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Will The Fed Let The Stock Market Crash Before An Election?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Anyone in their position with the tools at hand would not have any other real option other than to buy stocks in whatever quantity is needed to reverse the selling and blow the shorts out of the water.
Since I'm writing this on Sunday evening, if the Dow Jones Industrial Average opens down 1,000 on Monday morning, I'm going to look very foolish. Such is the risk of being contrarian. So what's contrarian now--expecting a crash or expecting a bounce and rally?
Exactly what the sentiment consensus is right now is open to debate. Analysts expecting a stock market crash see those expecting a rebound as the consensus view.
But if we look at various measures of sentiment such as the Put-Call Ratio and greedometer.com, we find elevated levels of fear over the past few weeks. The consensus can hardly be said to complacent when the VIX index is over 20.
Let's set aside sentiment measures and technical analysis and ask a larger question: will the Fed let the stock market crash before an election? Once again we find two camps among participants. One camp believes markets still obey the basic rules of technical analysis. The Fed and other central banks may intervene at the margins, but their interventions only work on low-volume days. When selling increases, it overwhelms the relatively modest size of central bank intervention and the market then crash.
The other camp holds that all markets are now engineered, and intervention can reach essentially unlimited levels if the Powers That Be deem that necessary. I covered this view in Have We Reached a Financial Singularity? (September 4, 2014)
For context, let's recall that the Fed conjured up $16 trillion to backstop global banks in the Global Financial Meltdown; (the Levy Institute came up with $29 trillion after poring over all the data):
To put $16 trillion in context, note that entire gross domestic product (GDP) of the U.S. is about $17.3 trillion, and all residential mortgages in the U.S. total about $10 trillion.
Long-time readers know that I see the Federal Reserve as an intrinsically political entity. Though it casts itself as an independent institution that's above the political fray, this is simply good PR: the Fed is as political as any other institution of the central state.
What would happen to incumbents in the election a few weeks from now if the stock market crashes? The happy story--that all is well and you would be wise to re-elect the incumbents responsible for the economic good news--would be reduced to rubble.
One can only imagine the phone calls being made to Fed governors by politicos of both parties suggesting that it would be a terrible shame if all the hard work of those in power was destroyed by a needlessly destructive market crash.
We can also imagine similar calls being made to officials in the Bank of Japan, the European Central Bank, etc.
We know central banks are openly buying bonds and stocks, either directly or through proxies. What possible reason would the central banks have to suddenly reverse their interventions and stand aside right when the global markets are in meltdown?
Thus we can also imagine some conference calls being made this weekend to coordinate intervention on whatever scale is necessary.
If central banks have learned anything since 2008, it's that waiting around for the panic to deepen is not a winning strategy.
We can also ponder the psychological consequences of the vast expansion of intervention. Where prior to 2008 the Fed and other central state players might have viewed $10 billion as a major intervention, what do you think whatever it takes is now? Do you really think $1 trillion would give those in charge pause? Since we're talking about propping up a $160+ trillion edifice ($80 trillion of assets in the U.S. alone), what's a trillion or two between pals?
Some observers think it bearish that no central bank has stepped up and announced a new easing program. I reckon the central banks have fully grasped that the public is now skeptical of PR campaigns, and so the smart move is to avoid public jawboning in favor of buying the assets directly, in whatever quantities are deemed necessary.
Put yourself in their shoes. Isn't this what you would do, given the dearth of alternatives and the very real risks of implosion? Anyone in their position with the tools at hand would not have any other real option other than to buy stocks in whatever quantity is needed to reverse the selling and blow the shorts out of the water.
If $1 trillion doesn't do the job, make it $3 trillion, or $5 trillion. At this point, it doesn't really matter, does it?
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The Federal Reserve will do whatever it takes to keep their bankster population alive and prosperous. Even if it means stealing from everyone else, by robbing accounts.
Corzine is one example of many banksters.
If central banks have learned anything since 2008, it's that waiting around for the panic to deepen is not a winning strategy.
This is the key take away from the article.... The question is timing of the button push, or stick save, with the bots runnin the markets, the difference between a hundred up and a thousand down is nano-seconds.
"... if the Dow Jones Industrial Average opens down 1,000 on Monday morning, I'm going to look very foolish."
