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MarketWatch Calls Out Fed To Disprove It Is Manipulating Index Futures

Tyler Durden's picture




 

A week ago we presented the observations of TrimTabs' Charles Biderman, who laid out a logical case for why there is significant circumstantial evidence that the Fed is manipulating markets by purchasing index futures in the aftermarket: "One way to manipulate the stock market would be for the Fed or the
Treasury to buy $20 billion, plus or minus, of S&P 500 stock
futures each month for a year. Depending on margin levels, $20 billion
per month would translate into at least $100 billion in notional buying
power...This type
of intervention could explain some of the unusual market action in
recent months, with stock prices grinding higher on low volume even as
companies sold huge amounts of new shares and retail investors stayed
on the sidelines. For example, Tyler Durden of ZeroHedge has pointed
out that virtually all of the market’s upside since mid-September has
come from after-hours S&P 500 futures activity." Today MarketWatch has an open appeal to the Fed to put Biderman's allegation to rest by publicly disproving that it is involved in any direct market manipulation. "Biderman's accusation of PPT market manipulation is another argument
in favor of a complete public audit of the Fed's books...there is a widespread
belief that the PPT does manipulate stock prices on a daily basis to
enrich its pals and screw individual investors.
It would be useful to prove them.

" We couldn't agree more.

Here is a summary of MarketWatch's Washington Bureau Chief thoughts on the issue:

Charles Biderman, chief executive of TrimTabs Investment Research, is
the latest and most credible person to charge that the Federal Reserve
and the Treasury (in league with top Wall Street firms) is rigging the
stock market on a daily basis.

In a special report released Tuesday, Biderman said the $6 trillion
increase in U.S. stock-market capitalization since March can't be
explained by the usual sources of funds flowing into the market -- such
as mutual funds, direct retail investment, pension funds, hedge funds
or foreign purchases.

The only logical explanation for the extent of the rally, he suggested,
is secret buying by a government committee known colloquially as the
Plunge Protection Team. It's like the dark matter that astrophysicists
conjecture must be there, even if we can't detect it.

The PPT was established by President Ronald Reagan in 1988 after the
1987 stock crash to coordinate the government's response to market
meltdowns. It consists of the Fed chairman, the Treasury secretary, the
head of the Securities and Exchange Commission and the head of the
Commodity Futures Trading Commission.

And while direct confirmation of PPT actions would be in a legal gray area, and maybe not result in the immediate incarceration of all those at the Federal Reserve and ancillary Wall Street firms who are aware of this activity, "doing so would likely violate the Federal Reserve's investment policies, and could violate federal law if not disclosed properly."

While non-circumstantial evidence of the PPT is still missing, numerous truth seekers have made their life pursuit to catch the Fed red handed in what will likely be the biggest piece of financial journalism ever, when disclosed. Alternatively, Bernanke can go on the record and confirm that he does not know or participate in any Fed-sponsored or directly initiated (choice of words here is very critical) purchasing of equity securities. Somehow we don't think we will hold our breath on that one.

h/t Mike

 

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Tue, 01/05/2010 - 19:46 | 183586 Jesse
Jesse's picture

 

It is more likely, in my opinion, that if this is occurring the Treasury is doing this through a bank, like JPM, rather than the Fed.

The Secretary of the Treasury is the chair of the Working Group on Markets, and the funds to undertake this program would most likely originate in the Exchange Stabilization Fund which is very private.  I don't think any group has oversight of their disbursal of money.

So, Bernanke can easily claim no direct knowledge, and an audit of the Fed might very well show nothing.

Tue, 01/05/2010 - 19:49 | 183598 GoldmanSux
GoldmanSux's picture

Agreed. Bernanke was asked this question directly under congressional oath.

Tue, 01/05/2010 - 19:57 | 183613 Careless Whisper
Careless Whisper's picture

A bunch of lyin' crooks. The Fed is redistributing the wealth from the taxpayers to the bankstas. They have been doing that since 1913.

LA Times editorial: Ron Paul's loopy ideas now making sense

http://latimesblogs.latimes.com/washington/2010/01/ron-paul-republican-party-federal-reserve.html

 

Wed, 01/06/2010 - 01:57 | 183952 El Hosel
El Hosel's picture

The Fed,GS,JPM,Bernanke, the PPT.... Lump them all together, call it what you want. I like to call them all the "DRTYFRKRS", it has a nice ring.

They are "making" the markets for now, reality and history will re-make all of it.

 

Wed, 01/06/2010 - 10:51 | 184244 Anonymous
Anonymous's picture

Agreed. It's completely f*cking asinine to waste time discussing which blood-sucking entity is actually used to try and disguise this fraud.

What do you expect them to do? - take out a full page spread in the WSJ listing who, when, why together with the guy's name who actually places the trades? Good grief!

Wed, 01/06/2010 - 10:54 | 184252 Anonymous
Anonymous's picture

Agreed. It's completely f*cking asinine discussing which blood-sucking entity is actually used to try and disguise this fraud.

What do you expect them to do? - take out a full page spread in the WSJ listing who, when, why together with the guy's name who actually places the trades? Good grief!

Tue, 01/05/2010 - 19:51 | 183600 Screwball
Screwball's picture

Ding, ding, ding - http://www.youtube.com/watch?v=Mx6utkFnMGo

About 6 minutes in.

