More Observations On The Federal Reserve Buying Stocks

Tyler Durden's picture

TrimTabs' Charles Biderman makes another appearance, this time on BNN, discussing "circumstantial evidence" of the Fed's goosing of stock markets. And yes, the debate of who is buying futures consistently takes front and center position. Liberty 33 - your move: feel free to refute any and all claims presented by the TrimTabs CEO. 

 

 

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AnonymousMonetarist's picture

 

A member of my extended family is considering a run for state representative.

In a fairly animated conversation over a marvelous holiday spread he decried a story on how job openings for shipbuilding in Norfolk were going unfilled because there were not enough applicants.

We agreed to disagree as to the cause while agreeing on the effect; he blamed the applicants, your humble raconteur blamed the role models.

Valuation by page views, suitcases of cash to fight proxy wars, deficits that don't matter ... past gospels that have been crushed on the shores of reality are more than just tales of past hubris, they are causes of our current woes. 

Don't blame the player, blame the game? 

How about blame both? While the chattering class bemoans the counterproductive 'populism', and wait for it ... blames the victim for the crime ... might it also be appropriate to consider that lies and their derivative actions have consequences?

If the custodes are given a free pass on propriety and sobriety why should we suppose that the great unwashed won't look to achieve the same notoriety?

What the heck collect a check. 

Strategic default cause it ain't my fault. 

Scam I am.

The American Dream as American Scheme.

It's back to the last start of a century, the difference being that America then was a start-up on the international scene as opposed to being now, let us say, a stumbling front-runner. 

The augury of markets, tis leading or lagging? ... For the folks in Peoria, in truth 'tis just nagging.

Few of my friends or relatives understand what a derivative is, what NSA means, what hedonic imputation references, what a benchmark revision signifies ... but they are thoroughly convinced that the system is rigged. 

Thoroughly convinced.

Put that into your econometric black box and the 'social fabric' punch card that will pop up will be riddled with holes.

Change we can believe in is like a jobless recovery ... learned helplessness leads to cognitive dissonance and the combination therewith results in cognitive helplessness and learned dissonance.

 

Clampit's picture

Well put.

I've heard arguments that we are now a white collar nation, that we will design the products others produce and live happily ever after. Hogwash. Anyone who has actually done product development first hand will tell you that Apple's ability to design top notch products in California is predicated on decades of producing top-notch products in California. Without the latter, the former with wither away within a generation or two.

And as for who pays for the casino, there is a reason behind the pension to 401k movement....perhaps people saw early on that games between seasoned professionals generally end in stale mate. 

 

Anonymous's picture

I agree that production experience is needed for product design; I disagree with you that Apple are designing much in California. Those overpaid folks in Cupertino email specs to their colleagues in Taiwan and Korea; the taiwanese do the hardware and manufacturing (in China), the Koreans do the look and feel of the display and keyboard. The indians do the system integration. Of course the american does the talking and marketing, that part is good for 50% profit, not too bad.

Problem Is's picture

"I've heard arguments that we are now a white collar nation..."

If those wearing wife beater t-shirts and Palin McMILF are white collar...

Then yes Amerika is a white collar nation...


Gimp's picture

I concur, yes the system is rigged. A 40 year veteran trader on Wall Street once told me "Who do you think pays for all of those fancy buildings on Wallstreet? You do!   Once you understand this simplest of economics you understand the system.

El Hosel's picture

 Seems pretty clear that "they" are buying stocks with money they don't have (and among other things selling gold that they do not own)  to create the perception of the markets they want. Why can't more people can see through this or at leat ask the right questions?

Anonymous's picture

Jeezus, y'all act like you have never seen a bear-market rally. Go ahead, ask the questions but also realize that you just... might... be wrong in your conclusions.

"The stock market, as measured by the S&P 500, plunged nearly 57% from its 2007 highs until it reached lows in March of 2009.

But even after rallying 58% in the seven months after the March lows, the market remained 31.5% off of its 2007 highs. That's nearly the same amount recovered during the market rally of 2003, as the market began to recover from the bursting of the tech bubble.

In other instances, such as 1975, 1962 and 1938, the market had actually recovered a much bigger portion of its losses seven months after hitting lows. And in 1983, it was actually 7.3% above its previous highs."

pros's picture

Insiders dumping bad paper to the government...

another version of the looting that has prevailed in the rigged markets...