Why would the Dow open down 1,000 points this morning?
For many months, most of us looked down our noses at what was happening in Western Africa. We watched the virus spin out of control and consoled ourselves that it was because of poor sanitation and lack of infrastructure. When it ran through the medical staffs of African hospitals we told ourselves it was because primitives failed to follow protocols. When the same thing happened in Madrid we said well, you know the Spanish. Now it has happened in Dallas.
We made the same assurances to ourselves about Zimbabwe. It was Africa not America. Zimbabwe had the best performing stock market in the world right up until Mugabe and his cronies blew up the currency. He did not have the luxury of a virtual currency. His was physical fiat. It took a good bit of effort to increase the supply and therefore the velocity of money. It took a year for the Zimbabwe money managers to destroy the currency.
Ours currency is virtual and it moves at the speed of light. When our currency slips and the flow becomes a torrent, it will be a matter of days not months.
The herd is not in the stock market and could care less about numbers on a screen. They are in the market of every day transactions and that market is fragile. Prices on every thing that matters is going up. Labor participation is still trending down. More and more are depending on government handouts.
The market that matters depends on transactions that involve physical contact. Ebola is on the lips of the herd and the herd is skittish. Africa has come to America.
The Fedsters strategy is nothing more than when a hedge fund purchases share of its largest holding on the last day of the quarter to make their performance appear a few bps better. Yes, the Fed has a unique turbo-charging tool for this practice (the printing press), but after a point, it isnt the press, but rather confidence in fiat currency that catalyzes the reversion to pre-manipulated levels. I'd assume the Fed will NOT allow an equity crash in the next 3 weeks, but perhaps a gentle 2-4% downdraft into the election. It is 'cheaper' to manipulate the illiquid overnight markets and call the TBTF algo-operators to make sure their 'buy' engines ignite when they see the Fed's 'Hand of God' in the overnight activity (1 uptick for a 2% boost, 2 upticks for a 4% . . . Paul Revere would probably shoot himself if he were watching this). This way, you get a nice 'pump' for the AM session, with a chance for some 'afternoon delight', as needed.
"If central banks have learned anything since 2008, it's that waiting around for the panic to deepen is not a winning strategy."
That is rather a meaningless statement. They knew that in 2008, yet the market crashed because Bernanke pulled in the slosh- liquidity, as the FED was extorting congress to pass the TARP.
If you dont understand that some portion of the market is a heard mentality then you shouldnt play. The question is that in the world of HFT trading is the role of the heard, is it a 1% influence or a 50% influence... HFTs can only do so much against folks liquidating their 401ks to money markets....
They are going to "Bail In" those money markets
ZH what took you so long?...
Will the MSM be honest enough to ask the substantive question(s) going into the polls for the professional politician(s) they want to in most cases re-elect or the new ones that have been bought off or threatened?...
Such as...
How are you going to go about saving me and my family from this pandemic the President of the United States tells us "isn't one" that has killed as we know thousands of Africans and currently (as we know it) one American already?...
Illegal immigration for 13 years that has destroyed the middle class with open borders while we're fighting a war on terror that now includes a pandemic?...
And while we're dealing with that Ebola thing, a range war with other superpowers in Syria and Ukraine which might end humanity as we know it so that we can keep the American dollar and our way of life secure?...
How to keep my 3 jobs and "Obamacare"?...
Oh yeah and almost forgot the issue(s) of the undeclared martial law thingy we keep seeing since 9/11 that include civil forfeiture, unlawful incarceration without due process that papered over our Constitution/Bill of Rights without ratification by Congress that gave us the NDAA?...
Not that the vast majority know or even care what is in it or what it might do to us with open ended 30 year wars against a tactic, pandemics and an economy that is in complete collapse, but a sample of voters out there might want to ask their candidates these types of questions going in this time around!...
On the Fed allowing the markets to crash?... I believe they already did long ago, but the American people certainly don't know it yet!
Grand slam Nemo jr!
Its not enough to support the market in times of corrections...the FED/Banksters have been doing that since 2001.....The amount of support must be increased to offset the losses from snowballing malinvestment. Once this puppy gains some downside momentum... there will be no stopping it.
Repub incumbents will blame the Dems. Dem incumbents will blame the Repubs...and the deeply stupid think that fixing the blame is fixing the problem. They will return their own incumbent.
