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Charles Biderman on CNBC
Tuesday, January 12, 2010
Late yesterday, Charles Biderman of TrimTabs appeared on CNBC to talk about what factors could have caused stock prices to rise last year, given that the usual ones were absent.
Since the case for government intervention in equity markets as suggested by Biderman is circumstantial, many will dismiss out-of-hand the idea that the Fed was a big, regular buyer in after-hours futures markets last year to the tune of hundreds of billions of dollars (after leverage), an effort that would surely make any market go in the desired direction.
That certainly would be a much easier approach to take for long-time investment professionals who would undoubtedly rather go on believing that stocks remain about the only "untainted" and "free" market after more than two years of Wall Street turmoil where shattered confidence and tumbling stock prices were a major factor, resulting in massive government intervention nearly everywhere else.
5 comments:
If true, it would seem that those on the wrong side of the futures trades would have a helluva lawsuit.
Yeah, that would be interesting - short-sellers suing the government.
Fed =/ gov't, at least officially. However, I don't see how the Fed could secretly trade in market-manipulating numbers without the connivance of, e.g, the Board and officers of the NYSE, and key brokers and specialists. Not to mention the insider information gravy for all involved. Sounds like a job for Andrew Cuomo.
If true, no one could sue the Fed, it wouldn't be illegal. The Fed can buy whatever it wants under 13-3. I the overall scheme of things, the money needed to move the futures isn't that much, watch Cramer's video from a few years ago bragging about how easy it is to move the futures market.
The Fed could be indirectly or directly involved via all their bailout programs, ZIRP and a wink and a nod between the Fed, JPM, GS or others.Buy treasuries, sell treasuries to the Fed, take cash and buy equity futures.
Biderman's been crunching data like this for decades. I think he's on to something. All the SPX gains since last summer have happened while the markets are closed. Never in my life have I heard a Prez, Fed chair, Summers and Treaus. secy. claim over and over again to look at the equity markets as prove their policies are working.
The fed and the treasury recognize that the Dow above 10,000 is critical to conusmer confidence. The average consumer does not understand economics, but they do notice the Dow. If you need final proof of market intervention, look at a chart of the SPY on Feb 4 2010 5 minutes before the close and again on Feb 5 2010 5 minutes before the close. Somebody desperately wanted the Dow above 10,000 on both days, and they had the financial depth to overcome the upward spike in sell volume, absorb all of those shares, and drive the market higher.
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