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TrimTabs Asks: Who Is Responsible For The Non-Stop Market Rally Since March; Gives Some Suggestions

Tyler Durden's picture




 

Submitted by TrimTabs' Charles Biderman

Are Federal Reserve and U.S. Government Rigging Stock Market?  We Have No Evidence They Are, but They Could Be.  We Do Not Know Source of Money That Pushed Market Cap Up $6+ Trillion since Mid-March.

The most positive economic development in 2009 was the stock market rally. Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion.  The “wealth effect” of rising stock prices has soothed the nerves and boosted the net worth of the half of Americans who own stock.
 
We cannot identify the source of the new money that pushed stock prices up so far so fast.  For the most part, the money did not from the traditional players that provided money in the past:
 

  • Companies.  Corporate America has been a huge net seller.  The float of shares has ballooned $133 billion since the start of April.
  • Retail investor funds.  Retail investors have hardly bought any U.S. equities. Bond funds, yes. U.S equity funds, no.  U.S. equity funds and ETFs have received just $17 billion since the start of April.  Over that same time frame bond mutual funds and ETFs received $351 billion.
  • Retail investor direct. We doubt retail investors were big direct purchases of equities.  Market volatility in this decade has been the highest since the 1930s, and we no evidence retail investors were piling into individual stocks.  Also, retail investor sentiment has been mostly neutral since the rally began.
  • Foreign investors.  Foreign investors have provided some buying power, purchasing $109 billion in U.S. stocks from April through October.  But we suspect foreign purchases slowed in November and December because the U.S. dollar was weakening.
  • Hedge funds.  We have no way to track in real time what hedge funds do, and they may well have shifted some assets into U.S. equities.  But we doubt their buying power was enormous because they posted an outflow of $12 billion from April through November.
  • Pension funds.  All the anecdotal evidence we have indicates that pension funds have not been making a huge asset allocation shift and have not moved more than about $100 billion from bonds and cash into U.S. equities since the rally began.

If the money to boost stock prices did not come from the traditional players, it had to have come from somewhere else.
 
We do not know where all the money has come from.  What we do know is that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers.  Why not support the stock market as well?
 
As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures.  Moreover, several officials have suggested the government should support stock prices.  For example, former Fed board member Robert Heller opined in the Wall Street Journal in 1989, “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.”  In a Financial Times article in 2002, an unidentified Fed official was quoted as acknowledging that policymakers had considered buying U.S. equities directly, not just futures.  The official mentioned that the Fed could “theoretically buy anything to pump money into the system.”  In an article in the Daily Telegraph in 2006, former Clinton administration official George Stephanopoulos mentioned the existence of “an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem.”

Think back to mid-March 2009.  Nothing positive was happening, and investor sentiment was horrible.  The Fed, the Treasury, and Wall Street were all trying to figure out how to prevent the financial system from collapsing. The Fed was willing to print whatever amount of money it took to bail out the system.
 
What if Ben Bernanke, Timothy Geithner, and the head of one or more Wall Street firms decided that creating a stock market rally was the only way to rescue the economy?  After all, after-tax income was down more than 10% y-o-y during Q1 2009, and the trillions the government committed or spent to prop up all sorts of entities was not working.
 
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.  Given the hugely oversold market early in March, not only would a new $100 billion per month of buying power have stopped stock prices from plunging, but it would have encouraged huge amounts of sideline cash to flow into equities to absorb the $300 billion in newly printed shares that have been sold since the start of April.
 
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.

If we were involved in a scheme to manipulate the stock market, we would want to keep it in place until after the “wealth effect” put a floor under the economy of, say, three quarters of positive GDP growth.  Assuming the economy were performing better, then ending the support for stock prices would be justified because a stock market decline would not be so painful.

We want to emphasize that we have no evidence that the Fed or the Treasury are throwing money into the stock market, either directly or indirectly.  But if they are not pumping up stock prices, then who else is?
 
Equity Mutual Fund Cash Equal to 3.8% of Assets in November, Just above Record Low of 3.5% in Mid-2007.  U.S. Equity Funds Get Estimated $5.1 Billion in December, First Inflow in Five Months.

The Investment Company Institute reported Wednesday that equity mutual funds held just 3.8% of their assets in cash and equivalents in November.  To put this percentage into perspective, the record low was 3.5% in June 2007 and July 2007.  While the amount of cash increased $8.1 billion in November, assets shot up $229.1 billion, leaving the ratio of cash to assets unchanged. 
 
Source: Investment Company Institute.

U.S. equity fund flows reversed sharply in December.  After posting fairly large outflows from September through November, U.S. equity funds received an estimated $5.1 billion (0.1% of assets) this month.
 
Apart from the shift in U.S. equity fund flows, mutual fund flows did not change much in December.  Global equity funds continued to post moderate inflows, taking in an estimated $7.1 billion (0.7% of assets).  This month’s inflow is in line with the inflows of $7.8 billion in October and $6.0 billion in November.
 
Finally, bond funds continued to rake in huge amounts of cash.  They received an estimated $25.8 billion (1.2% of assets), putting them on track to post an unprecedented ninth consecutive monthly inflow exceeding $25 billion.
 
Mutual fund investors tend to be poor market timers.  Based strictly on mutual fund flows, the clear contrarian play would be to short bonds right now. This year’s record inflow of $375 billion into bond funds is 44% higher than the record inflow of $260 billion into U.S. equity funds at the stock market top in 2000.
 
Note: Flows for December 2009 are estimates based on our daily survey and data from the Investment Company Institute.

We Plan to Stay Neutral (0% Long) on U.S. Equities This Weekend.  Investment Demand Remains Favorable: TrimTabs Demand Index Bullish at 58.9 on December 29.

We plan to stay neutral (0% long) on U.S. equities in our model portfolio.  As we discussed Tuesday, real-time income tax data shows no sign of a recovery in the U.S. economy.
 
But we do not want to be short mostly because investment demand is favorable. The TrimTabs Demand Index (TTDI), which uses 21 flow and sentiment variables to assess overall investment demand was 58.9 on Tuesday, December 29.  While this reading is well below the interim high of 77.1 on Friday, December 18, it is still above the neutrality line of 50.  The index is so bullish mostly because indicators that tend to be leading—notably excess margin debt and the cash balance of equity mutual funds—are indicative of greed.

Corporate Liquidity Likely to Be Neutral to Bullish Next Week.  New Offering Calendar Will Be Virtually Shut Down, While Corporate Buying Likely to Remain Light.
 
Another reason we plan to stay on the sidelines is that corporate liquidity is likely to be neutral to bullish next week.
 
On the sell side, new offerings are likely to be light because underwriters will just be returning from extended vacations.  New offerings amounted to just $350 million in the week ended Wednesday, December 23, and they are almost certain to be lower this week (Dealogic reports that less than $50 million is scheduled for later this week in addition to the $4 million that priced Thursday through Tuesday).
 
On the buy side, the economy’s weakness suggests corporate buying is unlikely to surge into the New Year.  Nevertheless, new cash takeovers and new stock buybacks combined are likely to rival or exceed new offerings next week.
 
Taking a look back, corporate liquidity was extremely bearish in December.  The $75.5 billion in corporate selling (new offerings + net insider selling) was 4.2 times the $18.0 billion in announced corporate buying (new cash takeovers + new stock buybacks).  Yet corporate selling was highly concentrated, with large follow-on deals for three big TARP banks accounting for 79% of the corporate selling.  We expect corporate liquidity to turn bearish again starting in the third week of January as companies take advantage of bubbly stock prices to unload more new shares.

 

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Thu, 12/31/2009 - 11:42 | 178852 MiningJunkie
MiningJunkie's picture

VINTAGE !

Thu, 12/31/2009 - 11:43 | 178853 Daedal
Daedal's picture

PONZI

Thu, 12/31/2009 - 11:43 | 178854 AAA
Thu, 12/31/2009 - 13:04 | 179012 Shocker
Shocker's picture

Marc Faber and Gerald Celente both are spot on.

Thu, 12/31/2009 - 13:21 | 179038 Oso
Oso's picture

"-A stronger dollar will be positive for equities based on historical market data"

 

wtf?  right away this discredits Faber.  Using historical market data when the USD is now a funding currency makes zero sense.  And not to mention the outrageous dollar vs everything else correlation that happened til last week.

The problem with R-tards looking at historical data is that they decide to give it precedent over logic and common sense, and they close their eyes to WHAT IS HAPPENING IN THE REAL WORLD.

Thu, 12/31/2009 - 11:47 | 178860 chumbawamba
chumbawamba's picture

Where do I get me some TrimTabs?  I'd like to go on a post-holiday diet.

