back up.

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I don’t care if it’s going up to 620 or 621 or 650 for that matter. If I’m going from $185 a share or $400.00 a share back up to 600,000, that’s at that point.

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It doesn’t matter if if you’re making a couple $1000 extra or not. So I would, I would be cashing out as fast as I could, but I would also be looking behind my back at the same time.

5:50
It’s like, OK, they’re gonna be coming for these shares.

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Somebody’s coming for them because again, you’re talking about one share representing like a $600,000 loss.

6:00
And not everybody who put orders in got filled. And it was just like a select few that got filled just by chance.

6:06
But from what I read, NYSE announced that it decided to bust or cancel all the erroneous trades for Berkshire Hathaway between 95951 at or below 603,700 and $18,000.30 a share, and that the exchange said that the ruling was not eligible for appeal and indicated it could not cancel other trades.

6:20
So notice how it says below. But there was also another problem too that took place. People were putting in market orders for this stuff.

6:29
Now remember, this thing goes right back up to its original price, right? But there was also a trading glitch to the upside where the stock went up to like I think a $741,000 per share.

6:43
Now look, if you go back and look at the chart from June 3rd of last month, you’ll see that the low of the day was $623,520 a share. There wasn’t any $185 per share, but what you did have was some fills that took place at $741,971,

7:04
which is like a / 120,000 dollars higher than where it closed the day at. So what do you think happened there?

7:10
Yeah, those were market orders that were getting filled. So when the market reopened and those orders were still out there and people were putting market orders in there thinking that they were only trying to get filled in the like 2 or $300.00 range and instead their system glitched and filled them at $741,000.

7:28
Look, most people don’t have enough equity in their accounts. I would say the large majority do not have enough equity in their accounts to even buy one share of Berkshire Hathaway.

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But then these people were taking on huge, I don’t even know how it got past the system, honestly, but they took on huge amounts of losses right out of the gate ’cause it goes right up, they get filled in the seven hundreds and it comes right back down.

7:49
Imagine that. Imagine how it ticked off. You would have to be thinking that you were trying to get filled at $700.00 a share, for instance, and instead you get filled at $700,000 a share and the stock comes right back down to 650.

8:00
Now you’re looking at like $80,000 in losses per share that they filled you on. And then next, how in the world did they fill you when you were breaking every margin requirement that there was?

8:10
Like I said, most people can’t get a fill of even one share of Berkshire Hathaway, and yet people were getting filled and they were taking on massive losses.

8:15
So then you read the articles about how Interactive Brokers, they took a $48 million loss on the whole thing.

8:23
Again, this wasn’t widespread where everybody was getting filled on this stuff and taking a massive losses, but there were some people taking some massive losses nonetheless.

8:32
Now check it out. You got it to where the shares dropped down to, you know, whatever dollars a share. And you probably had some rich billionaires that were getting cleaned out as a result of it.

8:40
So NYC is like, yeah, yeah, yeah, we’ll break those, we’ll break those. But the ones that went up to $740,000, I think our billionaires were able to sell some shares at incredibly high prices.

8:48
We we’re not going to crack those. We’re not going to break those trades. Nope.

8:54
We’re not gonna cancel em. We’re not gonna bust em.

8:56
Not at all. Those were not erroneous trades.

9:00
And so guess what? Those people have to eat em.

9:03
But it sounds like, from what I can tell, that Interactive Brokers lost $48 million because they decided to cover the customers trades after they asked for compensation.

9:12
So it sounds like IB had to take it on the chin. And that New York Stock Exchange says tough noogies, man.

9:20
We’re not paying for that. So it’s very weird to me that NYC was OK busting the trades of those that dropped below 603,000, but the ones that were going obviously way too high to the upside. OK, we’re going to why they not halted again, right?

9:36
I mean, you, you have no problem doing it with AMC or GameStop, but Berkshire Hathaway, you get the billionaires to be able to offload a few of their shares to some retail traders that didn’t have a clue to what they’re doing and they’re not gonna bust that one.

9:44
Kind of messed up when you really think about it, but in the end it sounds like the retail didn’t get penalized either. It was Interactive Brokers that had to eat the costs of it.

9:51
And honestly, that would have been a horrible 60 minute story for Interactive Brokers if they were making their customers eat that one.

10:03
Clearly it was a software glitch. I mean, seriously, you can’t have craziness like that going on because of a software glitch where prices are jumping from $185 up to $741,000 a share. I mean, it’s just absolute lunacy.

10:17
But what are some of the takeaways from this one? It does happen more than you think.