Tue, 01/05/2010 - 19:56 | 183612 Tyler Durden
Tyler Durden's picture

Alvarez never explicitly said the Fed (through the 33 Liberty op or otherwise) does not have any interference in futures trading. As noted in the post, exact phrasing, when dealing with career lawyers is critical, and alas Grayson did not narrow his question enough.

Tue, 01/05/2010 - 20:03 | 183617 Screwball
Screwball's picture

Understood, thanks Tyler.  But he does finger JPM.  Not a lawyer, but I remembered the exchange.  Just trying to help.

Tue, 01/05/2010 - 20:33 | 183637 ZerOhead
ZerOhead's picture

Loved the link BTW... took Grayson 53 seconds of waterboarding Alvarez before he coughed up JPM at 7:13... I love that guy!... thanks Screwball!

Tue, 01/05/2010 - 20:35 | 183653 Cognitive Dissonance
Cognitive Dissonance's picture

"I was not aware........"

"This was not brought to my attention......"

"I would have no way of knowing........."

As Tyler said, it's all about what the word "is" is and the 10 million derivations of the word games lawyers are paid big bucks to play. It's often a rigged game, in that the questioner is in on the fix and structures the question in such a way that it sounds like it's hard hitting. But it allows the answer to be phrased in a way that allows the train to pass through the mouse hole with room to spare.

This is one of the reasons Washington, and especially Congress when in session, play the extremely polite-to-each-other game. In this atmosphere, it would be extremely rude to directly question anyone with the intent to remove any wiggle room. Plus, if you let me go this time, I'm play ball with you when your ass is on the line.

Grayson did know, or should have known, how to phrase the question to force a direct answer. The fact that he did not speaks volumes.

The Potomac Two Step. 

Tue, 01/05/2010 - 21:02 | 183690 Anonymous
Anonymous's picture

Is Alvarez right-handed or left-handed?

If Alvarez is right-handed there is a better than 50/50 chance that the gold the Federal Reserves lists as being in it's ownership and possession is NOT there.

http://www.blifaloo.com/info/lies_eyes.php

The critical moment is at exactly 5:51 when Alvarez shoots his eyes up and to the left (our left). It is the most exceptional gesture he makes under questioning. Check it out... anybody?

Tue, 01/05/2010 - 21:13 | 183702 ZerOhead
ZerOhead's picture

I've got a double post coming up guys... sorry...

Does anyone know if Alvarez is right-handed or left-handed?

According to this information right-handed people who lie look up to the left (our left) when thinking up or telling a lie. The process is called visually constructive imaging...

http://www.blifaloo.com/info/lies_eyes.php

Grayson asks Alvarez if the Federal Reserve has possession of all the gold it has on it's books. At exactly 5:51 Alvarez takes a second to ponder and unlike any other moment stares high and to the left before he answers in the affirmative.

So if he's right-handed you may want to pick up just a little more of the shiny stuff... just sayin'...

Tue, 01/05/2010 - 21:25 | 183719 Cognitive Dissonance
Cognitive Dissonance's picture

Brings new meaning to the term "those lying eyes" doesn't it?

I was going to say, check to see which of Alvarez's hands are calloused. But in circle jerk Washington, both hands are calloused. Brings new meaning to the term "ambidextrous" doesn't it?

Tue, 01/05/2010 - 21:41 | 183738 ZerOhead
ZerOhead's picture

Don't want to get a 'bend' in the shaft now do we?

Water bottle says right... glasses say left... take your pick...

Tue, 01/05/2010 - 22:55 | 183806 loki
loki's picture

He is right handed.  See this clip http://www.youtube.com/watch?v=mXmNpdYpfnk&feature=related  at 00:04.

Water bottle: right hand.   Glasses: right hand (right handed folks remove glasses w/LEFT hand so they can wipe them with the right hand.   But pen in right hand is the give away... unless he is ambidextrous, then r hand dominant ambi.

Look for watch,  on Left for R handed, on Right for L handed.   etc etc.

Tue, 01/05/2010 - 23:53 | 183831 ZerOhead
ZerOhead's picture

See lower... I jumped the gun... maybe... good video shot BTW!

Wed, 01/06/2010 - 00:26 | 183882 WaterWings
WaterWings's picture

Awesome, if not for the comedy! You guyses noticed Grayson's tie, no? Zing! Not the first time he's worn it. It's his grillin' tie. But I think he's trying to co-opt RP.

Wed, 01/06/2010 - 00:46 | 183898 ZerOhead
ZerOhead's picture

Now that's a tie!

Tue, 01/05/2010 - 22:57 | 183809 merehuman
merehuman's picture

signing documents, autograps gives testimonity of left or right hand

Tue, 01/05/2010 - 23:17 | 183827 knukles
knukles's picture

He definitively answers in the affirmative as to the ownership of the gold.  The micro expression under examination has to do with the question put forth as to whether the GAO has ever audited such.  Further, he unequivocally states that independent auditors in fact do so. 

However, is he therein referring to the gold held on behalf of other nations at the FRBNY or the US balance sheet gold held in Ft. Knox?. 

That is the question, for the FRBNY vaults would be required to be audited by the depositors.  To my knowledge, nobody of an independent nature has access to Knox for physical audit count or assay integrity of the bars. 

Wed, 01/06/2010 - 00:48 | 183829 ZerOhead
ZerOhead's picture

Yup... you're right...

So the potential 'lie' would be ensconced in the statement he "believes the GAO has the authority to audit the gold... (doesn't say if they have so they probably haven't)... but goes on to say the Feds "independant accountant" is capable of verifying the golds presence and does"

And somewhere in there probably lurks a lie.