I am a fatter Chumbawamba.

Thu, 12/31/2009 - 14:25 | 179138 WaterWings
WaterWings's picture

Don't go to the gym next week. Just put some of your stockpiled canned food into a backpack and walk around the block 80 times. All the slaves from Wall-E will have all the treadmills and stairsteppers on a 15-minute wait the first half of January while they try to figure out how it works. Actually, go for the sad comedy:

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

Thu, 12/31/2009 - 12:00 | 178880 SilverIsKing
SilverIsKing's picture

Not sure if this had been posted on ZH:

Bankers Get $4 Trillion Gift From Barney Frank: David Reilly

http://www.bloomberg.com/apps/news?pid=20601039&sid=a48c8UpUMxKQ

Thu, 12/31/2009 - 13:19 | 179034 Rainman
Rainman's picture

Yes, it's been posted by commenters a couple times. I'm hoping Tyler/Marla take it further. A stunning sneak mega bailout buried in a 1200 page Bwaney Bill.

Horrifying....primarily because our government masters believe it will take that much money to keep bailing the banks in 2010.....and their willingness to do it is even more horrifying.

Thu, 12/31/2009 - 12:03 | 178888 Anonymous
Anonymous's picture

Who is buying? Simple answer - the shorts! its been one huge short squeeze.

Fri, 01/08/2010 - 23:38 | 188005 Anonymous
Anonymous's picture

please think before you post. Shorts? look at the data, not much shorting going on in the last 9 months

Thu, 12/31/2009 - 12:05 | 178892 Anonymous
Anonymous's picture

It's only a little suspicious that an economic illiterate like Obama would be able to almost exactly pick the market bottom.

His incoherent "profits and earnings ratio" statement came just days before the market started shooting up like a meteor.

Thu, 12/31/2009 - 14:41 | 179168 tewkatz
tewkatz's picture

I think it was also something like, 'this is a great time to buy stocks' and I remember laughing that a prez would be giving stock advice...that was, what, a 40+% rise ago?

Thu, 12/31/2009 - 22:38 | 179607 Chopshop
Chopshop's picture

yeah, maybe OB was actually looking at chart.

hmmm, 3.6.09 high wave candlestick on the INX ... 14:00 - 16:00 full-fledged breakout by the XBD ... week after Warren's letter to shareholders ... innumerable methodologies all actually signaling from the close of March 9th that there an extremely high possibility of 3 - 8 trading days before a Primary wave 1 (circle) bottom.

So yeah, Obama and our PPT overlords definitely timed their buying to actual charts and, gulp, social mood.

i know; how gauche.

Thu, 12/31/2009 - 12:06 | 178895 kane1559
kane1559's picture

Higher offering levels may explain some of the rally.  The Fed has manipulated credit markets thereby decreasing spreads thereby decreasing discount rates.  The IG index has come down from ~300bps in March to ~85bps today, while the HY Index has come down from ~1400bps to about ~500bps today.   A back of the envelope DCF calculation demonstrates that such a move could explain 20-30% of the rally. 

Thu, 12/31/2009 - 12:45 | 178976 Anonymous
Anonymous's picture

Yes, government-sponsored mispricing of risk on an extreme scale. Ain't it wunnerful?

Thu, 12/31/2009 - 12:11 | 178901 Cursive
Cursive's picture

FRB buying equities?  That's a no-brainer.  The BOJ openly admits to such.  Given the outrageousness of the FBR's actions since September 2008, by the time it is revealed, we will have moved on.  This is the meat of the article, though:

 

We plan to stay neutral (0% long) on U.S. equities in our model portfolio.  As we discussed Tuesday, real-time income tax data shows no sign of a recovery in the U.S. economy.
 
But we do not want to be short mostly because investment demand is favorable. The TrimTabs Demand Index (TTDI), which uses 21 flow and sentiment variables to assess overall investment demand was 58.9 on Tuesday, December 29.  While this reading is well below the interim high of 77.1 on Friday, December 18, it is still above the neutrality line of 50.  The index is so bullish mostly because indicators that tend to be leading—notably excess margin debt and the cash balance of equity mutual funds—are indicative of greed.

Thu, 12/31/2009 - 12:11 | 178903 Liberdadedescolha
Liberdadedescolha's picture

Feel free to check this chart.

http://1.bp.blogspot.com/_LZb5jzrUPyk/SzzLjEgiZdI/AAAAAAAAAHQ/zbGkLAddJh...

This divergence on RSI will be dadly on the new year, January for start.

Everyone a nice year.
http://midasfinancialmarkets.blogspot.com/

Thu, 12/31/2009 - 12:11 | 178905 Leo Kolivakis
Leo Kolivakis's picture

The folks at TrimTabs claim to be looking at liquidity but they are ignoring the huge sovereign wealth funds in the world, including Norwegian Petroleum Fund, China's CIC, and a ton of other huge funds. Add to this natural global pension flows into stocks every quarter and the trillions from investment banks and hedge funds flush with cash taking leveraged bets, and you see why risk assets are up across the board. The financial world awash with liquidity and asset bubbles will percolate in 2010.

Thu, 12/31/2009 - 12:20 | 178923 Anonymous
Anonymous's picture

"It is unlikely many pension managers were bold enough to boost stock allocation to take advantage of the market rebound since March.

In fact, some pulled money out of the stock market before it began recovering. Northrop Grumman, for instance, held about half its pension assets in stocks in recent years. Sometime in 2008 it cut the target stock allocation to a minimum of 15% from 45%. So by the end of last year, the allocation had fallen to 22%."

http://online.wsj.com/article/SB1000142405274870424750457460462022245651...

Sovereign wealth funds are not going to prop up
the market for years to come, and from all
indications, pension funds did not head into stocks
this year. Sorry Leo, this was the government,
and I have a feeling you'll be the one still
at the party long after the punchbowl has been
taken away and everyone has gone home.

I'll take Trimtabs research over your endless
inability to see that this will not go on forever.

Thu, 12/31/2009 - 13:40 | 179069 Anonymous
Anonymous's picture

blah blah blah blah blah

heard that bullshit almost every single day of the last 10 years

Thu, 12/31/2009 - 12:19 | 178920 vanderrook
vanderrook's picture

As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures.

There's a possible RICO indictment here somewhere; fortunately, these organizations are operating with the backing of "legitimate law" and the Pope's blessing.

Possible counts could include, but wouldn't be limited to:

wire fraud, counterfeiting, theft, embezzlement, securities fraud, bribery, extortion, etc.

 

Thu, 12/31/2009 - 12:22 | 178931 Ripped Chunk
Ripped Chunk's picture

Huh!?!?!?   All SOP in the "new book"

Thu, 12/31/2009 - 13:53 | 179087 Anonymous
Anonymous's picture

Section 14 of the Federal Reserve Act lays out a pretty short list of things that the Federal Reserve is allowed to purchase outright. Mostly, it's short term duration stuff (6 months or less) and notes that are issued by US govt agencies.

That's different than their Section 13 granted rights to lend against anything they feel like in a time of emergency.

Is there a different portion of the Federal Reserve Act that gives them the right to buy whatever they want?

Thu, 12/31/2009 - 14:13 | 179112 Rick64
Rick64's picture

The SEC is on it. Not much gets by those guys.

Sun, 01/03/2010 - 16:15 | 181354 merehuman
merehuman's picture

o yes . Thank the Regulators for a job well done. Without them, who knows, our market may have become criminalized!

Thu, 12/31/2009 - 12:19 | 178921 Anonymous
Anonymous's picture

Remember the words of Obama:

"We will do everything to repair the system".

Everything..........

Rigging the market works, until the day the investors/morons at the NYSE understand that the emperor has no clothes.

Thu, 12/31/2009 - 12:22 | 178929 Anonymous
Anonymous's picture

BREAKING:

FED merged with Kinko's.

New name: "Stinko's"

Thu, 12/31/2009 - 14:27 | 179140 WaterWings
WaterWings's picture

The stock price always goes up when we own 80%.

Where's Cramer with his noise buttons!

Thu, 12/31/2009 - 12:22 | 178930 HappyWarrior
HappyWarrior's picture

 

"The stock market is certainly not too big for the Fed to handle. The foreign exchange and government

   securities markets are vastly larger. Daily trading volume in the New York foreign exchange market is

   $130 billion. The daily volume for Treasury Securities is about $110 billion. The combined value of

   daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ

   over-the-counter market ranges between $7 billion and $10 billion."

