Government intervention in the financial markets without your knowledge, and maybe without your support … that is what many feel that the Plunge Protection Team is. A mechanism designed to keep the markets from crashing periodically by swift purchases of securities either during or on the verge of real panic starting. Here is the issue: it is fake, or at a minimum is grossly exaggerated beyond policymakers coordinating efforts. If you have watched the trading action you will have noted that two of the last three days saw massive buying at a time when fear was starting to prevail. It is amazing more conspiracy theorists are not out coming out of the wood work, but of course it is not even a full moon now.
The Dow Jones Industrial Average was briefly under 9,800 this morning, and right after 2:00 PM EST came the long steady recovery. Last Friday an end of day (the final minutes of the day) rally lifted the DJIA and after having been under 9,900 for a while the markets suddenly closed higher for a 10,193.39 close. There is a flip side to this though. Just yesterday there was an end of day tank. The “Flash Crash” from earlier in May 2010 that wiped out so many accounts with stop losses and a rapid shakeout that followed has also yet to be fully figured out or explained in any feasible manner. So is there a “Plunge Team” too inside the government attacking the market? Our take is simple: NEITHER EXISTS.
Teams have been formed to stop and slow economic free-fall. What do you think happened after September 11? What about the bailout to keep “The Great Recession” from being The Great Depression Part II”? There is of course central bank intervention and the U.S. Treasury rapidly buying or selling bonds. But a magical phone call to those with endless funds who magically start buying in unison simultaneously, no. There is not a magic call that goes out to all the billionaires and biggest traders that says “Blue Horseshoe Loves…. Everything!”… Can firms pull this off? Could you tie it to only being JPMorgan? or Goldman Sachs? Sure, so long as their new risk management systems are disabled and so long as those firms lock their new risk managers in a room. Enough about our take. Take the anonymous survey…
Below is a list of some of the ‘credible source’ links referring to the “Plunge Protection Team” to peruse:
- WASHINGTON POST ARTICLE that started it all
- AMAZON (zero matches)
- MARKETWATCH, via Charles Biderman
Keep in mind one other thing before getting too deep into government conspiracies… The last great combined real and mechanized effort that the government ever really pulled off successfully, and this may hurt some feelings, was probably World War II.
JON C. OGG
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