 

eventually those insider trades will be rescinded and Geithner/Bernanke can read about it from Federal Prison.

ozziindaus's picture

Agree. Like Fannie and Freddie government securitization (nationalization), the equity markets have been kept afloat in the same manner.
Has the gov. stabilized housing, AIG, Detroit? NO. So why did it work so well for equities? Because it is a demolition in slow motion. Wave 3 down will prove that.
Isn't this information available through DTCC? Just like naked short selling, what if there is a naked long buying program?

Naked short selling=phantom stocks sold short for real gains
Naked long buying=real stock bought long with phantom money

Sounds plausible to me in this market.

Anonymous's picture

Where is the 3th political party, promised by many, to sort out this mess?

Anonymous's picture

How sad!!! the canadians allow this to be told on their networks, but the USA,master of "free speech" would NEVER allow this guy on to describe a theory which is at the very least, plausible. So sick of the bullshit!!! and how could it not be illegal for a source of infinite sums to RIG a market?!

Anonymous's picture

Barry Ritholz thinks it's nonsense to think that the Fed buys stocks. He's a stupid fool. Charles Biderman is the polar opposite, a genius. Charles Biderman is a man of courage. The Feral Reserve is a criminal organization. It's sole purpose is to shovel money to the banks. Put those mother fuckers out of business.

Gordon_Gekko's picture

Barry Ritzholtz has his stupid head in the sand.

deadhead's picture

I read Barry's column that day and went through the responses.

Barry, I know you check in here and all I can say is that I am stunned at your position. I think you are a bright guy but am literally astounded at your position.

even bob heller has essentially admitted the futures nonsense.

 

Anonymous's picture

Barry runs a sizeable portfolio investing in equities, what do you expect him to tell his investors if he admit to massive manipulation? That his returns were all a gift from Uncle Sugar? If so, what's the point of investors putting money into his funds and paying him management fees? Might as well buy the manipulated futures themselves, cost just $5 an E-mini of $50k, that's 0.01%. Bet he charges far more than 0.01% non?

Cursive's picture

I quit frequenting Ritholtz's site after he chickened out about testifying before Congress.  Either a complete and utter puss or a self-absorbed hedge fund manager.  Either way, he's a sell-out to his countrymen and those who would prefer freer markets and less corruption.

Big Red's picture

Damn, I must have screwed up. Please advise me, although it's too late.

On January 4, I advised the "manager" of my IRA (rolled-over 401(k)) that I wanted to cash/close out, and they proceeded to sell. (My IRA was back to being about 9x% of its value prior to the happenings of last year). The check should be in the mail as we speak.

You see, I am 58, and figure that over the next years, I'd rather take the tax hit in 2010 (perhaps offset by some heavy tax itemizations, although I can forego that possibility) and walk away with all that I can, than either see (end-of-year forewarned) stories like those links noted above come true, or, that the money is just plain untouchable as this country unfolds all its new surprises.

It is not too late to tell even more peoples of what I've done (when it comes to my monies, I AM conservative), would it be wise for them to consider what I've done???

Sorry, I'm confused today, my wife passed on recently, and I'm in a quandary...

Anonymous's picture

You have 60 days (starting FROM January 4th) to rollover to a Roth, open another IRA or take the tax hit. Bear in mind if you wait until you're 59 and 1/2 the 10% penalty no longer applies. Get professional tax advice from an impartial
adviser now ... don't let your meat loaf!

Art Vandelay's picture

Sorry for your loss, Big Red.

Don't worry about cashing out the IRA; if you're a regular here, you'll find that no one has any idea how things are specifically going to work out, and when.

A small piece of advice: try not to make too many big life decisions while you're still mourning. Give yourself some time to recover and heal. All the best to you.

Anonymous's picture

I don't feel qualified to be giving you 'advice' really, but fwiw I think you did ok. Very sorry to hear of your wife's passing. Take it one day at a time, and remember to make time to be around friends and family when you're ready. Take care sir.

deadhead's picture

big red....my primary concern is your age of 58 and at 59.5 you can avoid the 10% penalty for early withdrawal of an IRA.

if you want to stay away from stockbrokers, financial planners, etc, please do yourself a favor and see a CPA soon.  perhaps you can rollover the ira back into another ira and just plop the money into an fdic insured account at a local bank.

 

really, see a CPA.

I am sorry and feel for you on the loss of your wife at such an age (i'm 54).  Please keep checking in here, there are some really good people with good ideas and they know how to help you not get screwed.  good luck to you

Trifecta Man's picture

This is what i think.  You will likely have to pay a 10% tax PENALTY for withdrawing money from the IRA before you are 59.5 years old.  That is on top of the taxes you have to pay on the money withdrawn.  Go see a financial planner NOW to see whether this can be rectified or offset by another contribution.  You might have 60 days to this.  I'm not an expert on taxes. 