 

-- Former Federal Reserve governor, Robert Heller in the Wall Street Journal on October 27, 1989

 

Thu, 12/31/2009 - 12:24 | 178934 Anonymous
Anonymous's picture

Ahhh Sir Barney Frank, Harvard class of 1974. I recall sitting with Barnsie in those days... we would muse about taxation, government theft, and other things...Being a Harvard man he knew well that the government would provide endless riches for he and our classmates on the Wall street. We are entitled to it , you see. A special breed; a special class. One of our classmates, Lawrence Summers, a delicious pederast himself, would tell us of amazing machines that would replicate the 100$ bill over and over without sweat or toil. One fellow a tall Moorish sort, Barrack, would tell us of his fancy notion to nationalize the entire free market of our 50 States. W dare not dream such fanciful thoughts. Dear Professor Bernhake chided our lack of free thinking and progressive notions. But we could only dream of such a society. Ahhh Harvard harvard harvard

Thu, 12/31/2009 - 12:25 | 178939 Cognitive Dissonance
Cognitive Dissonance's picture

A ponzi is only called a Ponzi when there are "victims" with money lost. While I vehemently disagree with any type of market manipulation what-so-ever, regardless of its source, I challenge anyone to find an average Joe who has money in a 401(k), IRA, cash brokerage account, mutual funds, pension or individual stocks who isn't extremely happy that half or more of their losses have been recouped over the past 9 months.

Unfortunately, with nearly everyone listening to the same radio station (WII-FM) we have devolved into a "What's In It For Me" (WII-FM) society. Many politicians, business leaders and average Joes, while half drunk and feeling they can speak honestly, will confess they're actually grateful, even relieved, the government did intervene in the markets, pushing them up.

I heard someone the other day spout a rather remarkable statement that pretty much sums it all up. "You can't worry about tommorrow's meal when you're starving today." The ultimate rationalization for doing what ever it takes to eat today, including destroying tomorrow.

Thu, 12/31/2009 - 12:49 | 178986 SteveNYC
SteveNYC's picture

You are right. Just goes to show how dependent on the government this country has become. Makes Europe look good.

Thu, 12/31/2009 - 13:16 | 179027 Anonymous
Anonymous's picture

Hell, with the capricious, despotic manner in which the last SEC chair on a daily basis outlawed shorting of the stocks of the corporations his buddies "ran" (i.e., used as Ponzi fronts and stole from), we don't only make Europe look good we make Pakistan look good! We make Pakistan look like Switzerland. Learn from the Cherokee: America is a scam run for the wealthy. The Federal government is just the arm of the mafia that won.

Thu, 12/31/2009 - 16:20 | 179295 Anonymous
Anonymous's picture

Not to take away from your point, but the Cherokee probably took a different lesson: all their wealth and assimilation (the Cherokee were probably the Native American tribe furthest on the road to adopting white culture as their own; there were even Cherokee slaveholders) weren't enough to protect them against the executive power of the state.

Fri, 01/01/2010 - 13:27 | 179880 Anonymous
Anonymous's picture

How is that a different lesson? It's exactly the same, just drives home the point that there's nothing you can do to prevent the theft, even signing contracts, winning Supreme Court cases, and assimilating to the mafia's tacit "social contract".

Thu, 12/31/2009 - 12:57 | 178997 Daedal
Daedal's picture

A ponzi is only called a Ponzi when there are "victims" with money lost.I challenge anyone to find an average Joe who has money in a 401(k), IRA, cash brokerage account, mutual funds, pension or individual stocks who isn't extremely happy that half or more of their losses have been recouped over the past 9 months.

I'm not following? Kevin Bacon didn't have any realized losses until this year but that doesn't mean he wasn't part of a Ponzi scheme just because his statement stated he was experiencing a positive return.

Likewise, I'm sure when  Mr. Bacon saw his statements he was satisfied with the amount of bacon Madoff was bringing him. Nonetheless, the Ponzi scheme was in full bloom at that point.

Just because the Fed propped up 401k's doesn't mean that these very people will not be withdrawing a heavily devalued dollar once they start collecting their 401k's or whether or not they will face a much higher tax bracket upon doing so. Your conclusion applies aptly:

The ultimate rationalization for doing what ever it takes to eat today, including destroying tomorrow.

Thu, 12/31/2009 - 13:36 | 179048 Cognitive Dissonance
Cognitive Dissonance's picture

"A ponzi is only called a Ponzi when there are "victims" with money lost."

I wasn't speaking legally but rhetorically. People often determine what is good or bad based upon how they are affected. Very few people have the capacity to step away from their own self interest and actually take a stand that would hurt or harm themselves.

Why haven't "we the people" put up more of a fuss about the blatant governmental and corporate corruption that's being revealed on a daily basis?  Because the average person has made a mostly unconscious calculation that as bad as the corruption is, they are (directly or indirectly) benefiting from the corruption.

People seem to believe, correctly or not, that if the crooks are making money for themselves, "we the people" will also make some money. This perception of mutual benefit has been brilliantly supported by the artificially engineered stock market rise.

This is the perverse reason why for centuries the powers that be have very shrewdly connected the people's well being with the king's well being. Kill the king and you destroy yourself. This may or may not be the actual outcome if you kill the king but it's not facts we're dealing with here, it's perceptions and beliefs. Control the mind and you control the body.

Thu, 12/31/2009 - 13:56 | 179093 Daedal
Daedal's picture

This is the perverse reason why for centuries the powers that be have very shrewdly connected the people's well being with the king's well being. Kill the king and you destroy yourself.

Spot on -- I can't help but draw a comparison between your example and our nanny state. How can we fight the system if we get incentive checks (welfare, food stamps, cash for clunkers, social security, etc etc) not to do so?

Thu, 12/31/2009 - 14:26 | 179139 trav777
trav777's picture

The dollar ponzi helps all of us out.

If we destroyed the FIRE economy, we'd all actually have to - shudder - WORK and produce things.

Instead we prefer to speculate and gamble.

Gresham's Law - counterfeit is cheaper

Thu, 12/31/2009 - 14:38 | 179165 WaterWings
WaterWings's picture

Ding! Then I could quit my job as the overnight mall security and stamp license plates instead.

Yes, the FIRE economy is a slow burn; lots of smokescreen.

Thu, 12/31/2009 - 13:19 | 179031 Tomified
Tomified's picture

No Victims? What about technical and fundamental traders who have seen every bearish pattern busted and ridiculous valuations? What about those who believe in free markets? What about  taxpayers, whose money is being shoveled to the upper echelons (those who own stocks)?

Definitely a Ponzi scheme. Everyone is all money good, only as long as it keeps going up. Should enough of them decide to withdraw their money, then losses all around are humongous. Either that or taxpayers become the last bagholder, just as they are with MBS.

 

 

Thu, 12/31/2009 - 13:35 | 179057 Cognitive Dissonance
Cognitive Dissonance's picture

"No Victims?"

I didn't say there are "no victims." I was talking about how people view crime based upon their own self interest. I'm speaking big picture here. Take a few steps back and look at human behavior with regard to what is considered good and bad. Most people have a severe deficit of empathy unless they themselves have been hurt.

I really wish people would take the time to read something a few times, let it sink in, give it some thought and then respond. Invariably people reading something the first time let their preconceived notions and points of view distort what they are reading. We all do it regardless of whether we admit it or not.

Thu, 12/31/2009 - 16:22 | 179299 Anonymous
Anonymous's picture

Technical trading ought to be renamed "circle-jerking". Tell me what value technical trading adds to the economy.

Spot on with the fundamental traders, though. Seen any of them lately, or are they all buying gold, guns and grassland?

Sat, 12/25/2010 - 07:30 | 829472 h3m1ngw4y
h3m1ngw4y's picture

i suggest you read the following:

http://www.safehaven.com/article/19444/trading-for-everyone

 please notice the following quote

Trading builds honor and integrity like few other things can. Why? You are completely at the mercy of your own decisions. When you make a trade that doesn't work out, and it happens often as losing is a major part of trading, you have no one to blame but yourself. Sadly we live in an era where personal responsibility and accountability are dying, people prefer to blame others for their own poor decisions.

so please put this into the context of your writing.

i like the idea beeing the only person responsible for my own actions. if you dont like the rigged markets, nobody is telling you to trade them.

if i make poor decisions, its my doing. by accepting this i choose freedom of decision over greed.

if you think otherwise (how the markets should work) you are part of the problem not the solution

Thu, 12/31/2009 - 13:42 | 179039 nope-1004
nope-1004's picture

A ponzi is only called a Ponzi when there are "victims" with money lost.