Couple of points here for context. First, the market is only about 5% off its all time highs - hardly a "crash." Even if it fell another 10%, and it won't, that would only be a moderate correction. Second, you assume that the average sheep (voter) has the ability to connect market moves to politicians activities. They can't even be bothered to stir from their icoma to recognize ther erosion of their rights/freedoms by these same politicians. Too much credit given where it is obvoiusly undue.
Half the voters voted wrong and so did the other half.
Neither party cares about the voter.
But I think you're assuming that it takes the sheeple's active participation to force a real correction. At this point, I do not believe that is the case. The noose is just getting too tight.
It's getting harder and harder to keep up. Pushed much further financially, we are going to see a "former middle class" throw up their hands and give the hell up.
If this "consumer economy" cannot consume: A real correction or crash is inevitable despite all the printing in the world.
BTFD BTFD BTFD bitchez. Here is a list of women to vote out of office in California
"If $1 trillion doesn't do the job, make it $3 trillion, or $5 trillion. At this point, it doesn't really matter, does it?"
If what has been done already hasn't worked, no amount is going to work.
"If central banks have learned anything since 2008..."
If I have learned anything since 2008, is that many of our American Cousins, including CHS, are completely convinced that other central and national banks must be "something like the FED", and so use the same strategy, the same tactics, etc.
this article is about the FED and if it will save the (US) stock market ahead of the elections. which other CB does such things? Of course, if you go back in history, you will find some years where the Bank of France or the Bank of Endland "did it". loooooong back
and yet here we find CHS talking so carelessly about "central banks", plural, and so adding to the cherished myth of all CBs being "the same"
I suspect many elites dream of one-world government, but we're hardly there, yet, and highly unlikely to ever be so, IMO.
The world looks more like a bunch of competing crime syndicates, to me, with regional agendas outweighing global ones.
Yes, and as the pressure builds the thieves will fall out and conflicts between them will only grow.
War serves to unite coalitions of crime syndicates at a moment like this. But war requires an enemy, and wars have become unwinnable.
And wars have a nasty way of leaving power vacuums in which revolutions can take hold.
Scanned some morning news shows for Ebola info and found some interesting things -
The blame is on the Texas health care worker for breaking protocol - there is no recognition that Ebola may be airborne or that the protocols may not work
Many hospital workers still do not know exactly what to do - a few places held conference calls???
If it takes person to person contact to spread Ebola then why did the CDC go to her apartment and spray handrails and grounds?
The CDC does not even have a list of all the workers who came in contact with the patient, and no one is following up with them!
"Denise DiMarzio, who was in a Harvard Vanguard waiting room when the quarantine was ordered, described a harrowing scene, including “people running by with yellow precaution gowns on in masks and gloves. They couldn’t tell me whether or not I should stay or leave, and that panicked me,” said DiMarzio, a nurse who is seven months pregnant. “I don’t know if he was coughing and had secretions on his hands and was in the same waiting room as I was. Makes me a bit nervous. No one’s really told us what to do. They just said take a shower and check your temperature for the next 21 days.”
http://www.bostonherald.com/news_opinion/local_coverage/2014/10/boston_o...
...What better day to have the market crash than Friday October 31, 2014. The election is only 4 days away. The masses, in the U.S., are putting on scary faces. The payday weekend will see paychecks cashed and spent for one final hurrah.
...
...It will only be a matter of who has shorted the market. What better way for Warren Buffett, Bill Gates and George Soros to become the worlds first Trillionaires.
...
...The president will make his permanent residence on the nearest golf course in the knowledge that regardless of the markets and the elections his administration is now on cruise control.
...
...The bombs are falling; the missles are flying; the soldiers are dying and Ferguson is burning. What else can you ask for?
Primate-plusers have somehow devolved since the Middle Ages. Back then, when the brigand-brigade came toddling down the lane to pillage your home, you raised the alarm, shut the windows, and placed the first bolt into the crossbow. Fast forward to today, and Americans are cowering in their homes with no preparation for self-defense. These folks are going to win their Darwin Awards. . .
So much for the dow opening down 1600. Dang it.
"What would happen to incumbents in the election a few weeks from now if the stock market crashes?"
