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.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".
"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.