 

A ponzi is only a PONZI when it becomes public knowledge that covert manipulation of financials was taking place.  A ponzi can still be called a ponzi if someone cashes out and wins, but by your definition, a victim who loses money is where the definition lies.

I disagree.  The economy today is one big PONZI.  Gov't intervention in equities, gov't backing insolvent balance sheets, PPT, manipulation of Gold, and desire to lower the price of oil (so that the mid east doesn't gain power) are all components of todays PONZI.

 

But if you want to stick to the "victim" definition, then didn't we all lose money when Ben backed the banks?  Aren't we all victims?

PONZI baby!

Thu, 12/31/2009 - 13:46 | 179077 Cognitive Dissonance
Cognitive Dissonance's picture

I'm not speaking legally or morally. I'm simply pointing out how people are conflicted and often incapable of seeing things from a disinterested point of view. I'm talking about human nature here, not legal definitions or actual damages.

It is in the best interest of a corrupt power structure to encourage selfishness in the people, usually through scarcity of resources. As long as people are chasing their own selfish motivations, they will not band together against the governments tyranny. This is what's going on in the world today. Selfish interests pursued by the citizens means more government and corporate corruption and tyranny.

The act of reaching out to work with others means you must stop (at least for a moment) pursuing your own self interests. This is why governments pit their own citizens against each other. We are so busy fighting for the last few scraps of food we don't take a moment to understand why we only have a few scraps of food. Divide and conquer externally morphs into divide and control internally.

Thu, 12/31/2009 - 19:07 | 179467 Anonymous
Anonymous's picture

Which gives us the answer to why the gubmint would juice the markets - it's not so much about the money poured in - it's more about keeping the game going (not letting the people figure out the magnitude of the scam) so that they can retain power/stay out of jail, etc.

Thu, 12/31/2009 - 14:22 | 179127 Anonymous
Anonymous's picture

check back with us by sept. 2010, and we'll see how many are still smiling.

Thu, 12/31/2009 - 14:30 | 179146 Rick64
Rick64's picture

I agree that most people are happy that the market recovered, but the way they did it was with taxpayer money giving unfair advantages to a few Banks and no transparency at all. Then they over did it to an extent where nobody believes their is any credibility to an actual recovery. They could have toned it down and let a little reality in. I think most people realize that some of it was necessary but overdone at the taxpayers expense.

Thu, 12/31/2009 - 15:04 | 179205 Cognitive Dissonance
Cognitive Dissonance's picture

Rick64,

At first blush your request (They could have toned it down and let a little reality in) sounds reasonable until you understand that there are huge as-yet-undisclosed (and if they have their way, never disclosed) illegal operations, scams, drug money laundering, illegal war financing, Ponzis and other "officially" authorized or enabled black bag or simply corrupt schemes that need to not only remain covered-up but continuously supported as well. Old lies must still be fed, even while they're making new ones.

This rabbit hole is so much deeper and darker than even the most cynical among us realize.

Thu, 12/31/2009 - 19:09 | 179469 Anonymous
Anonymous's picture

Which is why they will resort to ANY MEASURES to keep the game going. The stakes are too high.

Thu, 12/31/2009 - 20:47 | 179537 Rick64
Rick64's picture

Agreed, but they still could have made it a little more believable, and think investors would have returned to the market. I know the whole derivitives market is worth 600 trillion, so I realize that there is much more at risk than they are admitting. A lot of factors including illegal ones come into play that I don't have knowledge of.

Thu, 12/31/2009 - 21:48 | 179565 Cognitive Dissonance
Cognitive Dissonance's picture

I think they DID try to make it more believable but failed for various reasons, at least from our point of view. We will never know what this would have looked like if they hadn't tried to make it look believable because that isn't the route they took.

They lied just enough to allow (enough of) us to indulge ourselves in the lie. I often say leaders lie to enable us to believe the lie rather than face the truth. It's the human version of putting your head in the sand. The lie doesn't need to make much sense when you or I really truly do want to believe what we are told.

The average Joe is so frightened of a total economic collapse that s/he has in many ways reverted to infantile thinking and reacting. It doesn't take much to convince a frigthened little girl that all will be OK, other than a hug and a brave face.

The girl knows deep down you're lying to her but as long as you play the game, she can delude herself into playing her part. False courage isn't hard to muster when you really don't wish to go the other way.

Thu, 12/31/2009 - 15:40 | 179253 Anonymous
Anonymous's picture

Yeah, I call total bullshit. I perfectly timed the crash starting '07 and made a killing. Then I lost it all when the government secretly suspended free markets. I am more savvy than the sheep and deserve to win for my good predictions. That is how an efficient market would work. What we have now is just manipulation, insider trading and bullshit. Go on, dude...buy more, I dare you.

You have to wonder what the long term affect will be of people realizing that the stock market all just bullshit built on lies. I am sure it will not have a happy ending.

What we have now almost seems like reverse equity backwardation! No one willing to buy at any price!

Thu, 12/31/2009 - 21:22 | 179557 perchprism
perchprism's picture

 

I put everything in Treasuries, and missed the plunge.  But I've kept it there, and have missed the entire run-up since March.  Why?  Because the fundementals aren't there.  Now it looks like govt manipulation is why the market isn't behaving in a grokkable manner.  I have no choice but to stay out.

Thu, 12/31/2009 - 12:28 | 178945 Anonymous
Anonymous's picture

Isn't it illegal for the Fed to buy futures? I thought that was what Grayson nearly tore the Fed legal counsel a new one in questioning regarding.

Thu, 12/31/2009 - 15:07 | 179208 Cognitive Dissonance
Cognitive Dissonance's picture

Not if it's declared a national security issue. You can do anything you like if you declare it in the interest of national security. Like torture, illegal wars, false flag attacks, mortgage fraud, etc. You know, business as usual.

Thu, 12/31/2009 - 12:33 | 178953 One Eyed King
One Eyed King's picture

It is necessary to convince the aging and apathetic American Middle class that they still have a hope of retirement in the near future when they go online and check their 401k plans balance, for the powers that be to keep the status quo and those same folks in front of their TV's and not in the streets.

Thu, 12/31/2009 - 12:34 | 178958 Greyzone
Greyzone's picture

Isn't market cap basically defined by last trade price times number of shares outstanding? Hasn't trading volume been ridiculously low? Then why does Biderman think that there needs to be some hidden $6 trillion wealth effect in play here? There is no way that GS could dump all its shares today at its current price. Likewise for BoA, Citi, JPM, or even real producers like IBM, Microsoft, or Ford.

Market cap is a convenient illusion, easily manipulated, especially in the penny stock arena where some of the financials have been dipping their toes in recent months.

Thu, 12/31/2009 - 13:37 | 179061 Anonymous
Anonymous's picture

Bullseye!

If you and I were market makers, we could take a stock that was suffering low volume and mark it to whatever we want; groups of manipulators do that all the time--illegally, of course.

Think of the market as one big float. The whole thing (DJIA, NSDQ, whatever) could be driven up by two "guys" selling back and forth to each other EVEN WHILE DISTRIBUTION WERE OCCURRING! Though, of course, the level the averages could be pumped to would be constrained by the amount of distribution and the amount of money one (two) were willing to lose--or print.

Is the Fed willing to PAL (print and levitate) around with the market? As long as nobody can audit their books, why not? "On a long enough time line" every dollar's value goes to zero...

Thu, 12/31/2009 - 19:11 | 179470 Anonymous
Anonymous's picture

+1000 this is the answer

Thu, 12/31/2009 - 22:47 | 179612 Rainman
Rainman's picture

The banksters ran a similar buy-it up equity scam in 1930. It worked until it didn't. And when it finally didn't, it didn't for a very long time.

Thu, 12/31/2009 - 12:58 | 178998 Anonymous
Anonymous's picture

No kidding, Mr. Biederman. Now watch carefully as all the
the "forbearance" gains from equities are pocketed,
stocks are sold and the funny money is used to support the Treasury debt calendar in 2010. No mistake that bonds are at a low and equities are at a high right here, which will lead to the old switcheroo and more "forbearance" gains in bonds next year. Amazin' what they'll do, ain't it? But all the "dumb" money is still bullish:)

Sat, 01/02/2010 - 06:50 | 180430 Cognitive Dissonance
Cognitive Dissonance's picture

I keep thinking about the $2.5 Trillion that needs to be issued in 2010 ($1 Trillion more than in 2009) and I'm wondering where the money will come from if I can't figure out where the money came from in 2009.

Oh, now I remember. Apparently the catch-all misleadingly labeled "Household" accounts.

