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Does anyone still think there's a PPT?
Monday, March 02, 2009
If there is such a thing as a Plunge Protection Team (PPT), otherwise known in some circles as the Working Group on Financial Markets, they're sure doing a lousy job of keeping the stock market from taking a header into the pavement.
Could it be that markets are just doing what markets are supposed to do?
It seems that mysterious S&P500 futures buyer N990 (or whatever he/she was called) has failed to appear anywhere near a stock market for some time now...
10 comments:
Where's my Roubini rally? Crap
No the markets are not doing what they are supposed to do. If you believe that then there was no problem on the way up.
Stupid markets don't know crap.
There is a "PPT" -- you can go read the executive order that created the Working Group on Capital Markets. That is simply a matter of record. And we know Paulson started convening it more frequently in 2007, and it is unaccountable and unauditable, despite the fact that it likely takes action through and acting upon the private sector, with anti-competitive implications.
The market action under Paulson up till the September '08 crash has looked very suspicious to me. I was watching it closely in 2007 when it seemed to have unlimited rallying power despite the fact that the housing collapse was well known since Spring '07, and the Bear Stearns hedge funds collapse happened in August '07. What was the market doing rallying to new historical highs through October 2007?
Many who watch these things closely noticed the market seemed to rally a lot near vulnerable technical, especially due to heavy buying in index futures. That's a strange way for the market to be rallying on "fundamentals".
And I have no doubt that propping was and continues to go on to attempt to slow the crash of the market -- which is probably why it was so violent and sudden when it finally happened.
Now, this is not to say that the market can be suppressed in the long run. "PPT" is really a misnomer in that sense -- you can't "prevent" a plunge. However, intervention by a major party changes the timing, and may change the winners and losers.
A concrete example is that after my successful home builders and bank shorts through early 2007, I switched to an options strategy, because things were going so well with regular shorts. This turned out to be a disaster -- not because my picks were bad, but because all of the bailouts and interventions stretched out my picks' "lifelines" just a few extra months. In most cases, this was enough for the time premium on my options to boil off (this could have been somewhat mitigated if I was an active trader, but I am not).
That brings me to another point -- plenty of outrageous intervention is completely public (Fed alphabet soup programs and quantitative easing, TARP, ad hoc bailouts, short-selling banning, etc). I would like to see more accountability from government about all of this, especially exerted by those who cherish their freedom to make money in markets from making the correct calls (isn't that what they are for???)
So as far as I am concerned, where there is smoke there is fire, but one not need to get all worked up about the PPT. There are PPT-like things are going on in plain view in spades.
I know - they're still doing something, but they certainly aren't propping up the stock market over the longer term...
Hello Tim,
My guess is their will be a huge rally tommorow.
No real reason and I'm going to be on the sidelines in cash.
Just figuring on huge bear market swings on top of the long term deflation.
Have to figure the lower employment means less institutional buying as people aren't putting money into 401k's and the growing baby boomer exit from the maket as they retire.
James/LAEF2
The battle for the equity market is long lost for the PPT. They're having to throw everything they have to hold bonds together. That is eventually going to blow too. Read something at Mish's over the weekend regarding the Citigroup bailout that made sense immediately. Everything possible is being done to persuade foreign bondholders not to bolt. Can you imagine if interest rates started skyrocketing everywhere?
we know the PPT exists. what we don't know is which way they currently want the market to go.
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How's this for a conspiracy theory:
The PPT is not capable of stopping a market decline.
Nor is that it's purpose.
The PPT does exist, but its mandate isn't to support stock prices, it is just to ensure that they drop at a rate that is slow enough to stop the average investor from panicking and selling out. The PPT wants a managed decline, not a complete collapse.
When they just lose 3 or 4% at a time (usually every two weeks or so), this rate of loss is slow enough to keep them in the game in the hope that the markets are near the bottom.
The average investor is going to ride this market all the way to the bottom, because their advisors keep telling them that there is no use selling now.
Sukh
Who wants to trade in this market? There's so much manipulation and interference that it makes no sense anymore. I can understand holding physical or holding cash (for the short term) but trading stocks is a game best played with a blindfold and a dart board.
I hate to sound like I'm wearing tinfoil, but Sukh's idea makes a lot of sense. Surely the powers-that-be have some inkling of how bad things are and are cognizant of their inability to stop this runaway train. A MO of preventing panic, rather than stopping something they cannot control, seems logical.
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