"No Longer Confined To The Lunatic Fringe": SocGen Admits Markets Are Completely Manipulated

Tyler Durden's picture

Perhaps the most interesting thing about China’s "unprecedented" plunge protection efforts - which, as we outlined on Wednesday, have succeeded in making China Securities Finance Corp. a top-10 shareholder in at least eight firms - is that in some ways, they aren’t “unprecedented” at all. That is, while some of what we’ve seen out of Beijing over the past month - notably the sweeping trading halts and the Politburo agitprop campaign aimed at "malicious" foreign short sellers - was more overt than what we might expect to see in more "developed' markets, there’s certainly nothing terribly unusual about a central bank propping up equities. 

After all, the BoJ is well on its way to cornering the ETF market in Japan and, as a matter of policy, steps in to support Japanese stocks when sentiment appears weak, while the SNB has amassed a stock portfolio worth nearly $100 billion. As for the US, well, we’ve made no secret of our feelings about the slightly more than arms-length arrangement between the NY Fed and Citadel. 

Meanwhile, US corporate management teams are also in the business of propping up stocks as buybacks have served to replace the monthly flow lost to the taper. 

Considering the above, one is certainly left to believe that the term "market" may have lost all meaning in the seven years since the crisis. Here with a rather shockingly honest lament on manipulated markets, the disappearance of Benjamin Graham’s "voting machine", and perhaps most importantly, a vindication of the tinfoil hat fringe blogs, is SocGen.

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Via SocGen

No longer a voting machine

If in the short run, to paraphrase Benjamin Graham, equities are a voting machine, then it seems many of these votes are being coerced by interventionists. China is not alone in trying to influence equity prices, central bankers the world over have become obsessed with asset prices, to the extent that the notion of central banks making outright purchases of equities is no longer confined to the lunatic fringe. Of course none of these institutions are remotely interested in 'weighing up' the long-term returns. If they were, given the absence of attractive valuations and actual cash flow growth, they might be a little more circumspect in their cheerleading.

Corporate executives, who are rewarded for achieving EPS and share price targets, typically in the form of stock options, are also experts in the art of creating a short-term positive market impression. And to great effect, given the (literally) incredible performance of some tech stocks last week. Positive price momentum is a powerful force and one that few corporates are likely to readily interrupt with bad news. So while 'prudence accounting'may inform GAAP earnings, it seems largely absent from many of the pro-forma figures corporates would like us to focus on.

One of our favourite charts below highlights the extent to which near-term earnings are influenced (manipulated ...?) by the approaching reporting season. Earnings are usually cut immediately prior to reporting only to see them beaten during that season. We call these "just in time" consensus forecasts. The problem with these manufactured surprises is they create a false impression as ultimately there is no follow-through to higher future expectations – the trend in earnings is still down. So perhaps it is best not to be short during the reporting season. 

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VinceFostersGhost's picture



Admits Markets Are Completely Manipulated



Cognitive Dissonance's picture

It actually started when they began to manipulate money, the means of exchange.

Fun Facts's picture

Gold is the fiat anchor. The frame of reference.

When they manipulate gold, they manipulate the value of the whole fiat ring against real assets, which is of course why the gold manipulation is so important to the success of their now wholly fraudulent ponzi system.

Supernova Born's picture

If this is success, batten the hatches for failure.

N2OJoe's picture

So is this good news or bad news? Ah who cares, time to instantly dump Billions in gold shorts onto the futures "market" at the most illiquid hours possible!

KnuckleDragger-X's picture

I remember way back when Japan was going to be the richest, most dominate country in the world and was buying up America. Now we have China and the script looks eerily familiar......

Mayer Amschel Rothschild's picture

"Whoever controls the price of gold controls the world." H. Kissinger

Dapper Dan's picture

"Whoever controls the Prime Meridian controls the world"

D. Dan,  Circa 2008




"Whoever controls the Indian Ocean dominates Asia. This ocean

is the key to the seven seas in the twenty-first century, the destiny

of the world will be decided in these waters."


Alfred Thayer Mahan








LawsofPhysics's picture

Correct, and it has been like this for 100+ years!

Slomotrainwreck's picture

"...the notion of central banks making outright purchases of equities is no longer confined to the lunatic fringe."


The manipulators have become the "lunatic fringe"

T-Bond's picture

"...the notion of central banks making outright purchases of equities.

It's much easier than that. They do it by purchasing "non-deliverable, cash settlement" futures and options contracts. Buy until expiration. Let them expire. Rinse and repeat.....Never have to sell.

p00k1e's picture

The start point was some Chosen Folk stringing Jesus up to shut his trap.   Let the good times roll.

J J Pettigrew's picture

Control the cost of money, ie interest rates, and you control the cost of everything

denominated by money.  Simple really.

Thus we are not a free market but one manipulated by an unelected body of pseudo economists from ivory tower universities and mutual admiration societies.

Apparently, also, trading through the NY Fed branch loaded with Goldman Sachs and JP Morgan "friends"...and Citadel.

People who are tired of this, and are in the business...should have a trading halt of their own...enmasse .

Let Goldman and Citadel trade with each other.