And we still know nothing of the ownership of said gold.

That clears everything up doesn't it.

Tue, 01/05/2010 - 21:13 | 183703 DaveyJones
DaveyJones's picture

+100

Tue, 01/05/2010 - 20:24 | 183640 GoldmanSux
GoldmanSux's picture

Agreed. Look at Bernanke's body language when answering the question. He answers so quickly in the negative that my first thought was, he knows who's doing it. More specific questions are definitely in order.

Tue, 01/05/2010 - 20:52 | 183679 deadhead
deadhead's picture

As noted in the post, exact phrasing, when dealing with career lawyers is critical, and alas Grayson did not narrow his question enough.

Bernanke's response to Sen. Bunning fits this bill as well.  The response was very carefully parsed and certainly open to interpretation.

Our incompetent Congress has all the power in the world to get to the bottom of this but unfortunately, it is likely that they won't.  It is possible that the day will come but it is more than likely it will be in the aftermath of an enormous implosion in our financial system.  The USA power structure simply will not proactively take reasonable steps to solve problems if it causes even the slightest amount of pain: only a flow blown crisis will prompt any action, most of which will involve enormous efforts of wagging fingers back and forth between Dems and Repubs.

The USA is past its peak, no question about it.  At this juncture, the question is how long until we find ourselves on the trash heap of busted civilizations. 

Tue, 01/05/2010 - 21:12 | 183700 DaveyJones
DaveyJones's picture

Corruption induced incompetence. I'm with CD. Covering each others asses, like priests in a child inquiry

Wed, 01/06/2010 - 00:18 | 183877 Oracle of Kypseli
Oracle of Kypseli's picture

Why don't we all arrange our finances as if there is no gold?

Isn't that a safer bet?

Tue, 01/05/2010 - 21:17 | 183709 10044
10044's picture

this clip is just a masterpeice, Grayson bombards the bastard. Hysterical, I fell out of my chair watching it, and I've watched it over 5 times.

Just fantastic

Tue, 01/05/2010 - 20:39 | 183656 Scooby Dooby Doo
Scooby Dooby Doo's picture

Agreed. It's a non-issue. Put this puppy to bed. You'll never discover the real truth. And poking around may upset months of work put in to find a few of the gang. IYKWIM.

Wed, 01/06/2010 - 01:02 | 183913 Oracle of Kypseli
Oracle of Kypseli's picture

But since we all know it or it is say, 90% apparent that the PPT is buying, what difference does it really make?

Wed, 01/06/2010 - 01:01 | 183917 Oracle of Kypseli
Oracle of Kypseli's picture

dupl

Wed, 01/06/2010 - 09:53 | 184174 Cursive
Cursive's picture

Brilliant, Jesse.  The last thing we need is to develop a hypothesis that can be easily refuted.  Maybe it's the FRB, maybe it's a Treasury-sponsored bank or hedge fund.  There has been talk of a "Reston 6".  The audit/investigation can also look into these strange bearer bond episodes such as the one on the Italian border....

Tue, 01/05/2010 - 19:44 | 183588 Mongo
Mongo's picture

Nothing to see here.. move along now

Tue, 01/05/2010 - 19:52 | 183603 koaj
koaj's picture

marketwatch cares about the Fed all of the sudden? clicks must be low

 

 

Tue, 01/05/2010 - 19:56 | 183611 carbonmutant
carbonmutant's picture

Either that or they have employed someone to do God's work.

Tue, 01/05/2010 - 20:04 | 183614 Charles Mackay
Charles Mackay's picture

The Exchange Stabilization Fund is under the joint control of the Fed and Treasury.  I believe there is some type of system where investments the ESF makes are shared and equal between the Fed/Treasury.  The Fed's investments in the ESF should appear in the "other investments" line of the Fed balance sheet.  While that amount has risen by about $52 billion over the last year, a good portion of that is accounted by the purchase of various toxic assets when the financial system was collapsing.

It's also possible that the Treasury side of the ESF is buying stocks without the Fed.  While I am not a legal expert, it does appear that the ESF has the ability to buy almost anything - therefore I think Marketwatch wrong about the legal ramifications. Unless there is outright fraud here somewhere, the actual amount of money invested in the market could not have exceeded $40 billion - and that is a very high guess.   More likely, the amount actual committed to the market would be much less.   Still with leverage, a cumulative investment $20 billion in futures could have bought $200 billion in notational value of stocks.  That's quite a chunk, but unlikley to be increased much more. 

P.S. This is not my guess, but only a possibility of what could have happened.  

Tue, 01/05/2010 - 20:04 | 183619 Rainman
Rainman's picture

A $ 6 trillion market cap funds flow that can't be traced to the usual suspects.......??

Never underestimate the cast iron balls on the Boyz behind the curtain.

They could buy France with that much fiat currency.

Tue, 01/05/2010 - 20:05 | 183621 Waterfallsparkles
Waterfallsparkles's picture

I have been trading for years and it is so undeniably evident.  I have never seen a Market like this one.  No matter what the news the Market creeps back up to even.  Day after grinding day for the last 11 months. It is beyond comprehension.  Even the Floor Traders have cashed out and are not Trading. I think Art Cashin on CNBC said he cashed out in October.

China is directly buying Oil, Gold and Copper and I have my suspicions that the Fed is buying Oil, Gold and Copper stocks. This way they can own the commodity without drawing suspicion.