Thu, 12/31/2009 - 13:01 | 179005 Anonymous
Anonymous's picture

Welcome to the totally managed economy, USSR-style.

Thu, 12/31/2009 - 13:03 | 179010 Anonymous
Anonymous's picture

please tell me someone else saw kudlow and huffington going at it on cnbc about 20 minutes ago???

Thu, 12/31/2009 - 13:05 | 179013 LB426
LB426's picture

OT:

Arianna Huffington to Larry Krudlow this morning on CNBS, when discussing moving cash out of TBTF banks: "Im sorry, Larry you know you and I have known each other for a long time I have no idea why anybody is still listening to you."

The banter, in this segment and the segment that followed, was classic.

Thu, 12/31/2009 - 13:17 | 179030 Screwball
Screwball's picture

I saw that - classic!  Not a fan of either, but I do appreciate what the HuffPost has done as far as ripping the administration on the financials.  Kudblow can sure dish it out but can't seem to take it.  He was pissed.  Good - fuck you Larry - your nothing but a lying sack of shit, pumper extraordinaire.

When he was bashing the local banks, all she needed to say was; then put the money in a credit union.  That might have put him over the edge.

Thu, 12/31/2009 - 13:35 | 179059 deadhead
deadhead's picture

I do appreciate what the HuffPost has done as far as ripping the administration on the financials

As I have preached on ZH, HuffPo has been brutal on the administration as far as banks, wall st goes.  The important takeaway in my book is that this attack is coming from Obama's most loyal portion of his base.  I think the ramifications are enormous and will force Obama's hand in 2010 in terms of his subservience to the Bernanke, Summers, Goldman, JP Morgan complex.

p.s. Geithner's name left out on purpose because he is Larry's water boy and will get the boot in 2010.  Rahm will blame everything on Geithner.

Thu, 12/31/2009 - 13:47 | 179081 Screwball
Screwball's picture

Couldn't agree more DH, and I know you have.  It takes some nuts to do that IMHO.  Anytime AH or HP is brought up, many people just cringe, and by reflex, attack.  They tend to shoot the messenger, and not the message.  Hell, even Hitler said some pretty smart things.  People need to remember that.  You can learn something from an idiot if you can filter out the souce and focus on the message.

By the way, thanks for your contributions here, and keep up the good work.

Thu, 12/31/2009 - 20:52 | 179540 deadhead
deadhead's picture

Anytime AH or HP is brought up, many people just cringe, and by reflex, attack.  They tend to shoot the messenger....

Many people are unaware that Arianna was a genuine conservative for most of her life....she fully understands the conservative economic thinking model and practiced it for years....i think i recall reading that it just dawned on her one day that too many people were still being left behind economically or something to that effect.

She is putting a massive effort into the "move your money" project encouraging people to yank deposits from the TBTF banks and place with community banks....I'm sure that this has the TBTF (not gs, ms but traditional banks) crew very uneasy. 

 

 

Thu, 12/31/2009 - 14:47 | 179179 WaterWings
WaterWings's picture

I can't figure it out. It's like a Taibbi article: Look! Theft! Those rascals! (but don't actually do anything about it)

This slow motion fiasco is really just the average American accepting the corruption as the norm. They don't want to 'steady the ark' of the Fed gods - "I have a job for crissakes. I have kids to feed." 

 

Thu, 12/31/2009 - 16:07 | 179284 Screwball
Screwball's picture

I agree, but what can we really do?  I have written my congress people many times, even ones that are not in my state.  It doesn't seem to make a difference - see the original bailouts of 100:1 against - they do what they damn well please.  People bitch and moan, and maybe write, but in the end we have no voice it seems.  Frustrating, but I have hope someday the tide will turn.  It might take an epic event to cause it, but even the market crash and 9/11 didn't seem to matter.  After a time, it's right back to same ole, same ole.

 

Fri, 01/01/2010 - 15:50 | 179992 msjimmied
msjimmied's picture

I find the steep learning curve imposed by ZH exhilarating! I am absolutely guilty of posting links to ZH at Huffpo. The giddy adulation for Obama on the site is gone, and so is the hope for change. There is something to be said for laying bare the facts so that collectively the base turns...As a group, the comments here are of a much higher caliber, you guys understand all the facets of the market and the possible cause and effect. Perhaps if more of you would migrate out and preach where the preaching is needed, we can reach critical mass sooner. You are going to have to shift gears though to get through to them. Realize there are more of them there and here. Help them with their comprehension on financial issues, nothing is difficult if you allow yourself to learn, and they will, they aren't dumb, just not as well versed as you guys...We need to change course, we need to pull together. I do not want to waste years watching this play out. I don't want to buy a gun damn it! Even though you guys say it more eloquently than the average poster on Huffpo, it's the same sentiment. We the people voted for change, millions of us can deliver it.                   

Thu, 12/31/2009 - 13:28 | 179050 tinfoilhat
tinfoilhat's picture

I'd rather slam my genitals in the decklid of a rusty '59 Chrysler than listen to that woman's prattle ... but it was an amusing moment when she handed Kudlow his ass.

Thu, 12/31/2009 - 14:45 | 179177 ahab
ahab's picture

no doubt-  her voice causes severe genital shrinkage- however she has been on target with some of her criticism-

the commenters on HP are probably the dumbest fucking people alive however

Thu, 12/31/2009 - 16:25 | 179301 Anonymous
Anonymous's picture

Everybody's got their own idea of fun. Enjoy!

Thu, 12/31/2009 - 16:36 | 179313 Zippyin Annapolis
Zippyin Annapolis's picture

Larry and Adrianna parted ways after Larry gave up the coke and Adrianna started snorting Newt Gingrich.

Fri, 01/01/2010 - 08:28 | 179756 Rick64
Rick64's picture

That was priceless. Finally somebody stating the obvious. Look at Kudlows body language and then his loud denials and comprimising stance to take the spotlight off his incompetant calls before the market crashed. He would have been a natural in politics.

Thu, 12/31/2009 - 13:05 | 179014 Anonymous
Anonymous's picture

please tell me someone else saw kudlow and huffington going at it on cnbc about 20 minuts ago????

Thu, 12/31/2009 - 13:25 | 179045 Anonymous
Anonymous's picture

Exactly greyzone. There doesn't have to be 6 trillion in dollars. It is all an illusion.

Thu, 12/31/2009 - 13:30 | 179052 Anonymous
Anonymous's picture

I think a huge asset to the Fed in manipulating the market has actually been blogs like this one. With much smarter and insightful people pointing out every policy blunder and potential market top on the charts... it's no wonder that the market seems to stay mysteriously one step ahead of every market correction.

Everyone knows about the 'invite only' gathering at the Treasury a couple months back with top bloggers, so it's no secret they're spending some serious time scouring these blogs. Zero hedge and others have basically been doing their work for them.

One of the only remedies I can think of is STOP SHORTING the market every time there is an outcry from the blogosphere that we're at a potential top. We're probably providing the only tiny bit of kindling that's keeping this charade going. I say, take January off. Let the market just finally implode in on itself with no shorts available for the Fed to suck the market higher.

Thu, 12/31/2009 - 13:31 | 179054 miker
miker's picture

Fed is behind stock market rally.  Fed and other Central Banks are working to keep gold price from moonshot.  Fed and US Government along with Saudis are keeping oil prices from collapsing and igniting a deflationary spiral.  Keep an eye on Audit the Fed legislation!  I doubt it will ever pass, but if it starts to get close; prepare for market collapse.

Thu, 12/31/2009 - 13:44 | 179073 Anonymous
Anonymous's picture

Remember the point near the March lows when Obama looked straight into the news camera and said, "Now would be a good time to buy stocks"? Don't say you weren't warned.

Thu, 12/31/2009 - 15:12 | 179218 Anonymous
Anonymous's picture

When do you believe a liar? An unmitigated liar?

If he was truly interested in having the plebes buy, he would have made a much stronger case than simply 'warning' us as you write.

Congratulations if you did buy and hold till now. I wonder how many others but insiders did hold. Afterall, the only way the market could have risen 60& on NASDAQ is if there original buyers who sold in April, May, etc.

Thu, 12/31/2009 - 14:16 | 179115 Anonymous
Anonymous's picture

BTW - Stock market continues to pay dividends of 2-3% annually. Those decrying how its all BS always seem to neglect that. Rally since March is driven by finally getting some better regime in financials (removal of MTM) which caused Q1 earnings at BAC, GS, etc to be fantastic. At the same time, all economic indicators ticked up (have you noticed that leading indicators have had there best run since 1982, new jobless claims are down from 700k to 430k this week). KMX beat Q3 eps estimate by 155%, JPM beat Q3 eps estimates by 40%, majortity of companies beat estimates in Q2, Q3 and will again in Q4 (already baked). Risk takers have made massive money the last 12 months. This is likely to continue.

