Wikinvest Wire

TrimTabs and the Plunge Protection Team

Wednesday, January 06, 2010

We haven't heard too much about the Plunge Protection Team lately, that is, until the folks at TrimTabs talked to the folks at Marketwatch yesterday and this report was filed:

The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market.

"We cannot identify the source of the new money that pushed stock prices up so far so fast," Biderman said in a statement Tuesday.

The source of approximately $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn't come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds.

"We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?"

The Federal Reserve or the Treasury, Biderman said, could have easily manipulated the stock market by purchasing $60 to $70 billion worth of futures of the S&P 500 on a monthly basis.
There were net outflows from U.S. stock funds since March of last year as investors plowed hundreds of billions of dollars into bond funds, one of the many troubling aspects of the recent stellar performance of equity markets that becomes all the more puzzling after former Fed chief Alan Greenspan recently cited the rise in stock market capitalization as one of the major factors in the nascent economic "recovery".

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4 comments:

Doctor Optimist said...

It is amazing how the stimulus-induced increase in many numbers is then cited as "proof" of how resilient the American economy is. Like we're a bunch of kindergartners that will believe whatever we're told. Next thing, maybe Bernanke will tell us Santa will bring us lots of toys if we're good this year.

Anonymous said...

Fed chief Alan Greenspan recently cited the rise in stock market capitalization as one of the major factors in the nascent economic "recovery".
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Greenspan also said the global equities rally is good beccause it re-liquifies the markets. I found his statement odd. If he would of said it's good because it show's investor confidence in the markets, that's one thing. Or if he said markets go up and markets go down, but why did he feel the need to defend rising equity markets?

sedentary state said...

>Alan Greenspan recently cited the rise in stock market capitalization as one of the major factors in the nascent economic "recovery".

That this guy is not treated as a pariah is a monument to human stupidity.

Anonymous said...

Its a form of the magical thinking that neo Keynesians use. They believe the printing press is magic so...

In the past, the stock market recovered when the economy did. Noting the correlation, and confusing cause/effect, they print to increase market prices. They figure that increasing market prices will make the economy recover.

The same with the long discredited Phillips curve. When the world was on the gold standard, low unemployment caused CPI prices to temporarily rise. The printers again confused cause/effect, and decided that debasing the currency would lower unemployment. That is, print to increase CPI prices, and hope that unemployment drops. The Phillips curve then disappeared, because rising CPI prices then meant nothing more than currency debasement. The high inflation/high unemployment 70s resulted from this chaotic thought process.

Of course, if the only tool they have is a printing press, they have to justify their phony baloney jobs somehow. Especially when printing enriches the printers, and their friends. (By robbing everyone else.) They come up with absurd rationalizations to trick the general public, so the public doesn't get rid of the printing press.

Their propaganda is so effective that even the multi trillion taxpayer bailout didn't make the public ask any questions about the printers.

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