Makes Sense

The U.S. Banking System is Effectively Insolvent

I second the analysis of Socialism Cannot Compete. Now, how do we persuade Congress to get the hell out of the way of (those who ought to be) free Americans?

The 'Plunge Protection Team' Working Overtime: A Play-By-Play

Thanks to <strong>crataylo... for the link to the Robert Bell editorial. While it was obviously slanted politically (what are the odds that the next Democratic president will revoke Executive Order 12631 and decommission the PPT?), the information led me down some interesting paths. One thing that bothers me: I could find nothing online to corroborate Bell's contention that the Contract Administration Services (CAS) of the Defense Contract Management Agency could do anything with its power to permit price premiums on DOD contracts to cover pension fund losses that would operate in the short term to prop up securities markets.

In fact few of Bell's suggested intervention paths seem suited to the short term, although it is barely conceivable that the PPT could organize a conspiracy to repatriate foreign profits under the "American Jobs Creation Act" and trigger one or more takeover bids on their signal.

On the other hand, the Fed's Permanent Open Market Operations:

www.newyorkfed.org/mar... Note link on page: "Show last 10 Operations"

Can apparently have a profound short-term effect. See Michael Bolser's "Repurchase Agreements and The Dow" (2003):

web.archive.org/web/20...

Bolser writes:

"There were four closely spaced Permanent Open Market Operations just prior to the 1,000-point mid-March [2003 -R] DOW launch. In addition, there was another POMO on March 13th of $710 Million coupled with a net TOMO injection of $3.25 Billion which resulted in a 303 point DOW gain on that day."

Add to that the Fed's Temporary Open Market Operations:

www.newyorkfed.org/mar...

and you have something a trader ought to watch very closely. Heres what the Fed says on their POMA page: "Monetary policy can be implemented through outright purchases or sales of securities, which permanently changes the size of the Federal Reserve's System Open Market Account (SOMA) portfolio."

I suppose you can set some financial news services to automatically tell you when the Fed acts on
the POMA or you may as well check it daily while you check the TOMA page, since that does show new operations daily. Now all I need is help charting the history data of these operations and see if they are as good predictors of market moves as Bolser suggests they were in 2003.

On the other hand, if it is truly a conspiracy of the PPT and their Wall Street friends, why would they publish data that tips their hand? That's not entirely a rhetorical question, but as I indicated, I haven't back tested the hypothesis that the Fed data is predictive.

The 'Plunge Protection Team' Working Overtime: A Play-By-Play

I'm curious, just what legislation is it that authorizes the government to manipulate the "free" market in securities?