It is impossible to day trade as there is no volitility.  Looks to me like the Fed has eliminated the daytraders entirely.  This helps to keep the Market stable and protect their investment in the Futures or Stocks they have purchased.  As I am sure the Fed is not used to any kind of volitility in their investments.

Between the FED buying Futures all day long an the HFT Trading this is not really a Market in my opinion.  Just a form of Price Fixing as there is no real discovery of price if the Market is artificially proped up from an outside source (FED) and then maintained by the HFT Computers all day.

Tue, 01/05/2010 - 20:16 | 183630 john_connor
john_connor's picture

Well said.  Speaking of manipulation, look for the run up to continue to the State of the Union where the allmighty will declare things allright.  Then add another week for good measure, and we might have a few 0.5% down days.

Tue, 01/05/2010 - 20:32 | 183647 Waterfallsparkles
Waterfallsparkles's picture

What helps it appear like the FED is buying Futures is the CONSTANT Gap Up everyday. I have never seen the Market Gap Up so consistently without any news or reason. Then of course the HFT maintains the price the entire day.

I also have never seen a situation where the Market literally flatlines every day until about 3:45 PM.

No matter what anyone says the Market is not behaving in a normal manner.

Tue, 01/05/2010 - 20:55 | 183681 Screwball
Screwball's picture

Agree.  I'm no expert by any means, but how many times when it looks like the market is going to take a nice dump, you see these big green candles pushing it right back up.  I've watched it hundreds of times it seems.  Maybe that's normal, but it sure seems funny.

March 10th ( A Tuesday, after a nothing Monday but still the closing low.  The 6th was intraday low of 666) when it all started, was the leaked internal memo from Citi to Bloomberg "Pandit Says Citigroup Having Best Quarter Since 2007" - http://www.bloomberg.com/apps/news?pid=20601087&sid=a9Qw3.AHut7g - so it started out as bullshit too.  But that was good for +379 on the Dow that day and we were off to the races.

For the technical guys, since March the rally has defied every Bearish flag/signal it has encountered.  There has been 3 or 4 Bearish candle patterns and the head & shoulder pattern of July, specifically the 13th.  Futures were down -18 on the Dow at 8:00, then around 8:50 Merideth Whitney was on CNBC and upgraded Goldman, and we were off to the races again.  The techs were waiting to see which way to go off the 875 neckline. Shorts got whacked again.

Tue, 01/05/2010 - 22:59 | 183810 loki
loki's picture

my shorts got burned off.... I'm finally, 90 cash, 5 s&p, 5 gold.  Burned enough....  I'd like to sit out this ass-fucking but my ass is too burnt.

Tue, 01/05/2010 - 20:07 | 183623 Anonymous
Anonymous's picture

Well the ESF sure as hell wasn't using its firepower on supporting the dollar last year...

Tue, 01/05/2010 - 20:14 | 183624 Scooby Dooby Doo
Scooby Dooby Doo's picture

I know... But maybe a little late for this now, no?

Meredith cuts Goldman Sachs estimates again
http://www.cnbc.com/id/34708807

Doesn't she know where Lloyd was in December?
http://i49.tinypic.com/2lwn8yf.jpg
http://i47.tinypic.com/260sby9.jpg

For pricing inquiries on our Bubble Machine software (Nation Builder Edition) please contact Mr. Faryar Shirzad.

Tue, 01/05/2010 - 20:10 | 183625 whacked
whacked's picture

"non-circumstantial evidence of the PPT is still missing"

 

And no doubt will continue to be the situation.

 

Do not fight the Fed.

 

"Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole." His statement has been used to claim that the Fed actually did act in that way. Mainstream analysts call those claims a conspiracy theory, explaining that such claims are simplistic and unworkable"

http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets

 

Cannot see Paul's audit bill becoming legislation. If it passes the Senate then Obama will veto it. Money dictates who is in power, not morality nor ethics.

Tue, 01/05/2010 - 20:52 | 183678 Rainman
Rainman's picture

Heller's analysis is only productive if market credibility does not undergo long term irreversible damage.....which is fast becoming the case.

When the Dot Com bubble burst, Nasdaq returned to half its top end valuation and remains in that range to this day. Fantasy was washed out of that market.

Uncle Sugar's Cash 4 Equities program is an ariticial fantasy as well. It is not a strategy. It is a scheme that generates unsupportable valuations through artificial demand . Just like the banker buy-ups of equities in the early 30s. When manipulated demand was revealed and ceased ( AFTER the looting, of course ), market confidence evaporated and the equity sector tanked for a very long time.

How can this end any way but very badly ??

We damn sure need to audit the Fed.

Tue, 01/05/2010 - 20:27 | 183644 Anonymous
Anonymous's picture

I think there is a way to extract that info. I am sure there are many hedge funds who suffered losses due to shorting the market. they might have a legitimate reasons for a class action suit against the FED. there is no ban on shorting,and yet if it is true that an entity with an unlimited resources is secretly your opposing trade,then for sure you will always be the loser. But that is for the big money to go after them. The alternative would be to publicly ban short selling and announce to the general public that the FED would be actively intervening in the market. In all cases,economically(aside from profit or loss for investors),the general economy will not benefit from that kind of monkey business. Look at it this way:From 2007-2009,there was nothing but money transfer from long to shorts first,and then from shorts to longs later. What was the actual growth for say GE when its stock was at $30-$6-$15?So basically,and beside Wall st. companies,the general economy is not going anywhere,whether the s&p=600 or 1200.