Meat Hammer's picture

+1 for "mutual admiration society".

lunaticfringe's picture

I love the title however, I did not authorize the use of my photo. Please take it down ASAP!

Meat Hammer's picture

Someone's ready to say "Pull it!" now that the elites have stacked their phyzz.

Cognitive Dissonance's picture

First they laugh at you, then they fight you, then they agree with you.

VinceFostersGhost's picture



I know this one.....then you kick their ass.

CPL's picture

Exactly.  There are only three inconsistent and consistantly annoying laws in the universe.  Sod's law, Murphy's law and Finagles law.  Anything will, can and does fuck up no matter how well planned, engineered, prayed for or developed.  If it's not on your side, takes very little to break literally anything or anyone.

swmnguy's picture

I'd say, "then they pretend that's what they'd known all along." 

LawsofPhysics's picture

Get it right CD; "First they ignore you, then they laugh at you, then they fight you, then you win." - Gandhi

Cognitive Dissonance's picture

Notice I did not use quotation marks. Thus I did not get it 'wrong'.

LawsofPhysics's picture

Either way, there will be a fight.  There always is.  Nothing of any real value comes without sacrifice or work.

same as it ever was...

J J Pettigrew's picture

"Every truth passes through three stages before it is recognized.  First it is ridiculed, then it is opposed, and finally it is

regarded as self evident."

Fun Facts's picture

It's now an open secret that the central banks are maintaining absurdly high valuations in equities via open market operations.

Everyone knows it except the CNBC tards.

Supernova Born's picture

The markets are now analogous to the Chernobyl sarcophagus , the Fukushima "containment" and the Hanford nuclear waste tanks.

booboo's picture

I would say a septic tank and I see the Taxpayer Honey Wagon in the distance coming to pump it out.

Solio's picture

Those holes were engineered in!

Ward cleaver's picture

Not true FF, they know it but are paid to say what the "Market Makers" tell them to say. No difference between them and that lady reporting the North Korean news on their only channel.

madcows's picture

The real question is "why?".

Remember, the central bank is just a collection of banks.  They are all lenders.  And, they've far over extended themselves.  This is about preserving the banks.  And they're desperate.  They're pulling out all the stops.  They can't create enough organic growth with low interest rates to collect the loan payments.  So, they bailed out their banker buddies with TARP.  They lowered the interest rates, but that wasn't enough. So, they lowered them further by BUYING treasuries.  But that wasn't enough.  So they began to buy mortgages and securities.  Still, that wasn't enough, so they began to buy equities out right.

The FED is shitting its pantsuit b/c the FIAT system is collapsing under their abject greed.

Silverhog's picture

One thing we know they are not buying paper Gold or Silver. That's done on the sly and only physical. 

NoDebt's picture

Buying gold and silver is racist.

Meat Hammer's picture

Why don't you add something to the conversation? We don't want ZH to be an echo chamber, so why don't you give us your thoughts on the state of things?

pachanguero's picture

Ok, here in Thailand the gold is flying off the shelves....low price=more buying.....every whore in town is buying gold.

And that is a fact Jack!

NoDebt's picture

As I said, I believe we have reached a permanently high plateau in stock prices.  There's little reason for them to go higher (QE4 not announced yet) but no chance central banks will let them go lower.

bentaxle's picture

But what kind of QE will QE4 be...if there's no collateral? The "no collateral" Weimar kind?

ebworthen's picture

The collateral is your life and mine.

LawsofPhysics's picture

Bingo!  Forward soviet/tenant!!!  

FYI- this "collateral" (my tribe and I) bite back!

ThroxxOfVron's picture

"The collateral is your life and mine."


Human productivity is the only collateral that has ever existed.

This is the last thing the statists and parasites, oligarchs and bureaucrats, debt dealers and counterfeiters, ever want the citizenry to wholly realize as the citizenry may act to enforce their property rights with regards to themselves..

LawsofPhysics's picture

Please report to the nearest FEMA camp for your re-education...

(but yes, spot on)

Ghordius's picture

"Human productivity is the only collateral that has ever existed"

no, human productivity is the worst collateral that has ever existed

productive land and (staple or luxury) trade goods are the best, followed by capital goods like ships and machinery, but even cattle

"quality of collateral" is actually easy to understand: does it produce something, best reliably? then it's fine. can you reliably exchange it? second best

humans-as-collateral only comes into the game when the weasels start to say: "why not?"

Examples: "everybody ought to own a home", or "everybody ought to have credit", or "everybody ought to have a university education" or "everybody ought to have a car"

Meat Hammer's picture

On August 9, the Federal Reserve applied the pin to the bubble.  It increased the bank-loan rate and began to sell securities in the open market.  Both actions have the effect of reducing the money supply.  Rates on brokers' loans jumped to 20%.  On October 29, the stock market collapsed.  Thousands of investors were wiped out in a single day.  The insiders who were forewarned had converted their stocks into cash while prices were still high.  They now became the buyers.  Some of the greatest fortunes in America were made in that fashion.


mvsjcl's picture

What's the point of this article?

Supernova Born's picture

To state the obvious and irritate the delusional.