Which incumbants? I don't think a crash would affect the vote much this November. Voters are already unhappy about what is going on in the country. I don't think the FED proping up the market would save them, either.
I doubt they will ever voluntarily allow the market to correct itself. My fear is that Rand Paul is put into power to serve as the scapegoat. That would pave the way for all sorts of nonsense about how "free market principles" are to blame and that more governmental oversight is needed...
lol. his premise.. the FED is political?
they are the apex of politics. they own both fake L and fake R
they are the source of all moves. so trying to read their tea leaves, from a perspective that suggests they actually care .. is childish and naive.
the CB's are like locusts. they have consumed all the productive cpacity of of the west. they are done here, they are moving on. the BRICS are the next fields of green for them to consume, monetize, deplete many generations forward of productive capacity.
they DONT CARE about US. we are property. depleted, consumed, rung out. period.
P < P + I
hell no!
Obama plays golf while people die off.
Stop ebola, Obama!
If you really want to put it in perspective, figure out how many years of earnings(profits) will be needed to pay off the debt, not how many years of sales(GDP).
You cannot pay it back with sales.
Immagine a cruise ship with Ebola. This is a life-altering disease that will kill demand.
Meanwhile hoards of infected West Africans are entering the US, not showing signs yet.
A fatal PC error by Obama and the CDC. Even the CDC doesn't know why a protected person contracted the disease.
Seems like the next level of quarantine steps need to be taken because this one is not working.
Staff will quit otherwise. Perhaps completely sealed and bio-suit virus killing wash-downs are required.
duplicate
Both parties are corrupt as hell. What difference does it make?
The only thing I'm worried about is the evisceration of social programs which will cause a race war. Some, well knowns, have been pushing for a race war, for years.
Put yourself in their shoes. Isn't this what you would do, given the dearth of alternatives and the very real risks of implosion?
No actually I don't need to put "myself in their shoes", and any self-respecting honest individual would do the only thing that is left if they were in their shoes when they have thoroughly betrayed their own profession and integrity...
Put a gun in the mouth and squeeze the trigger with all six chambers loaded ensuring you don't give yourself a second chance!
CHS we call you NAIVE.
"What possible reason would the central banks have to suddenly reverse their interventions and stand aside right when the global markets are in meltdown?"
this game has been played since the begining of time. first setup the trap, lure the sucker in, spring the trap. simple.
lets start with: 1. to put you bitchez down on the ground 2. to SAVE you bitchez from the evil short sellers and 3. to RULE over you bitchez as you beg for more for all of time
Now wake the fuck up and never let a crisis go to waste... and never bet against Soros
You know the wank stains that ruin all our cuntries? They aint any different the world over, hell, chances are the dirty inbred bastards are related and sleeping with their own kids, you know that lot?
They are frightened, as in shit scared. And they know we know.
Not just the internet but alternative parties springing up here all over the place.
The people, my friends, we will, be heard.
Think on that NSA you fucking cunts. And you lot in GCHQ, pass that on to the queem.
Burn this fucker down.
:-)
The key questions are:
What do they know now?
What do they expect to know, and when?
What do they know they don’t know?
What do they want the masses to know?
Who do they want to take the blame for what the masses expect and the insiders know?
Elections are double edged as anything prior is past and investigable, and anything after is the future and we must move along. Even if it means being “evil”; we are assured it is the lessor “evil” and thusly the right thing to do; if not the only thing to do.
Doesn’t anyone remember Henry Paulson and his napkin.
The market(s) are slaves to the whims of cocktail napkin doodling. Where are those charts and stats?
Charles is usually better ... much better
this post is complete nonsense
They knew a few years ago about a possible implosion of western society and loss of government trust/respect, so its been media control, smoke mirrors and bs that has failed and lost the future generations to lives of debt, poverty, starvation, disease, terrorism, natural disasters, energy shortages and little hope of a secure and safe future.
It gets to a point with 7 billion people when the money changers lend too much money that gets burnt on tangible goods that fcking break because they are made in China.
So they print more, add more, problem is everything fucking breaks and the systematic transfer of wealth into the new middle classes that are emerging worldwide start to hit, especially when they cannot feed on this new wealth, they really only have debt remaining, but government debt is bad and consumer debt is out of control haha that just feeds their demise, the awakening.
They never bet on the internet, they never saw it coming.