Smart risk taking almost always beats defense. Try it.

Thu, 12/31/2009 - 17:54 | 179400 Anonymous
Anonymous's picture

So sorry, I'm not buying overpriced dogshit
on your recommendation:)

Thu, 12/31/2009 - 18:03 | 179407 Anonymous
Anonymous's picture

So sorry, I'm not buying overpriced dogshit
on your recommendation:)

Thu, 12/31/2009 - 14:23 | 179130 Astute Investor
Astute Investor's picture

I wonder if the Fed has an offering circular available so I can co-invest with them in 2010...

Thu, 12/31/2009 - 15:13 | 179219 Cognitive Dissonance
Cognitive Dissonance's picture

Support their fiat greenback and by extension, you are a co-investor.

Thu, 12/31/2009 - 14:25 | 179137 firstadopter
firstadopter's picture

Isn't it obvious? Fed is letting banks like Goldman, JP Morgan, Morgan Stanly etc. to borrow unlimited amounts of money at 0%, so they can buy stocks, bonds (with much higher yields than 0%), commodities, and futures.

It's like free profits. Borrow at 0% and even buy Treasuries with that money. You save the banking system plus goose the stock market and keep Treasury yields low.

Crazy stuff.

Thu, 12/31/2009 - 14:30 | 179149 ozziindaus
ozziindaus's picture

If a stock price goes up in the market and nobody's invested in it, has it really gained value?

Thu, 12/31/2009 - 15:31 | 179238 Anonymous
Anonymous's picture

Price!=Value

Thu, 12/31/2009 - 14:49 | 179185 orangedrinkandchips
orangedrinkandchips's picture

Thank you so very much!

There have been times in my life where I have seen things that were not right and I knew it since I was probably tripping...Now I know for certain BB and friends are taking it STRAIGHT FROM THE BOND SALES TO THE FUTURES MARKET. Yet I start to doubt my cynical side right when it's so right on. I was born yesterday but stayed up all night.

The Market was the only way out of hell for BB et. al. I mean it becomes obvious sometimes when all the news is very bad yet we rally. Sure.

It's a put on...a total put on

Thu, 12/31/2009 - 15:32 | 179239 the grateful un...
the grateful unemployed's picture

In 1987 Geo HW Bush walked down to the floor of the NYSE about day 3 of the crash, and pledged government money to Wall Street, and that was the inception of the Presidents Working Group on the Financial Markets. Since then Bernie Schaffer and others have been opining about the Plunge Protection Team, entering the market at critical points, and buying futures, especially around expiration. The only thing you can say about the conspiracy theorists is that they missed the degree of the intervention by ten fold, and the preemptive strike launched by Paulsons old company, Goldman, which was to pull the plug on their rather large derivative position with AIG, and THEN go the Congress asking for taxpayer money to bailout out AIG, which was a direct pass through. 

Taking these economic statistics seriously, Biderman confirms our collective capacity to trust in a thoroughly opaque and corrupted system. (Should Paul and others succeed in auditing the FED you will see a classic diversion; buyoffs, threats, people dying in sky diving accidents who have never been sky diving)

By way of analogy I offer this minor scandal in horseracing, which happened a few years ago. The problem seemed obvious to most players, that the odds on the winning horses were going down DURING the race. Someone was betting after the race had started, it was happening pretty much everywhere, and with the new high tech national betting pools, the reasoning went, that the odds were late being posted, because electronic transfer of information lagged the opening of the race (although you trade stocks real time, don't you?) And the late money was right about 95% of the time. Then a couple kids from Drexel U figured out a way to late post the pick six during the Breeders Cup. They won the pick six, but unfortunately for them they were too piggish, and entered four identical winning tickers, which they posted from an offtrack site, through a glitch. One of them worked for the company which handled the information transfer.

Anyway they got caught, but that had nothing to do with someone betting the horses after the races had started, but it did illustrate to sceptics that the system could be hacked.So a prominent handicapper filed a lawsuit, to make the parties involved open their books.

The lawsuit failed, but something happened. The problem stopped, without comment or explanation. Suddenly 5-1 on the winner meant 5-1, and not 8-5.

The question lingers who was doing it? I have my own ideas, the race tracks were doing it. They were tagging on their own extra surtax. Tracks are struggling, many would be broke without casino money. Now we get to state and federal governments, the Plunge Protection Team, the Presidents Working Group, and smart guys from Yale and Harvard. Ya think?

Thu, 12/31/2009 - 19:19 | 179475 Anonymous
Anonymous's picture

+1000 that's the ticket - same thing goes on with Medicare fraud - it's the healthcare providers doing it. The otherwise legit actors. Extend this example to anything you please.

Thu, 12/31/2009 - 15:49 | 179265 Anonymous
Anonymous's picture

I am personally responsible for the $6T infusion.

-V

Thu, 12/31/2009 - 16:03 | 179278 Anonymous
Anonymous's picture

Asset Allocation shifts need not be as obvious and explicit as bonds - > equity. Why not Treasuries & Agencies -> Corporates High Grade -> High Yield -> Equities _> Commodities & every other asset class imagineable. 2 Tr can do a lot indirectly....

Thu, 12/31/2009 - 17:20 | 179364 Mark Beck
Mark Beck's picture

My ZH friends, please, lets look closer at the TrimTabs bubbly words, of net worth. 

The great myth #1; owning equities = wealth.

Equities can only provide a return upon conversion, that is, finding a buyer. Equities have the opportunity to create wealth (a return), as futures tend to indicate broadly. What is important is not your stock holdings, but strategies for conversion, in and out. Equities are not liquid until they are converted. 

Well why is this important, because your real net worth does not just depend on the current stock price, but on the disposition of buyers. Your ability to convert.

One example, is if you hold a lot of shares and wish to convert. Lets say, the sale of your 3% of a company will take 10 trading days. But, what you find is as you sell, the price starts to drop, and you incur fees. So, the market will dictate your final conversion price, not your original holdings. This is often viewed as volatility, but strategies to beat it, in the end, are only as good as your ability to find buyers. In the equity market place, finding a buyer is your real goal. Without a buyer you hold a share, what the share is really worth, is out of your control. Unless of course you hold controlling interest in the company. 

The TrimTabs article is one of "who is buying", because identifying buyers is how we convert. One abstract way to look at this, is to imagine who would have the money to buy what you are offering. What is their opportunity and financial position to be a viable buyer? So often we can surmise their actual financial position based on what they can buy. For example, funding purchases while trying to de-leverage debt. How can somebody with huge debt and no access to credit buy something?

----------

In the end, a truly profitable business, a company that you want to own shares in, lets say, is only as good as the people running it and its own equity position. Not the share price.

The best kind of ownership, in our new era of corporate greed with corrupt management, is controlling interest. Ask Warren Buffett why he did not just invest in the Railroad, but wanted controlling interest. Because, ultimately without ownership you cannot directly control equity appreciation and growth. Also, if you really like the underlying assets, you must take controlling ownership in order to secure your investment.

----------

It is in understanding conversion, where you can see why it is easy to manipulate the perception (futures, or some indicator) of liquid net worth. But futures essentially are personal contracts, a bet, nothing more. The real power lies in how they can be used to leverage perception (skew indices), with a relatively small amount of capital.

**********

The great myth #2; Higher equities = a healthy economy.

Is the government plunge protection team playing the investment community as "SUCKERS". A form of high tech propaganda? A public happy button? Nothing more. If I may, a scam? 

Really, if engaged in this behavior, our government overseers at the FRBNY, must not be fooled by their own ruse and call it reality. They are not fixing anything, they manipulate perception. In the end all of their energies could have been spent on more productive endeavors. All this wasted money and energy to create a lie.

----------

The equity market place is not the core of our economy, to me it has no more important than the farmers market held every weekend on main street in the summer. A place of exchange, of trade. This activity, is in no way an indication of our guiding principles, or strategies created thereof, in formulating the Nation's economic policies and well being of its people.

Now the market has its functions; capitalizing new companies, brokering transactions and so forth, but see it for what it is.

Mark Beck

Thu, 12/31/2009 - 18:49 | 179452 Anonymous
Anonymous's picture

Myths indeed! You should tell the MSM/CNBC to stop affirming those 2 false equations. And even if you succeed, it is doubtful (that after 2 decades of brainwashing by MSM) whether most americans are thoughtful enough to understand basic truths.