Green Sharts's picture

I'm sorry you lost your wife Big Red.  You have received some good advice.  If you don't need all the money in your IRA for an emergency there's no need to cash it out all at once.  You say you're 58 but don't say when you'll turn 59.  If you turn 59 in the first half of the year, that means you'll hit 59 1/2 before year end and you wouldn't be subject to the 10% penalty in addition to taxes.  If you won't hit 59 1/2 until 2011, taking the money this year makes no sense at all.

As others have said you have 60 days to take that check and deposit it into an IRA you set up somewhere else without any tax liability or penalties.  Here's a link to an article on that:

http://www.investopedia.com/articles/retirement/06/rollovermistakes.asp 

Trifecta Man's picture

After the indirect rollover to another IRA, he may still have to pay some tax or penalty on any amount that does not get rollovered.  Another thing to discuss with financial planner.

http://www.phoenixwm.phl.com/html/taxlaw/page2-1.html

See "IRA Rollovers from IRAs" in above link.

Anonymous's picture

see my comment below regarding rule 72T - i didnt post it as a reply

Problem Is's picture

Some states have a tax penalty as well. If you live in TBTF Calif... add 2.5% to the feds 10%.

I think deadhead's thought about talking with a CPA is what I would do. Good luck to you.

phaesed's picture

In a h/t to ZH, you guys were all over this story with JPM SPY gunning over 8 months ago, nice to see that the mass media is still about 2 months behind where you were then.

trav7777's picture

All the Fed would have to do is lend to a bank at 0% and have them buy index futures.  That's it.  And they can shrug and pretend they had no idea.

Bama told everybody what was gonna happen on Mar 6.  And then they went and did it.

Gordon_Gekko's picture

Using the term "lend" pretty loosely i.e.

trav7777's picture

Well, then they can repo the securities to the Fed and get the cash back and repay the loan.  And it's all good

Anonymous's picture

No kiddin'?

Gordon_Gekko's picture

Not to beat my own drum, but some idiots did make fun of me when I proposed and explained the Fed's stock-market manipulation modus operandi LAST YEAR (spring/summer I think) on this very site. BTW, the criminals at the Fed and GS et. al. are really not as intelligent or smart as they imagine themselves to be. Cheap tricks is all they are capable of. Only your own unwillingness to accept the criminal nature of our government as well as economic and financial system stands in your way of understanding the truth. Once you do and look at things in a different light with an open mind it all becomes CRYSTAL CLEAR.

Rick64's picture

and stock market manipulation is the least of their crimes.

Anonymous's picture

" see you on the Dark Side of the Moon " --

http://thereformedbroker.com/2010/01/11/ladies-and-gentlemen-we-are-trad...

Objects on the surface of the Moon experience only 16.5% of the gravity they would experience on Earth. In this way, a 200 pound man bounds up and down off the Moon's surface with the buoyancy of a 33 pound child.

Ladies and Gentlemen, we are trading on the Moon.

- Joshua M Brown 1/11/2010

And for those who are mostly long (or completely long or long and leveraged), it feels pretty damn good.

There are signposts along the road reminding us all that this market could turn down sharply at the drop of a hat. These signs come in the form of pent-up home inventories, still-savage unemployment stats and the ever-worsening condition of the commercial real estate swamp and those institutions who lend into it.

Some investors are compartmentalizing these warning signs and jumping into the stock game so as not to be left behind. They do this with one eye on the exit and a quiver on their backs filled with put contracts and sell stop limit orders.

Many more, however, are beginning to ignore these warnings altogether, like a well-traveled airline passenger ignores the safety procedure demo at the beginning of a flight.

This willful ignorance is occurring for the simple reason that we've been in an anti-gravity environment - where stocks bounce off of each piece of good news and bad news indiscriminately, each bounce propelling them higher still.

Here are some features of the recent anti-gravity stock market:

•Bad employment number - stocks go up
•Good employment number - stocks go up
•Sovereign credit default - stocks go up
•Sovereign credit downgraded to junk - stocks go up
•Hawkish Fed speech - stocks go up
•Dovish Fed speech - stocks go up
•Hawkish Fed minutes released - stocks go up
•Dovish Fed minutes - stocks go up
•Treasury auction goes well - stocks go up
•Treasury auction goes poorly - stocks go up
•Crude oil and other raw costs rally - stocks go up
•Crude oil and other raw costs sell off - stocks go up
•Banks report earnings - stocks go up
•Banks dilute their shareholders back to the bronze age - stocks go up
•CES preview captures our imaginations - stocks go up
•CES becomes a joke with 3D TV and a $2300 battery-powered bike - stocks go up
•The weather is unseasonably warm in November - stocks go up
•The weather is Antarctic across the country, Black Friday is snowed out - stocks go up
•Stimulus plan is roundly criticized as wasteful and irresponsible - stocks go up
•Talk of a yet another stimulus plan begins - stocks go up

Bounce. Bounce. Bounce. Bounce. Bounce.