Tue, 01/05/2010 - 20:32 | 183646 Johnny Dangereaux
Johnny Dangereaux's picture

Maybe we can even have different models of guillotines...the 'Marie' for the small ones and the 'Robespierre' for the big ones.....

In a metaphorical sort of way of course!!

Did you know silver kills germs? Yes, it's an Anti-Microbial

Perfect thing to be passed around from person to person.

Oh yeah, and it rallied a buck in 2 friggin days...go figure!

(I am hitting my button now like kramer)

BUY!BUY!BUY!     AAAAAALLLLLLLAAAABOARD!!

 

Tue, 01/05/2010 - 20:35 | 183655 Johnny G.
Johnny G.'s picture

Just buy $700BB notional of "way out of the money" S&P futures and watch the quants hedge delta.  The market goes up, everyone feels better.

I posted that last October on this site.   I have repeatedly said that in March and April '09 there was a crazy amount of SPX Dec 1250, 1000, 950 and 900 call buying.  Along the line of $25MM (per strike) in premium "thrown away" (same went for Sep, Oct and Nov) on calls that were 50-100% out of the money.  Such a large amount of notional (well over $100B in notional) - forced the market to stop dropping due to the hedge needed to sell such an option.  Then, as the market went up, it forced additional hedging; until it became self-fulfilling.

The question was, who had $500MM to throw away on a bet that was at least 50% out of the money?  It's too large a bet for any hedgie.  I doubt even the Squid would throw $500MM into a shredder.

I didn't have access to the Time & Sales of the SPX futures which would be the place to begin such an investigation.

BTW, it turns out, they made a fantastic "bet" and made a killing on everything but the 1250's.

Tue, 01/05/2010 - 22:00 | 183754 Overpowered By Funk
Overpowered By Funk's picture

Who indeed has $500mm? I've been saying this since April and got a tin foil hat this summer as a joke for my birthday from colleagues at work.

Tue, 01/05/2010 - 22:23 | 183778 Johnny G.
Johnny G.'s picture

LOL.  I detect a hint of sarcasm.  But funny none the less.

Tue, 01/05/2010 - 23:47 | 183845 the grateful un...
the grateful unemployed's picture

keep an eye out for volume in far out of the money index puts. these things are chick magnets, and the market is the chick.

Wed, 01/06/2010 - 02:36 | 183984 Anonymous
Anonymous's picture

I think it's the hedge that causes the buy. The black/scholes or whatever box they're using to determine "risk" says, buy ".25% s&p equity" and it's a "zero risk" trade. But .25% notional s&p of 100BB is 250MM. Which is a large net inflow when shit is dropping 25 points a day. And the bottom gets made by someone who is willing to drop $500mm into a shredder on 75% (mean) out of the money options.

Today, would you bet $10mm on the S&P hitting 1511 by Sep 2010 to break even? You only need 1521 to double your money. How about $1MM? How about $100K?

It's a stupid bet. That's why the whole thing doesn't make sense.

forgot to log in - Johnny G.

Tue, 01/05/2010 - 20:37 | 183660 Anonymous
Anonymous's picture

"Biderman's accusation of PPT market manipulation is another argument in favor of a complete public audit of the Fed's books...there is a widespread belief that the PPT does manipulate stock prices on a daily basis to enrich its pals and screw individual investors. It would be useful to prove them."

First, Biderman's accusation is not another argument in favor of a complete public audit of the Fed's books. It is just another accusation. Whether Biderman makes it, or one of his data subscribers makes it, it is the same accusation.

Second, in what way would UPWARDS manipulation of stock prices screw individual investors?

Third, $6 trillion rise in market cap has nothing to do with actual investment flows. The rise in market cap in low volume is just that.

Fourth, if it were futures, it would be blatantly obvious in open interest numbers, just like every other time when someone was blatantly out on a delta limb (think SoGen, ING, and others). It would also be obvious in the roll/expiry as the owner would want to roll it and the complicit dealers would not be short outright, just short the basis (to be unwound at expiry), making for a VERY rich roll and/or ugly upward print on the expiry.

Tue, 01/05/2010 - 20:38 | 183662 buzzsaw99
buzzsaw99's picture

Congrats, another tenor joined the choir. God's work is never done.

Tue, 01/05/2010 - 20:52 | 183677 rhinotrader
rhinotrader's picture

I just wished I had been long for 9 months. 

Tue, 01/05/2010 - 21:19 | 183713 Anonymous
Anonymous's picture

If the Chinese wanted to perk up its biggest customer's "economy", wouldn't it make sense to divert some percentage of its gargantuan stimulus flow into SPX futures? Having tired of the limited upside in US treasuries, why not grab equity instead? What percentage of $1.6T would it take to materially goose the US averages in a low volume market?

With all of the frenetic stimulus-induced capacity expansion going on in China, they're going to need SOMEONE to buy all of the extra trinkets, gadgets and baubles.

Tue, 01/05/2010 - 21:34 | 183732 Anonymous
Anonymous's picture

Who you guys quit it already? Slutty rutty to 850 or better by year end..... Go Hawks!

Tue, 01/05/2010 - 21:47 | 183741 msorense
msorense's picture

At this point they have to keep it up almost every day.  They know the fundamentals are already deteriorating further every day now.  Heard that BAM model is predicting an imminent crash for what that is worth.  Fourth quarter GDP will be strong about 4-5% but it is past, first quarter won't be as much.  