Thu, 12/31/2009 - 19:21 | 179476 Anonymous
Anonymous's picture

All this wasted money and energy to create a lie.

But that was the intention. The lie is the MOST IMPORTANT PART.

Thu, 12/31/2009 - 18:07 | 179414 Anonymous
Anonymous's picture

WTF? Today illustrates we were out of morons willing to
pay 25 times earnings for a 2% GDP. Not to worry, we
have lots of morons.

Thu, 12/31/2009 - 19:33 | 179482 Anonymous
Anonymous's picture

Trimtabs' analysis would be much more useful if it discussed government purchases in terms of liquidation. How is it a move in the liquidationist gambit? It's a dead end to say the government wants to "prop up the market" or "improve the economy." That tells us nothing about overall policy. Among other things, if those were the goal, there are many ways to achieve it except by propping up the market. So something else is going on.

The main problem with economic research is that there is little literature on liquidation. It's not so much that liquidationist periods have been short. It's that when economies "recover" there's less interest in liquidationist policies. The fact that during the Depression 3/4 of workers kept their jobs, has stifled interest in liquidationist proceedings of the 1930s, along with the notion that Hoover may have been a liquidationist, but FDR was not.

They both were. If we studied the liquidationist process, we would do less reading of our thoughts into government officials. Actors in those positions don't think like you and me--they are expressions of liquidation.

A big area which is severely understudied is supply chain deterioriation. That's infected transportation, and it is now moving to agriculture. Supply chain deterioration is another expression of liquidation.

On ZH, I read far too many ad hoc responses. It says to me that ZH writers don't have sufficient intellectual ballast. They're like batters not quite sure what the pitcher will pitch next. But chance is not at work here--liquidation is.

The blind spot is that many of the ZH writers' presumptions are liquidationist doctrines. They don't realize it. Or maybe they do!

Sat, 01/02/2010 - 01:02 | 180346 RockyRacoon
RockyRacoon's picture

Thank you for your post.  I may not have comprehended fully enough to determine whether you mean that liquidation is an intentional FED policy, or that it is coincidental to policy.  Which do you see and why?  Or is the FED focused on the issue at all? Thank you in advance for your reply.

Thu, 12/31/2009 - 19:39 | 179488 Anonymous
Anonymous's picture

I have used a mean reversion trading strategy for years, has worked consistently well (65% to 70% of the trades are winners), until last March. Since then, it's all screwed up. The market has not traded "normally" since then.

Maybe that's why Merrill, Goldman, UBS etc continue to stay bullish? They know the "fix" is in? Morgan Stanley is looking ahead to when it all blows up, which is why they have a different take. Everyone else is taking this market at face value, and is scared to death. A little cynicism, applied correctly, can be very profitable in here. But the music stops, always, sooner or later. Personally and for clients, I am roughly neutral. Too dangerous either way.

Thu, 12/31/2009 - 20:34 | 179528 poydras
poydras's picture

The high correlation between all world indices weakens a domestic intervention hypothesis.

Mon, 01/04/2010 - 09:45 | 181880 Anonymous
Anonymous's picture

"The high correlation between all world indices weakens a domestic intervention hypothesis". I initially thought this as well but it is often a case of tail wagging the dog. US action often causes other markets to follow. I also podered whether intervention was really unilateral and given the "orchestration" of the bailout globally and China's propensity to support its markets in past meltdowns that its entirely possible Chinese leadership led to global gov't intervention in the markets. Whether most of the funds originated from the Chinese sovereign funds or quantitative easing across the globe the net result was that we may have missed out on a true throw in the towel type bottom where the peg ratio's are ridiculously low...etc. Most of the century low valuation ratio's weren't even approached. Frankly this may throw a ringer in some valuation strategies since you now have to figure out when the emotional lows are AND have to figure out where gov't intervention starts in case they prevent the natural lows from occurring.

Thu, 12/31/2009 - 21:51 | 179567 Anonymous
Anonymous's picture

I can no longer count the times that the market has gone up this year on terrible news. The final straw was the rally the day the U3 hit 10.2%. then the final final straw was the 2nd downward revision of 3q GDP. Today it is the downward revision of Chicago PMI, news not 24 hours old, and it is revised lower. Never higher. Always worse.

It is all a big lie ponzi scheme , but if you have been all in, you are doing well for the year. They killed this short... Now that I'm long it will rollover very soon. Maybe today was the start..

Fri, 01/01/2010 - 00:54 | 179679 Grand Supercycle
Grand Supercycle's picture

 

I use technical analysis and more people should study share price trends in my opinion. 

Technical analysis can also assist us as to the direction of the economy.

The primary trend for the stockmarket has remained down since early 2008.

The rally since March 2009 has been a bear market rally contained within a much larger bear cycle that started in 2000.

http://www.zerohedge.com/forum/market-outlook-0

Fri, 01/01/2010 - 03:50 | 179729 Anonymous
Anonymous's picture

Hello from Pinefox

The first time I heard Obama say something like "I think now would be a good time to buy stocks" I had some kind of a physical reaction to that statement.It stopped me in my tracks. I immediately thought the "fix" was in because that would be an incredibly dangerous statement to make if it wasn't! If the Pres. encouraged people to buy stocks and the market cratered, the damage would have been incredible. I thought how irresponsible of him to encourage people to put their money at risk when they had just lost close almost half of their retirement funds. I didn't know about the Plunge Protection Team at the time. I couldn't trust in my instincts, and I didn't stay fully invested so I lost some $, but I am convinced the stock market is rigged and that the music will stop. The financial condition of the country is much worse on every level, personal debt, government debt, state debt, lower tax revenues, lower personal incomes etc. etc. etc. So, when the music does stop, it will be ugly.
Try to have a Happy New Year,

Fri, 01/01/2010 - 05:45 | 179740 Anonymous
Anonymous's picture

This rally has been a long short squeeze. It wouldn't have taken much intervention to sustain this rally. ZH has repeatedly reported coincidental buying on the dip. This would have been enough to send a message to shorts to close their positions.

The oldest cliche is "Don't fight the Fed". The Fed inflating the equity markets is the best bullish signal.

Fri, 01/01/2010 - 05:46 | 179741 Pinefox
Pinefox's picture

Also, no one can trust any numbers that come from the government as has been said before.

Fool me once etc.

Fri, 01/01/2010 - 06:00 | 179742 Pinefox
Pinefox's picture

When I heard Obama tell people "I think now would be a good time to buy stocks" I knew the fix was in. It stopped me in my tracks. If he encourage people who had just lost almost half of their retirement savings to invest in the market and it cratered,the damage would have been serious. I remember thinking what an irresponsible thing it was to say. I didn't know about the Plunge Protection Team then. I think it is rigged and when the music stops it is going to be ugly and the music will stop.

Fri, 01/01/2010 - 08:46 | 179762 Reductio ad Absurdum
Reductio ad Absurdum's picture

The answer is that it doesn't actually take $6 trillion to raise the value of the stock market by $6 trillion.

Here is an extremely simplified example to make things clear:

-----------------------------
Let's say there's a company with ticker symbol XYZ that has 1 billion shares of stock outstanding. Lately, XYZ's stock has fallen to $1 per share. Now assume (for utter simplicity) that on a particular trading day there are exactly 2 market participants: one person selling XYZ and one person buying. The seller offers to sell a single share of XYZ for $6000 dollars(!), and the buyer, incredibly, buys the one share at that price.

After this transaction, the value of all XYZ shares becomes $6000. Instantly the market capitalization of XYZ jumps to (you guessed it) $6 trillion dollars ($6000 times 1 billion shares).
-----------------------------

Notice that in this theoretical example only $6000 dollars was spent, and it caused the overall value of the market to increase by $6 trillion (well, $6 trillion - $1 billion...).

So now every shareholder in XYZ had their wealth multiplied by 6000 times, right? Well, just wait until they try to cash in their shares.

Sat, 01/02/2010 - 00:12 | 180313 Anonymous
Anonymous's picture

Close ... Now that the stock is $6k a share I am selling. Good thing some sucker noticedcrhe momentum and wants in. Like thevreal estate bubble, the greater fool theory prevails until you run out of fools. Luckily for now, I have the ppt ensuring there are fools in endless supply.

Fri, 01/01/2010 - 09:01 | 179764 Anonymous
Fri, 01/01/2010 - 12:25 | 179834 Anonymous
Anonymous's picture

This is a silly article. You don't need money at bid to change prices. You just need a change in the perception of value amongst market participants.

ie, if for some reason I own a rental property with mkt price of $100k and rents double, I am suddenly not willing to sell for less than $200k. Bid at the market doesn't matter.