Money changers now have the wobbles, bad time to have the wobbles, crashing markets are the least of their worries.
@AmerUtu..
.."They never bet on the internet, they never saw it coming"..
Anyone who knows anything about running a prison knows that unlimited communication is to be considered as contraband and forbidden..
The biggest mystery to me is how they ever allowed us the internet in the first place.
Can the Fed stop a market crash in the face of a domestic Ebola outbreak? Perhaps not.
Blissed out this weekend and caught a movie called "Rampage". A complete tirade but they didn't mention how the FED rules America. Lots of bullets and explosions though!
What happens when you create a giganitc class of folks who have nothing to lose? Why, they become fodder for "radical" thought. 1776...???
Media says sleep, consume, obey, procreate...
Oh yeah, FUCK YOU BANKSTERS!
Fed won't let the 5 big banks fail anytime, election or no.....
Still an open border policy. Hoards of west Africans boarding planes to the US. It should have closed down the flights. Even though they don't have a fever they may be infected. This is leading into an overwealming nightmare.
The Dallas hospital already will have staff that quits. I would rather quit and than being at risk of contracting Ebola every day at that hospital.
The whole aspect of services woul be in the toilet once this disease get's going here. Screw it being a nurse if you have children. Quit and take you kids out of school and leave. Why risk a better than 50% chance of dying.
Can obama even run again???? If not let it fall
No bank will fall and even if they do it will be liquidated and taken over by another
The stock market really is a sort of money transformation device for the uber wealthy to covert the digital 1s and zeros on the computer screen electronically entered by the central banks to stocks, from which when sold, are converted to cash, and finally used to buy hard assets. In this context, it is a money laundering device. As long as there are hard assets to be acquired, then the stock market will continue its role as the facilitator.
When the Obama administration uses the same ploy as Reagan in 1982/1984...with the complicity of Saud.
As one of those who have regularly emphasised this point since I have started posting here in 2011 Jan. : The tripple whammy of MIC/OIL/Petrodollar nexus of "they came to Bagdad" destructive logic.
Pax Americana's hegemonic asymmetric ME wars and Oil patch protection strategy.
We are back to the Cold War Scenario with the same ingredients as in 1982/1984.
Tipping times, then, for the creation of the "supply side" WS/City neo-liberal revolution which required to co-ordinate two major strategic objectives of Pax Americana ramp up into its Oligarchy- Saud Compatible configuration; that Nixonomics had initiated under Dear Henry's globalized Metternichtian vision --as a result of the earlier Friedmanian BW revoke monetarist gamble to permit the USA to extirpate itself from NAM/Great Society debacle :
1° Kill off the Soviet Union economically, using the Oil glut of Saud pumping, along with MIC ramping of Middle East spending in Iraq/Iran (sunni/shia divide and ruin great game) and Star Wars smoke n mirrors. It would have as collateral consequence the creation of the Taliban culture and its Frankenstein consequences in Afghan/Pakistan's societal perversion under "planned obsolescence" CIA/MIC logic.
2° Use the soft oil environment to allow the supply side risk asset economy to be launched via the "junk bond" and shadow banking/HF contagion. (The only Administration rule is : "there are no rules" and the only WS yardstick is market EVA to maximise investments based on quarterly report syndrome and Asset stripping predatory Gordon Gekko knee-jerks). Short term financialized capitalism reigns supreme.
(inspite of all the signs of Peak Cheap oil signals provided by the Shah's warning in 1978 and subsequent 1979 second Oil hike, a major betrayal of civilization's cardinal law-- limited RM at economic prices as already announced by Club of Rome 1972 findings-- which has made first world lose 40 vital years in fighting the Ecological challenge visible even then with Ozone hole and the first signals of global warning formulated).
The world that created the likes of Soros, Dimon and "Goldfein" under the benign regard of Greenspan/Clinton/Rubin/Summers et al.--- Leading to GWB hubris, NWO/WTO China world factory and... Lehman moment.
Today, we are back to the same strategy of Reaganomics's inceptional mindset, in an age where Chindia now challenges the Economics model, Russia the ME energy model and the first world 99%, the ripple effect of middle class pauperisation of this Oligarchy run globally dystopian model.