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I’ve seen plenty of glitches in the past. I’ve seen plenty of trades that get busted.

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This is probably one of the most notorious ones that you’ll ever find. But these things do happen, and they probably happen a little bit more than you expect.

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I mean, you can go on to a lot of charts and you’ll see these crazy shadows, upper shadows or lower shadows on the charts that had some wild price action.

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And then a few days later, they disappear because the trades got busted. But here’s the thing.

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It’s really not a way to try to profit in the stock market. I know a lot of people tried.

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In the end, what happened to people who tried either had your trades busted or you came very close to taking on a massive loss you’d never would recover from.

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The other thing too is just don’t get worked up about missing out on this. And another thing that you don’t want to miss out on is swing trading. the-stockmarket.com.

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Go to swingtrading.stockmarket.com. That’s the service that goes alongside of this podcast here.

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And with it, you’ll get all my stock market research each and every day. It’ll take you to shareplanner.com and you’ll be able to choose what service you want.

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But with it, you get all my daily watchlist. You’re going to get watchlist reviews, watchlist updates.

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At the beginning of each week, I send out my master bullish and bearish list of stocks that I’m following and that I’ll curate long and short setups from.

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Plus you’re going to get stock market updates and you’re going to get big tech updates as well.

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So it’s a really good value, really helps traders out from the feedback that I get.

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And so check it out, swingtradingthestockmarket.com. And in the process, you’re helping support this podcast.

11:48
So like I said, missing out on these events, yes, they don’t happen every day for the most part, they’re rare.

11:56
But yes, it happens more times than you think. However, the number of people I saw trying to put orders in for it, most of them didn’t get filled.

11:59
It’s really just a waste of time. And I think it’s a mindset.

12:06
The the history of these kinds of events are pretty fascinating, like boogie rights. But there’s a mindset that prevails on Wall Street about trying to find this like easy money.

12:14
Like it’s some kind of like ATM machine that you don’t even need a debit card for. You just tell it, hey, I want millions of dollars and it’s just gonna spit millions of dollars right back at you.

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It’s like you’re looking for a free handout, but instead, when you think you’re getting a free handout, you’re only getting more losses.

12:22
That’s what you’re seeing with the GameStop fiasco.

12:26
That’s what you’re seeing with AMC now. You’re seeing it with Chewy.

12:34
Yeah, I, I guess this past week, Roaring Kitty or Keith Gill, I guess he took a position and Chewy, the stock and everybody started piling into it.

12:41
It was like up over 20% in the pre market and then it finished way lower on the day.

12:44
I mean, why are they buying Chewy?

12:51
Were they gonna buy it the day before? No, they had no intention.

12:54
Some of them didn’t even know that stock even existed. And yet here all of a sudden they see Keith Gill buy it.

12:58
So I got to buy it. And why are they doing it?

13:00
You’re trying to get a free buck and you think that you can ride the coattails of Keith Gill in the process.

13:05
The problem is, is that Keith Gill doesn’t care about you. He’s making his own trades and you’re helping him get out of his own trades.

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It’s the same reason why people jump into penny stocks. They think that they can get rich quick off of those things.

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Yes, I do believe that trading can lead to wealth, and it does for people. But it takes hard work and it takes time.

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It takes dedication. It takes creating and developing a strategy and developing your craft and understanding about your risk and reward profile and your preferences and all of that.

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But you can’t do it just by, hey, I’m gonna go follow Roaring Kitty or I’m gonna try to buy Berkshire Hathaway ’cause it’s trading at 185 and somehow they’re gonna let me keep those shares. No.

13:41
And I also think too, that a lot of this mentality comes from the people that you see on Twitter. A, a lot of the people that I will, will look at and so forth, just sometimes out of curiosity, sometimes because I respect their opinions.

13:51
And others are like these that they’re, they’re heavy spammers. They look like they never have a losing trade. And honestly, ask yourself, is, is this person so good that I’ve never seen him have a losing trade?

14:05
Then he’s a fraud. That that’s what it comes down to if, if they can’t express the fact that they have a losing trade and all you ever see them talk about is they’re winning trades, they’re a fraud.

14:12
Cause nobody’s batting 1000 in this market. I would venture to say hardly anybody’s even batting 70% in this market.

14:19
And the stock market in general is what I’m talking. It doesn’t mean that you can’t have periods where you’re on a hot streak or whatever.

14:23
But in general, if somebody’s not posting their losses in terms of like all you do is seems like, oh, you should have bought one.

14:30
I recommended Chipotle at $100. Oh, you should have bought Apple when I recommended it at 180.

