A New Force in Markets

The Internet is changing how we buy and sell.

More breathless Net-hype?

No. Just a realistic assessment of change. Here are two recent personal experiences that illustrate the change:

  • A Stock Market Crash

At the market close on October 19, 1987 one of my compatriots went to the Dow Jones tele-type machine and scrolled through yards of paper with stories and updates from the day. Then she carefully cut out the figures for the close. She also cut out stories with the incredible statistics of the day. The Dow Jones Industrial Average had fallen 508 points, 22.6 percent. The decline exceeded the 12.8 percent crash of October 28, 1929. Trading volume was an unbelievable 604 million shares, a figure everyone knew was smaller than what people had wanted to trade.

It was History.

We knew it was a big day and a big story. We also knew that trading volume was so high the system had started to break down. People who wanted to buy or sell couldn’t reach their brokers. Investors who had on-line accounts couldn’t get through no matter how hard they tried. Even in a well-wired news room, getting information was frustrating.

That was eleven years ago.

This August was very different. When the bottom fell out of the market on August 27th, I wasn’t in the news room. I was taking a working vacation in Santa Fe, New Mexico, using a laptop and the Internet to communicate. As the market fell I checked the amount of cash in different accounts. I re-examined a short list of investments I had been thinking about making, concentrating on bandwidth technologies and biotechnology. I went to websites like Bloomberg.com and Microsoft Investor.com to see how much the market had fallen and what had fallen most.

Then I clicked to Schwab and checked a retirement account that I manage for a friend. I placed a buy order for a deeply discounted closed end fund, still leaving more than 20 percent of the account in cash. The order was filled in seconds.

It was just as fast at Fidelity where I keep my taxable and tax deferred accounts. My two buy orders were filled in seconds.

By the close, 935 million shares had changed hands on the New York Stock Exchange, the second highest in history, and the Dow Jones Industrial Average was down 4.2 percent. Small stocks were down more. Nothing had broken down, and everyone was ready for the next day. To be sure, August 27 wasn’t as big a day as October 19, 1987.

But it was a very big day. And anyone, anywhere, could buy or sell.

What made the difference?

The Internet and the World Wide Web. Now one phone call connects you to the entire world. It doesn’t matter where you are, what time it is, who you are, or the size of your account. Investing will never be the same: It will be better, particularly for the small investor.

  • The broader marketplace.

In August, I decided to sell one of my motorcycles, a classic 1973 BMW “toaster tank.” Traderonline.com is a website that has massive listings for motorcycles, classic cars, conventional cars, recreation vehicles, and airplanes. How massive? Try selecting from an inventory of 25,521 motorcycles.

I posted an ad, free of charge, and waited. Carl Jensen from Sacramento, California responded. Did I have photos?

I took photos with a digital camera and sent them to his e-mail address.

He bought the bike the next day, by phone.

To complete the sale, we agreed to meet at Albuquerque airport. I would ride the bike, from Santa Fe to Albuquerque and meet his flight from Sacramento. We met, examined the bike, traded pieces of paper, and Carl roared away, intending to be in Sacramento by Sunday night.

A thoughtful young man, he called Sunday night to let me know he had arrived safely—and loved the bike.

I bet Carl bought his Southwest Airlines ticket on the Internet, too, just as I did.

It’s a new marketplace.


This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.


Photo: Andrea Piacquadio

(c) Scott Burns, 2022