Having worked for one of the (smaller) big firms, and had a chance to watch from the sidelines and seen how days like this work: No, these circuit breakers don't screw the regular guys. They discourage the regular guys from screwing themselves.
There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doing it, too.
> They discourage the regular guys from screwing themselves.
If you're a little guy who believes that, say, 2019ncov is about to tear the world a new asshole, that's probably a decision you'd like to make for yourself.
I don't doubt what you're saying, but it's a matter of perspective. Sometimes the "panic" is the correct reaction. We're sitting on top of a perfect storm which is shaping up to be a massive potential black swan. And with the current circuit breakers, trading is only interrupted for something similar in concept to "the 99%".
Across all indicators, too! Oil price, US markets, international markets, t-notes, gold price, and a bunch I'm probably not aware of because I'm not a professional investor. China just shut it's economy down for two weeks. Long term outlook is rightfully poor.
Panic is almost never the correct reaction. Deciding that there's going to be a downturn and you should prepare yourself for it financially is one thing, but under what circumstances would it be optimal for you as an individual to panic-sell?
In my mind, panic is the thing you do when you realize that you haven't prepared. That you don't have enough resources for an extended downturn, that you're financially over-leveraged, and that you are in danger of losing your home and being unable to feed yourself and your family. There are TONS of people who are experiencing this right now in China and Italy, and many others of us who will be experiencing it the next few weeks in the rest of the world.
But panic also implies that you don't have time to fix that, and there's nothing you can do as an individual to change it. If that's the case, you probably don't have a lot of investments in the stock market anyway. Or if you do, and you're over-leveraged in the markets because you were gambling with your money instead of investing with it, then yes, you're panic-selling right now.
Panic sell is the correct thing when your doctor gives you a short time to live. Since your money will be worthless no matter what happens you may as well get it all now and spend it on whatever can buy a moment happiness.
There is an exception if your religion lets you take your stock with you. I don't believe in one, but I guess if you want to.
But that exactly is one of those fallacies. If 2019ncov "tears the world a new ..." then your shares are going to be worth about the same as bills in your hand: nothing. Nobody will seriously risk their health for money.
And what's the rational thing to do in such a case? Let's say you're at a poker game. And you have a deal: you lose, you get shot, you win, you get your winnings. What is the rational thing to do?
You should go all-in. It is one of the very few cases it is actually rational to do that.
There are a lot of firms whose core business strategy is to keep a level head and take advantage of people who panic and (over)react on days like this. They get damn rich doing it, too.