The Dow dropped 130 points shortly after open Thursday morning, and continued down. The President spoke concerning financial regulations on the nation’s biggest banks. The market moved 20 points lower as he spoke, at one point minus 229 on the Dow.
This is populism that seems incredulous to the observer. Talk about biting the hand that feeds you. One can just imagine the meetings behind closed doors. Tim Geithner was on the stand with the president, looking nervous.
You see, Turbo Tim has to deal with the lords of finance. You may have heard of the Plunge Protection Team (NYSE:PPT). This is a rumored group of investment bankers that work in conjunction with the government to manipulate the stock market. Buys are made when the market is moving against the wishes of Uncle Sugar. We have covered this group previously in MarketToday.
“This shadowy group (PPT) enters the market with strategic buys to turn the market when sell-offs are underway. Look no further than our favorite connected bank, Goldman Sachs (NYSE:GS). GS, along with others, protect positions and sectors. This is not altogether altruistic because in many cases they have other positions to protect. There is no doubt that a small group of connected bankers enter the market in coordinated action, to curry favor with Uncle Sugar. This favor is valuable, as seen last fall when GS was bailed out and protected by TARP funds and the AIG rescue that sent billions indirectly to GS through CDS’s that GS held.”
One has to remember, James Pierpont Morgan is credited with saving the American economy in 1895. As a result of the 1893 panic the Federal Treasury was almost out of gold. J.P. created a private syndicate that supplied the U.S. Treasury with $65 million in gold to save the government at the request of President Grover Cleveland.
Who will the government call, when they need help? After you burn bridges, it is a painful process to rebuild them. How anxious will the ‘lords of finance’ be to do the bidding of Uncle Sugar when they are the target of the latest populist campaign?
I saw a rumor this morning, that the Federal Reserve is entering the stock market to make strategic buys. A strong hand buying gives the appearance of strength at key inflection points, when the market is teetering on taking a dive, or to stem the bloodshed. Estimates by one investment group are that as little as five billion dollars could have been deployed to influence the market over the last few months. We know the Fed has been buying Treasuries from primary dealers to manipulate the bond market, could this be another reason they don't want to be audited by the congress?
The market worked higher Wednesday after the initial drop at opening. We like to watch the buying at certain times of the day. 12:00, 1:00 and 3:00 seem to bring out deep pocket buyers. If you don’t see volume supported with buyers, there may be more pain ahead.
Since you probably wondered why the market was down today, why not add a few other fears to your closet of worries? After all, “Who you gonna Call?”
What could be more manipulative:
1. Support and bid the markets higher to add credence to the economic programs of the administration.
2. Publicly attack the financial sector and withdraw support or even sell the market lower, just before announcing a requirement for 401K’s and IRA owners to invest in “safe” annuities and treasuries.
We don’t know, but are naturally suspicious.
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“The penalty good men pay for indifference to public affairs is to be ruled by evil men.”— Plato
Disclosure: No Positions