Who will do the eulogy for the last bear standing?

Tue, 01/05/2010 - 21:59 | 183751 You Cant Handle...
You Cant Handle the Truth's picture

Qui tam.

Tue, 01/05/2010 - 22:10 | 183763 Anonymous
Anonymous's picture

There are no markets anymore, only interventions (GATA).

Tue, 01/05/2010 - 22:14 | 183767 Anonymous
Anonymous's picture

Nikki would like to know how the cabal is accomplishing the melt up in the other major exchanges around the world.

If the market is indeed rigged since March who do I sue to get my short trade money back ?. Would I have to get on line behind the citizens of Iceland and their CDO fraud claim ?.

Tue, 01/05/2010 - 22:15 | 183769 Anonymous
Anonymous's picture

PPT Vs. Project Mayhem.

Would have made a great Celebrity Death Match.

Tue, 01/05/2010 - 23:08 | 183816 Anonymous
Anonymous's picture

The Primary Dealers Credit Facility is effectively a vehicle to prevent declines in prices.

"In practice, the PDCF [Primary Dealer Credit Facility] allows dealers time to arrange other financing for their assets—for example, by raising equity—or to sell assets at a pace that would not overwhelm the markets and drive securities prices down.

http://www.newyorkfed.org/research/current_issues/ci15-4.pdf"

Further, tightening spreads on corporate paper act as a buoy to stock prices.

There is also a research paper out there from the, I think New York, Fed that discusses the direct purchase of equities by the Fed's system open market account. This topic was broached in the early part of the past decade in response to the budget surplus which presented problems to the Fed conducting "monetary policy" through open market operations.

Tue, 01/05/2010 - 23:54 | 183855 the grateful un...
the grateful unemployed's picture

I've noticed that for the last four months the market always goes up on the first of the month, which leads me to speculate that people are using their food stamps to buy stocks. Or that Goldman is frontrunning the transfer of funds into SNAP debit accounts, which they gradually pay back over the period of the next few weeks. But if the dog salivates at the sound of the bell, he's a dog?

Wed, 01/06/2010 - 00:00 | 183861 pooplagrande
pooplagrande's picture

Does anyone remember when Obama got on TV last March and said that he thought that "this was a good time to buy stocks"? Was that the biggest insider trading tip of all time? Maybe that was his idea of transparency...

Wed, 01/06/2010 - 00:12 | 183874 pooplagrande
pooplagrande's picture

Honestly....can someone look into this? He either is privy to insider knowledge of what is about to happen or he is the true Oracle:

 

http://www.usnews.com/articles/news/obama/2009/03/04/obama-says-buy-stoc...

Wed, 01/06/2010 - 01:22 | 183883 WaterWings
WaterWings's picture

Dewd! O made the entire staff of CNBC look like hucksters. Creamer needs a "I got this." noise button.

Wed, 01/06/2010 - 00:35 | 183885 berlinjames02
berlinjames02's picture

Poopie,

Yeah I remember that. It was on or about March 6th. I remember because I made fun him of on Facebook calling him a 'stock analyst'.The O-man really made me eat my words!

In hindsight I agree with you completely... seriously the biggest insider trade ever.

Wed, 01/06/2010 - 00:38 | 183892 Anonymous
Anonymous's picture

Of course the Fed has been buying equities.

Wed, 01/06/2010 - 00:55 | 183910 bingocat
bingocat's picture

"Biderman's accusation of PPT market manipulation is another argument in favor of a complete public audit of the Fed's books...there is a widespread belief that the PPT does manipulate stock prices on a daily basis to enrich its pals and screw individual investors. It would be useful to prove them. "

First, Biderman's accusation is just that - it is not further argument for a public audit any more than my whining is.

Second, in WHAT way is upwards price manipulation "screwing individual investors"? Most individuals are extremely happy to be screwed by having someone ramp the price up. The screwing happens when prices fall after those individual investors get sucked into the market because of manipulated prices, but Biderman says it was not retail or pension funds.

Third, crying "not fair" to government manipulation is beyond pointless. It happens every day everywhere. Just deal with it. The vast majority of people who make their living working for the government have figured this out - just go with the flow. If you can identify early what the next political cabbage patch doll will be you can make lots of money in the boring old private sector.

I agree that there may be some Chinese and/other buying in there. It is eminently possible that it is a monetary inflation hedge. Smart bureaucrats get that. Given that some of the greatest capitalists in China are the government (P.L.A., SAFE, etc), why would this be surprising in the least?

 

Wed, 01/06/2010 - 02:26 | 183978 Anonymous
Anonymous's picture

Don't Fight the Fed.

Wed, 01/06/2010 - 03:13 | 183994 Anonymous
Anonymous's picture

>>bingocat. I am surprised since you are registered here,that you come up with such statement" Most individuals are extremely happy to be screwed by having someone ramp the price up". It was the same manipulation that took place before the crises(by letting stocks artificially climbs through easy money),that prompted the huge FED injection and the huge debt that goverment embarked upon,in an effort supposedly to save people's retirements. As long as an entity with theoritically unlimited supply of money interfers in the market,there is no price discovery. As long as there is no real prices in the market,any major events that drives the market down(twice in span of ten years),would require another couple of trillions down the drain. And you have a stock market that is constantly a "hostage" of the MM. You either gives us what we want,or else,people will have no retirement. And that is way too far from what is intended for a capital market. This has become simply an instument of balckmail in the hands of Wall st. against Main st.Watch for the scenario repeating itself in a couple of years.......