Houston, we have a profit.

__________________________________________________________

http://www.youtube.com/watch?v=ZZSi02uccrc

Brain Damage
(Waters) 3:50

The lunatic is on the grass.
The lunatic is on the grass.
Remembering games and daisy chains and laughs.
Got to keep the loonies on the path.

The lunatic is in the hall.
The lunatics are in my hall.
The paper holds their folded faces to the floor
And every day the paper boy brings more.

And if the dam breaks open many years too soon
And if there is no room upon the hill
And if your head explodes with dark forebodings too
I'll see you on the dark side of the moon.

The lunatic is in my head.
The lunatic is in my head
You raise the blade, you make the change
You re-arrange me 'til I'm sane.
You lock the door
And throw away the key
There's someone in my head but it's not me.

And if the cloud bursts, thunder in your ear
You shout and no one seems to hear.
And if the band you're in starts playing different tunes
I'll see you on the dark side of the moon.

"I can't think of anything to say except...
I think it's marvelous! HaHaHa!"

Anonymous's picture

I agree something is up, but why didn't the fed stop the spattering that occurred from 1400 down to 666 on the S&P

WhataMess's picture

Did you not follow the markets during the crash?

The futures were being pumped throughout. Apart from the Lehman's collapse they mange to spread big down days out preventing 2 big down days in a row that helped disperse fears.

I am going on memory but I believe the top 3 percentage moves in the crisis were all up days. I was always led to believe fear was a greater emotion than greed.

GS is short Gold's picture

the markets were likely moreso interfered with during the collapse. I remember days with huge fear and Asia and Europe dropping 3-5% overnight. Futures would be limit down, and then suddenly a wave of buying right before the open the mkt almost flat. If the market had been allowed to trade without intervention, it may have dropped to 200 on the SPX and would still be there now.

Anonymous's picture

Biderman is credible and doesn't seem to have an axe to grind. I tend to believe this man.

malvotron's picture

Exactly.

But what to do?  In this environment, any analysis of fundamentals seems futile. 

CLOSE ALL SHORTS! BUY ALL THE S&Ps YOU CAN AFFORD AND JOIN ME ON MY YACHT///

 

Yossarian's picture

Who is selling volatility?  Perhaps this is the way The Fed is aiding the mkt- flooding the system with options?  I don't know- this just occurred to me...

Winisk's picture

Naive question here.  So who is buying up the TSX?  or are the resource stocks holding their own?

El Hosel's picture

Thats right Winisk,

 Most all of the world indices are hanging at highs, has the working group gone global ( new world order )? The man behind the curtain runs the whole world now?

Grains have not recovered much, neither have gasoline refiners, otherwise its all connected or so it seems.

The Deacon's picture

Hmm, food and gas.  DO those 2 items affect the CPI?

Anonymous's picture

this started in the crash of '87 with a buy of the MMX futures late in the day by Greenspan probably - a wanna be "player"
this was before he became senile in say..... 1996

gigeze787's picture

USG supporting equities isn't about helping Wall Street, that's just the collateral damage. It is about restoring the pension funds, both managed and self-directed, of the baby boomers. If this had not occurred we  would have had a revolution, and lots of unemployed politicians. fwiw, I don't think Ritholtz is naive or stupid...I think he's decided that there is a limit to how much he wants to (and practically can) take on the system without hurting his franchise -- especially since he seems to have supported the current POTUS.

Seal's picture

you're totally right about Barry AND I further assert that at least during the Bush period certain individuals and their positions in the market were targeted - probably through facilities of DoD

it's unlikely this will ever come out.

Psquared's picture

I would say it was both and possibly a third reason: easy way to pump even more liquidity into the economy flooded by cash from ZIRP and TARP but cash that was getting no traction. They got some bang for their buck ... so to speak.

GS, et al made some nice trading profits along the way too. (With our cash)

Seal's picture

wait until everyone goes to take delivery of their gold held in storage for them at 33 Liberty HAHAHA