So many black swans in the air that even Lady Lagarde wants to belly dance, as she loses control of the IMF --due to US reluctance-- and desperately changes in 11th hour, the IMF's perennial austerity mantra --one size for all- to Keynesian "demand side stimulation before we do supply side restructuring" ABOUT TURN !
Now this shocker is for the ZH Austrians another black swan addition to the existing flock.
The plot thickens ! Where is Hercule Poirot to solve the "They came to Bagdad carrying black flags" mystery ?
PS : For those who don't understand the analogy between my post and the gist of CHS's post :
He is saying : that FED's CB plays could Manipulate US elections in an Oligarchy controlled environment; of which the FED is an eminently political instrument (according to CHS).
I am saying : The current Oil price manipulation, if it can be maintained, by swing producer Saud, could bring down Putin's strategy just like it did the SU in the past (1982-1991). It could also have collateral fall out on USA's Oil shale plays ! ( Calling HP !)
If part of the genius of the Overlords in putting Obama in the White House was to utterly discredit and emasculate the Democratic Party, pulling the plug on the markets now could deliver the coup de grace.
Remember the resurgent Democratic Party of 2008, giving voice to the people's outrage over Bush Jr. and his wars, lies and torture factories, the anger over the breaking economic meltdown? There's not much left of that Party now, still less the party of FDR and JFK, but the embers still smolder and could flair forth. The Overlords may fear that as the economy goes into its inevitable collapse, the Democratic Party could - perhaps even accidentally - help catalyze the mass revolt they rightly fear,
One more massive debacle laid at Obama's feet, just before the mid-term where he and the Democrats have been thumping their drums and tooting their horns about the Obama Recovery, should do to blow them away.
How likely do I think this scenario is? Is that what they talk about when they gather in private? I have no evidence ... but it's what I would do if I were them.
since we are only at the midterms its too soon to talk about bringing the seats to an upright position. would Wall st crash the market while Obama is still in office or wait for Romney Clinton, or gasp, Paul? Obama is bought and paid for, TARP2 is an automatic. Romney might be more difficult, he is not a member of the NWO. Hitlery just wants to nuke Iran she doesnt' care how she does it. Paul is the real problem and he could broker the GOP process, which puts him out reach and Wall st can sleep soundly knowing he won't get in. so really no need to crash mr market yet, and not in 16 unless Romney/Paul run together, and HC gets hammered by some populist outsider in NH (like LBJ in 68). and there is really no Bobby K out there to ride in like a white knight. if the stock market craps out the pension funds take a hit, but they are so top heavy with millionaire retirees that the financial impact would not be devastating to average folks. and there is always the longshot possibility that Goldman takes over the FED by crashing the market themselves. their message to the Fed: we short you die. the real question is probably how loyal is Yellen to the Obama people and the NWO. that may be a conflict, he appointed her, it would the ultimate act of betrayal. for pure drama i like it. Yellen dumps the market and announces herself as a Republican. not the end but just the beginnning
lol Romney not a member of the NWO, like he doesn't have club privileges? lol
The hard thing is to get in the market.
If you sell or buy an ES contract you can be down $500 in a blink of an eye.
It like trying to get on a kicking bronco.
From The Director of the FBI...
Wonder how long he'll be keeping both his job and his life given the war and genocide this Administration and Congress has been serving up all these years?...
Oh and if we're still alive in a year...
James Comey 2016!
Well better a decade or two late than never I guess.. finally I read something that makes me hope there really are honest men left in government. In the end it's not Democrats or Republicans against the citizen, it's both of them in league against the people.
..think the media will touch this?
like I said before, you are on your own.
Does anyone really believe that all of these things happening are an accident? Well except most of the mindless followers of government, but seriously how can people not see these culminations of events that seem to just spring up out of nowhere just be as accidental?
The Obola Presidency IS the Crisis.
No it won't.
The article has it backwards, of course. The tried and true FED pattern since 1987 is:
1) New FED Chair Satan.
2) Provoke market crash.
3) Print trillions.
It's merely coincidence that a political election, amongst the the slavery class(Goyim), occurs in the same year that a new 'plantation manager' is appointed.
Markets crash, people blame dems, vote repubs, war machine marches on. If you were the FED and you were trying to engineer enough panic to usher in the "strong man" which party would you want that "strong man" to belong to?