Wed, 01/06/2010 - 06:13 | 184074 bingocat
bingocat's picture

It's a question of fear and greed. Most individual 'investors' are long-only. The vast majority of baby-boomers with too much equity allocation in their 401ks are not looking for 'price discovery.' Simply put, the vast majority are 'happier' in December 2009 than they were in December 2008. Try having a serious conversation with them on the lines of "You can have a 'fully-transparent price discovery market' but the market will be a few tens of percent lower now and substantially more volatile later, OR you can take some upwards price manipulation." What would they choose? Very few individuals will say today "Please destroy my retirement fund, kick me out of my house, and put me to work digging ditches so that my children's children will have less debt to deal with and I can live in a country of always-transparent price discovery markets."  These are emotional times and most investors are still looking for financial peace of mind rather than intellectual purity of markets. In any case, markets have never been transparent or efficient on a short-term basis. Someone always has more information about short-term supply/demand factors than you do.

I do not advocate intentional boom/bust generation as good fiscal policy, but I think that very few Americans were prepared to see runs on every major and minor financial institution in the country, the end of the equity market as they knew it, and pumping money into money/financial markets as something to 'cushion' the downside is a time-honored tradition. NO central banker will willingly remove short-term pump-priming measures from his toolbox. Why would we expect This Time Is Different?

It seems that for most non-finpro posters, almost every aspect of financial markets movement in the past few years has been Wall Street vs. Main Street. This is poppycock. Wall Street does not blackmail Main Street the way the remora does not blackmail the shark. I bet Wall Streeters were far more scared of what was happening in late 2008 and early 2009 than most Main Streeters were.

The "huge Fed injection" was putting money into the system to counter the fact that private funding markets had ceased to exist. If the Fed had not done this, no amount of equity injection into the banks would have sufficed. Day-to-day funding of an economy is not to be taken lightly. Why people do not see that TARP and its follow-on acronymed efforts were not a rescue of Wall Street but of Main Street still baffles me. If S&P were trading at 300 now, and USTs were trading at 60cts on the dollar, who would that benefit? Would Main Street be better off?

Wed, 01/06/2010 - 10:43 | 184235 Waterfallsparkles
Waterfallsparkles's picture

You assume that the FED buying the market is good. But, what many fail to realize is that if the FED has the control in the Market that the numbers indicate, who is not to say that they were the ones responsible for the Melt Down.  They could have sold or shorted the futures just as well.

The control of the Melt Down could have been to allow the Big Players to be GIVEN or pay a pittance for their Competitors.

If you look at the results of the Melt Down it allowed JPM to buy Bear Sterns, Washington Mutual.  This rounded out their Business to include a Trading arm and a Mortgage originator.  Look at BAC they bought Meryl Lynch, Country Wide Financial.  This rounded out their Business to include a trading arm and a Mortgage originator. This truely made them too big to fail.

Yes, I do believe that the Melt Down was well orchistrated and after the Banks accomplished what they were after (either elimination of Competition or acquisition of desired Companies for nothing or pennies on the Dollar) the Market Miraculously turns around and defies gravity and goes up non stop.

So, in conclusion if the FED is Manipulating the market up it is not inconseivable that they also Manipulated it Down in 2008.  Problem seems to be that they did a lot more Damage than they even realized.  Now the problem is how to reverse the Damage and IF it can be reversed.

Thu, 01/07/2010 - 03:12 | 185273 bingocat
bingocat's picture

I don't assume manipulation is good. And if the Fed has been involved (and I see no hard evidence), it does not mean they are the only ones or control prices.

Nevertheless, the idea that the Fed would need to "reverse the damage" from a manipulated MeltDown requires manipulation ("reverse" being a transitive verb) so the argument would be inconsistent.

Nonetheless, the idea the MeltDown was created by Wall St so as to be able to buy at better levels is downright scary in that it is scary that people would think that.

 

Wed, 01/06/2010 - 04:35 | 184038 Anonymous
Anonymous's picture

All you need is Goldman borrowing at zero percent from the discount window.

Wed, 01/06/2010 - 04:43 | 184045 phaesed
phaesed's picture

Besides, a rising stock market should pull people out of treasury bonds, I'd think many would be happy at this thought.

Wed, 01/06/2010 - 09:07 | 184143 Anonymous
Anonymous's picture

>>bingocat."It seems that for most non-finpro posters" I think that you got your whole facts upside down,and if you are a "finpro",then you are a non-politicpro:1-Of course most people are happy to see some of there money back,but this is like the famous Nigerian scheme;send me $5k so I can unlock a dormant account and your share is half a mill.except that in this case the money dished out is (and according to various news report)was about 22 tril,to return some 6 trill to investors.2-I still remeber the day when the market dived to 750(watching my long position down by 25%,and I didn't have a short,so I was on the happy camp you mentioned by Jan)when suddenly the last half hour the market went up 50 points at the annoncement of TG as a treasury secretary,and you tell me there was no negotiation and "black mail" behind close door?And still:3-In Jan, GS came up with a recommendation to buy puts on the S&P for the Mar contract,which got me baffled. Where is the amazing plan that is gonna save the market?It turns out that GS and company has lost track of what they gained or lost,so they had to go back to the drawing board and let whatever didn't bottom in the Nov,bottom in Mar and buy it before the pumping begins.4-On numerous ocasions during the past few months the market was "left"to drop at certain crucial hearings by congress,as a show of what power Wall st. commands. Bottom line: I consistently comment here on the macro level that the whole model is flawed. This is not about me or anybody else making money in a real investment enviroment,rather it is about a casino where the house always wins and the rest plays for the odds of a lottery.I am sure this downturn made few traders(outside the house)rich,but the majority of investors has not even reached their breakeven point,unless may be they started investing in 1980,and then again they would have probably done better if they invested in TBs...

