While Grant Williams can’t speak for anybody else, his nearly thirty years immersed in equity, bond, and commodity markets all around the world, have shown him enough to absolutely confirm in his own mind that the markets are rigged. Not just some of them. All of them. In different ways, to be sure, but they’re all rigged. Not only are they rigged, but they are rigged in ways that beggar belief; and in many places they are rigged by the very people who ought to be responsible for stopping any rigging.
Whether Bill O’Brien likes it or not, Michael Lewis was speaking the truth when he said the market was rigged. He was talking about US equity markets, but rigging goes much, much deeper.
Whether Bob Pisani, Stephanie Ruhle, or any of the other talking heads who form the informational front lines between the public and the markets care to admit it or not is immaterial; the markets are rigged.
Arguing about whether the rigging is a “tax” on investors is so spurious as to be ridiculous.
In order for market rigging to be stopped, the changes have to come from those entrusted with regulation, in the form of stern punishments for those caught rigging them, and there must be changes to the rules to close the loopholes that allowed this kind of activity to occur in the first place.
Instead, the bodies which supposedly oversee the markets are involved in the most serious rigging of all.
What chance is there that we will see any change?
Get used to it, folks. As anyone who looks at financial markets up close with their eyes open will tell you, they are all rigged — it’s simply a question of degree.
The question is, do you adapt and work around the rigging, or do you simply decide not to play?
Central banks and governments seriously hope you choose the former option.
(Dictionary.com): rig: verb (used with object), rigged, rig·ging.
1. To put in proper order for working or use...
2. To manipulate fraudulently
Now, the Fed will argue that the first definition applies to their actions and that they are putting the market in “proper order for working or use.” I would assert, however, that (a) their manipulation of the market is utterly beyond contention and (b) it would be hard to find a more egregious example of fraud than the creation of money out of thin air.
Manipulation and fraud. To me, definition 2 is the correct one.
But IT DOESN’T MATTER which definition you choose. BOTH apply to the action of “rigging.” The anomaly here is that the people rigging the market are essentially the same people in charge of policing it; so, of course, everybody simply looks the other way. It helps that the Fed’s particular form of manipulation is moving asset prices of all descriptions in predictable directions, which makes money for everybody who tags along for the ride. When manipulation leads to profit, investors are willingly complicit.
Yes, the US government is the largest buyer of its own debt. This is not something we didn’t know, but think of the practice in terms of whether it’s “rigging” a market.
Is the world’s largest market trading where it would be under normal conditions and with freemarket forces allowed to exert themselves?
Of course not. It’s rigged.
Greek, Italian, and Spanish bonds? UK gilts? JGBs? Rigged, rigged, and rigged. Rigged. Rigged.
Like the Fed, the forces at work in these supposedly free markets will point towards the first definition of rigging and suggest they are putting those markets in proper order; but the truth is, creating a marketplace whereby Greece can sell $4 billion of 5-year debt at a yield of only 4.95% (as they did this week in a triumphant return to the bond market) made possible an implicit backstop by the ECB is fraudulent. It ensures that the price does NOT accurately reflect the underlying risk.
Thank heavens the bond markets are rigged. If they weren’t, this could get ugly.
Want more “rigging”?
Grant Williams' Full letter below...