Same with stocks. Earnings have recovered, sellers' willingness to sell (supply curve) is pushed to the left.

Trimtabs logic credibility out the door.

Fri, 01/01/2010 - 12:27 | 179836 scriabinop23
scriabinop23's picture

This is a silly article. You don't need money at bid to change prices. You just need a change in the perception of value amongst market participants. ie, if for some reason I own a rental property with mkt price of $100k and rents double, I am suddenly not willing to sell for less than $200k. Bid at the market doesn't matter. Same with stocks. Earnings have recovered, sellers' willingness to sell (supply curve) is pushed to the left. Trimtabs logic credibility out the door.

Fri, 01/01/2010 - 15:02 | 179955 Anonymous
Anonymous's picture

if you bought good stocks between nov and march, you had a plan, what is you're reason too sell, ie, distrubute now

if you bought junk stocks after march, what is you're reason too sell

in full disclosure, i always assume i'm the market, what is my own perception, i was 80% out after the black swan in aug of 07 when all markets dislocated

in 08 although convinced it was a sell all year, i was mainly long 20%, 20% of the time, buying big sell-offs

so on one side i did great, better than most, since the lows, well, i understand don't fight the fed, i understand he wanted money to take risk, yet, sorry, changing laws, dissolving accounting standards is not my idea of wanting to incur that risk, imho, banks are screwed and have been

so, where do i stand, piddling returns, piddling positions, maybe i'll be proved right in the long run, last man standing with cash, again who knows

most of the fund guys go for 3-5 year holds, or proclaim too

so, i imagine, many who got out, missed the downside, did not get back in, and remain tepid

my main mistake, no way in hell did i see copper tripling when mfg was crumbling, i thought it would be a slower grind

no matter what anyone says, no company can budget now worth a crap, what are you're costs, everything is so all over the board, yeah, huge conglomerates lock in hedges, yet, not all companies do

inflation/deflation, who cares, commodities continue, like oil hitting a hundred, imho, that is the corner they are painted in, all the refi's done when oil was avg. 50 a barrel, the lower and middle get's squeezed every 50 cent increase in a gallon of gas, avg familiy uses 40 gallons a week, cumulitive over the year that's a real hit to expendable income

Sun, 01/03/2010 - 01:05 | 180996 Anonymous
Anonymous's picture

Of course the market was manipulated, and of course the rest of the world largely followed. Just look at the European markets late in the afternoon, if the American go up, so does the Europeans and vice versa.
Thus little independent thinking or action, herd mentality.
But, as the say, the trend is your friend. Just don't forget, it is smoke and mirrors, and the trend can turn on a dime. The higher prices have been obtained and sustained with worthless computer digits, not even worthless paper money!!. The day there is no idiot behind you to sell the scrip to, then there is no value. That day will come, it is unavoidable like 2+2 is four!
There is only one way to counter this. Invest in something you can control and monitor, remove your savings from institutions where you count for nothing and where you are abused on every turn, hold gold for your savings and enjoy life irrespective of the criminals in charge. Don't let them rule you!

Sun, 01/03/2010 - 03:02 | 181030 Anonymous
Anonymous's picture

See the stocks stealth bull market, dark pools have been accumulating whilst perma-bears have scared small investors into NOT investing, which is why volume has been light

http://www.marketoracle.co.uk/Article9435.html

Sun, 01/03/2010 - 15:24 | 181306 Anonymous
Anonymous's picture

I've been wondering about that.

You have to remember that price is set when buyers and sellers agree on....a price.

It takes two to tango and two things can push up prices (1) lots of buyers (2) not many sellers.

Where I ended up in my (brief) deliberations was that well it's hard to distinguish REAL buyers and REAL sellers now that they have supercomputers gaming the market.

So even though it's impossible to tell from the volume statistics, perhaps the reason was that the people who owned stocks, just decided they were going to hold out until they got a better offer... and they did get a better offer.

That's not a conspiracy, that's the way markets work, like "I'm going to hang around with my cow until I get what I think it's worth".

I really cannot believe that having been chastised for taking crazy risks the banks took money from the Fed discount window and gambled it on the stock market - particularly since they knew that the whole world was looking. That simply defies belief.

In any case they could make great money just borrowing from the Fed at 0% and then lending that money to the Treasury at 3.5%, with no real risk.

The other thing is that the bottom and the rally were so predictable, it was almost textbook (if you were reading the right textbook), what happened is how markets left alone are supposed to work.

Incidentally, whether this computerized milking of millions of cents out of the system is "Good" or "Bad", I reckon that once piece of information that investors should be provided with is how much of the "Volume" is computers playing games with each other, and how much is willing sellers and willing buyers looking to do business.

Mon, 01/04/2010 - 16:50 | 182328 Anonymous
Anonymous's picture

Didn't you understand that before ? It was obvious throughout the year 2009 that Fed was buying through Banks and MMs, otherwise, people did not have money to invest in stock market. They proped it and they will have to maintain it so 2010 will be bigger then this otherwise Obama adm won't be able to show in next election that they eliminated the national deficit by such and such amount.

Wed, 01/06/2010 - 11:45 | 184311 Anonymous
Anonymous's picture

The observation is logical. If the stock market corrects again money will immediately flow from treasuries into equities. The net effect is that interest rates will need to rise to make treasuries attractive. If interest rates rise it will immediately halt any hope of a financial recovery which in turn would generate not only a double dip recession but possibly the second leg would be a full out depression.

Thu, 01/14/2010 - 20:30 | 194420 Anonymous
Anonymous's picture

Then: Obama said its a good time to buy stocks.
Now: Fed reserve says it made 45 billion.
Any relation between the two?

Wed, 02/23/2011 - 01:33 | 987711 shawnlee
shawnlee's picture

When I heard Obama tell people "I think now would be a good time to buy stocks" I knew the fix was in. It stopped me in my tracks. If he encourage people who had just lost almost half of their retirement savings to invest in the market and it cratered,the damage would have been serious. I remember thinking what an irresponsible thing it was to say. I didn't know about the Plunge Protection Team then. I think it is rigged and when the music stops it is going to be ugly and the music will stop.Strange for me,
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Wed, 04/20/2011 - 05:23 | 1187215 shawnlee
shawnlee's picture

When I heard Obama tell people "I think now would be a good time to buy stocks" I knew the fix was in. It stopped me in my tracks. If he encourage people who had just lost almost half of their retirement savings to invest in the market and it cratered,the damage would have been serious. I remember thinking what an irresponsible thing it was to say. I didn't know about the Plunge Protection Team then. I think it is rigged and when the music stops it is going to be ugly and the music will stop.Strange for me,hp practice exam \ icnd practice exam \ iseb practice exam \ jncia practice exam \ juniper practice exam \ test king \ mcdba practice exam \ mcdst practice exam \ mcitp practice exam \ mcpd practice exam \ mcsa practice exam \ mcse practice exam

Mon, 04/25/2011 - 07:05 | 1202892 george22
george22's picture

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Tue, 06/14/2011 - 03:08 | 1367058 kummar
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In other words, the very banks that Europe is bailing out are betting more and more aggressively with each passing day against Europe's own survival! Even George Soros

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Mon, 07/11/2011 - 01:45 | 1442784 john310
john310's picture

The absolute funniest part of this whole thing is watching the pols scramble to try to manage the economy, which is, of course, impossible. What is revealing about it is this: they still have their heads stuck firmly in the old paradigm, the one they grew up with, inculcated in them by Greenspan, that the Fed has always got their backs, that the system can go on forever based on lies and borrowed money scbcd dumps/scmad dumps/VCP-410 dumps/350-001 dumps/640-802 dumps/70-680 dumps/642-813 dumps/350-030 dumps/642-902 dumps/PMI-001 dumps

Mon, 07/11/2011 - 22:47 | 1446462 the grateful un...
the grateful unemployed's picture

i've listened to Biderman and he looks like Bambi staring down a Mach truck. with ZIRP a reality money must go somewhere. here's an interesting aside, look at the chart of the TIPS etf. if you look at the auction results you would throw up, 2 to 4 points premium to par, 0% fixed rate, real return NEGATIVE, and investors are buying these things hand over fist. Existing Tip bonds which are really NOTES, have any where from 10 to 20% premium. NOTES, not bonds. who is buying stocks (shhhh, no one) whic means the Fed picks up the slack on low volume days, or weeks, or near options expiration. its easy right now, but its like fighting off a runaway asteroid with a badminton racket.

Tue, 08/16/2011 - 00:55 | 1564241 newdeals2
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