Thu, 01/07/2010 - 04:10 | 185249 bingocat
bingocat's picture

The $22trln you are talking about I assume is the famed $23trln number from last summer. It is neither spent, or promised per se, and the assumptions it makes are effectively equivalent to a return to the Dark Ages (I kid you not). The assumptions behind Barofsky's calculations (the $23.7trln number) were as he was instructed to calculate: what if ALL POSSIBLE MONIES under ALL POSSIBLE GOVERNMENT AGENCY/SUPPORT PROGRAMS were used, and for ALL assets purchased, ALL ASSETS WENT TO ZERO and every penny spent was a TOTAL LOSS in every possible way? How much would that cost? This number assumes EVERY asset posted to the TALF and similar programs went to zero. EVERY mortgage owned by every bank (and the GSEs) in the US went to zero and every house foreclosed upon had ZERO value at sale, and every other program (the vast majority of which are not financial and are not covered by congressional approval in any case) also saw a 100% loss on everything it spent or guaranteed. If we want to use that as the assumed cost, the number gets a lot higher on the back end, because it assumes suddenly that US GDP has just fallen 50%, and the underfunding of future Social Security obligations would suddenly jump because of lack of employment payroll contributions, etc (all this while living like Mad Max). While it is clearly a ridiculous assumption, you can assume what you want but please understand the parameters embedded in your assumptions.

Responses:

2) Tough to imagine that the naming of Tim Geithner was the result of "black mail", but it is ludicrous to assume that vested interests and tradeoffs/compromises are not involved in cabinet member or agency head selection, even quiet times. This is politics for pete's sake. The same thing happens inside every major organization and most aspects of personal life as well.

3) one result in a sample of hundreds does not prove conspiracy

4) the market is manipulated upwards and so the drops are also manipulated as a show of what power Wall St has? I am confused.

Bottom Line: You "comment on a macro level that the whole model is flawed." I don't understand why you would say that given your subsequent comments. The definition of a casino is that it is a negative-sum game for players. The more you play, the more likely you are to lose. Most casino-goers who know that and still choose to play are like lottery ticket buyers - buying hope. If it is not a casino, then it is a market, made up of its participants. Some are bigger than others. PIMCO is big, but they made good money in 2009 by understanding that someone else was even bigger. They have decided in the last few weeks that they don't care to remain on the coattails of that someone bigger. If long-only equity market participants who don't trade short horizons want to make money, they sometimes have to wait very a very long time. Saying the market is "unfair" after the worst 10-year period for market indices in two centuries is like complaining that cities are rigged against pedestrians just after you have been run over by a bus.

Wed, 01/06/2010 - 09:08 | 184144 HEHEHE
HEHEHE's picture

How else do you explain the increase in commercial REIT's, dead banks, etc.

Wed, 01/06/2010 - 09:25 | 184157 FreddyInBangkok
FreddyInBangkok's picture

why ...

why is Biderman even mentioned.  his 09 calls were LOSERS

TWICE

 

 

 

 

Thu, 01/07/2010 - 04:43 | 185282 mrmortgage
mrmortgage's picture


The bailouts and stock index manipulation(PPT is real) you guys are referring to are backing up America, our way of life, our bonds and the loans of the guys you work with, work for etc. Just as the EU has their programs and the Chinese have their various policy implements to keep the workers in factory jobs.

Our dollar is nothing more than a promise by US to pay with our future work and creavity. The QE and PPT only aims to support our whole system. The 1.5T of FED MBS purchase is fine by me if the households pay their loans. It all works out if we all work and out compete other nations.

Fannie/Freddie/FHA loan book is composed of the loans backing middle class households. We are backing our currency. Our work, future income, blood, sweat etc.

Stop thinking us vs them etc. It's just US. It's not Congress, Wall St, the Chinese etc. American's bought too much, borrowed too much and we will pay the price for at least a decade. The "home debtors" with 100-125% loan to value mortgages working their asses off for their past spending and mistakes. You know all the government loan programs allow for 125% mortgage "reflief refinances" right? Because the mortgage balance is so far above the current value. 30-35% of current homeowners with mortgages owe more than their place is worth. About 20% of homes don't even have a mortgage. Do the math. A whole swath of American's bought too much and screwed themselves. Bestbuy, Harleys, motorhomes, powerboats, restaurants, VEGAS baby!, etc. The money didn't disappear that was borrowered and spent... it just went to the smart guys around the world. Money doesn't disappear it just circulates around the table. 

Why should the wealthy/elite who own all the assets suffer b/c some jackass wanted a 4000 sq ft 800k home in Vegas in 2006? That is now worth 400k that he defaulted on 1.5 years ago and was finally kicked out by the Clark County Sherriff.

The bonds/savings that back the banks were never wiped out. That is what the pension funds, mutual funds and the elite own. Your retirement account basically. The losses of 4-5T will be spread out over time with QE and borne by the masses.

 

thegreatloanblog.com

Thu, 01/07/2010 - 22:16 | 186394 bingocat
bingocat's picture

Precisely.

Thank you.

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