I am marvelling at the scale of the virtual disaster: the Dow Jones industrial average had it's biggest plunge since 9/11, and financial analysts are scrambling to explain it. There is this fascinating passage from the AP story:

When the Dow Jones industrial average plunged to its low of the session Tuesday, it happened with incredible swiftness — a matter of seconds — because of a computer glitch that kept some trades from being immediately reflected in the index of 30 blue chip stocks.

Dow Jones & Co., the media company which manages the flagship index, said around 2 p.m — just two hours before the New York Stock Exchange was to close — it discovered computers were not properly calculating trades. The company blamed the problem on the record volume at the NYSE, and switched to a backup computer.

The result was a massive swoon in the index that happened in the seconds it took Dow Jones to switch to its secondary computers.

I am not buying the seat-of-the-pants explanations. (Let's not even get into a discussion of whether the Cheney thing had anything to do with it.) They can explain why the Dow went down, but not why it did this.

My pet theory is that the large-scale preprogrammed selling requires feedback to function properly, and that the glitch in communications was key, in that it interfered with any braking systems built into the software.

(I personally plunged about $3,500 into the market the first day of trading after 9/11 to help save the market from a crash. I ended up making money on the investment, though that was not what I anticipated.)