Your tax dollars at work

We learned from the Florida Keys tourism council that tar found on beaches in the Florida Keys beaches "do not match the type of oil from the Deepwater Horizon oil spill."

To determine where the tar in question came from, the council tells us, "tar balls discovered on beaches at Fort Zachary Taylor State Park, Smathers Beach in Key West, Big Pine Key, Fla., and Loggerhead Key in the Dry Tortugas National Park, Fla. were flown by a Coast Guard HU-25 Falcon jet based in Miami to New London, Conn., Tuesday for testing and analysis."

Using a military jet to deliver tar to a lab? Have they never heard of FedEx? Did they absolutely, positively, need those results at the speed of sound?

It seems that ships passing through the busy shipping lanes near the Keys often shed oil. Still not a pleasant thought. But where the tar came from is secondary. Clean the beach first, then figure out who gets the bill.

About the Photo: U.S. Coast Guard photo by Petty Officer 3rd Class Patrick Kelley. The mobile offshore drilling unit Q4000 (near) holds position directly over the damaged Deepwater Horizon blowout preventer, May 18, 2010, as the drillship Discoverer Enterprise burns gas from a tube in the ruptured drill pipe.

Putting on the brakes

The guys at Planet Money interviewed a college professor who goes into detail about how automated market orders led to a self-feeding frenzy. Part of the problem is that when the New York Stock Exchange paused to see what was happening, trades moved to other exchanges where bids were lower.

After meeting with the exchange executives today, Securities and Exchange Commission Chairwoman Mary L. Schapiro is scheduled to testify at a House subcommittee hearing tomorrow about what the industry will do to stop this happening in the future.

SkyNet storms Wall Street

Yesterday's wild market ride -- in which stock prices fell into a "black hole" for a few heart-stopping minutes -- appears to have been caused by "black boxes."

Unlike an aviator's black box, which records what has happened, an investor's black box decides what's going to happen. Algos, or trading algorithms, allow investors to program computers to buy and sell when certain conditions are met. For more on algos, see here and here.

For example, if your box was programmed to sell Proctor & Gamble at $58, that would have been triggered yesterday at about 2:45 p.m. Off go however many shares of P&G you held.

Now imagine that happening across whole mutual funds, many of which are index funds that track the whole Dow Jones or S&P 500 indexes. That's how the whole market moved so fast in the same direction.

Thursday's dive seems to have been triggered by an error, but that error led to a series of computer-generated trades that fed into each other until they reached critical mass. The New York Stock Exchange -- which is responsible for less than a third of stock trades in the country -- halted trading briefly, and that seems to have been enough to stop the collapse before it could devour the entire S&P 500.

Buy orders may also have stopped the free-fall, and I would not be surprised if some of the same boxes that had sell orders at one price also had buy orders at a lower price.

Anyone whose black box sold P&G at $58 at 2:45 p.m. only to buy it back five minutes later at $54 made $6 a share today, when P&G closed at $60.

That math has some conspiracy theorists accusing traders of rigging the market. But I agree with Barry Ritzholtz here: There is no need for panic.

But we do need to keep an eye on those black hole boxes.