14:35
Oh, you should have bought NVIDIA when I recommended it at 60. If that’s all they’re doing and they’re only highlighting their winning trades, I got news for you.

14:43
They’re frauds. Now I I really don’t spend much time highlighting winning or losing trades for myself on social media.

14:48
One is because I’m focused on the stock market during the day and I just don’t really have time to go and highlight different trades for better or for worse.

14:52
The other thing is that I don’t do what a lot of these people do. Yes, I come up with watch lists and stuff, but there’s a lot of stocks in my watch list that I won’t take during the course of the day, either because of market conditions or or because I have some reservations about taking that trade.

15:05
But then there’s times where those trades will skyrocket.

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I had one on my master bullish watch list. It was ENVX. I saw that it had a little rising trend line going back to April and it was holding it and then it it test it pulled back to it and started testing it for a couple days. It didn’t necessarily say to myself, oh, this is a good bounce play.

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I’m gonna go ahead and buy into it. But guess what it did?

15:29
That’s a good piece of news. It went from one day where it closed from AT12O four and then the following day it went as high as 1712 and closed the day at 1626.

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An incredible move, like a 30% move.

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Now I could have gone on to social medias like, oh, look at my watch list. Look at you could have, I didn’t say a word about it ’cause I don’t have any.

15:48
I, I didn’t benefit from that. It was on my watch list.

15:51
But watch lists alone aren’t going to make you money unless you actually act on them.

15:58
But you’ll have a lot of people that they, and this is, this is like their secret sauce. This is how they build themselves up on Twitter and stuff is that they will go and have like 70 stocks on their watch list, which there’s nothing wrong with that, but they’ll take that watch list and they’ll look for the big winners.

16:08
Like, oh look, I sent this out to my Subs. They, they knew to get into it ’cause I had it on my watch list. No, you didn’t.

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So you can tell it kind of annoys me. But again, remember too that I’ve been on Twitter probably since 2009.

16:22
And so I’ve seen these people come and go and they always burn out. I mean, it’s always a new crop of people that are claiming how great they are at trading.

16:28
But anyways, that mindset, though, creeps into the minds of a lot of people. And, you know, they’ll either follow them in their trading and then they’ll get, you know, completely discouraged because they’re not making the millions of dollars that they were promised by these people or the person themselves just blows up.

16:44
There was a guy just about maybe like six months to a year ago that admitted that I guess in a moment of honesty, that he blew up his entire account and now he’s out there selling stuff again, acting like it never happened.

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Now, I’m not gonna go and say his name or who he is just because I really don’t feel like creating Twitter drama.

17:01
I’ve had some of that in the past.

17:04
I don’t need it anymore. There’s a reason why Jim Cramer blocked me on Twitter.

17:08
Anyways, all that’s to be said, you go back to the events surrounding the trading glitch behind Berkshire Hathaway.

17:16
Is it fascinating history like Boogie inferred here? Yes, it’s absolutely interesting stuff.

17:23
Did Warren Buffett care about it even going on? Was he really that worried about?

17:27
I don’t think he was worried. Yeah.

17:29
Forbes dropped his net worth, I think by $136 billion on their website at one point. And yeah, I’m sure he probably got on the phone and talked to some people about it, probably expressed his irritation with what was going on.

17:38
But in the end, I don’t think he was worried about some idea that he was going under from it.

17:46
But remember, these kinds of events aren’t worth getting yourself worked up about or trying to to profit from, because you’re really just trying to profit from a glitch.

17:55
And if it’s a true glitch that benefits you in the end. It’s kind of like, for instance, if if you wake up tomorrow morning and $10 million was deposited into your bank account, is that money in your account? Yes.

18:06
What’s going to happen to you, though, if you go and spend all that money? You go buy yourself a big old, you know, mansion in Malibu, and you go and buy yourself a couple Lambos.

18:15
And then all of a sudden the Fed finds out that there was a glitch of $10 million that was deposited in your account, and you haven’t said nothing. What are they going to do?

18:23
They’re going to arrest you. Now, this is a little bit different. You’re kind of waiting for them to decide whether or not they’re going to honor those trades or not. But in the end, yes, the money might have made its way to your account, but they’re going to take it right back.

18:33
And yes, they will follow those kinds of moves. When somebody’s making $600,000 on that trade, somebody’s also losing $600,000 on that trade. And you can be darn well certain that they’re going to figure out who made it at the expense of they’re very rich clients.

18:48
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18:54
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19:15
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19:18
I will make sure to keep it concealed with a good Florida redneck name. Thank you guys and God bless.

19:24
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19:32
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19:39
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19:56
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