There’s been a lot of chatter lately about secret cabals and the plunge protection team.

I notice it seems to be coming primarily from those folks who missed the rally off of the lows. Rather than admit their errors, they are rationalizing them with discussions of secret government equity buyers.

I addressed the PPT in Bailout Nation. This little excerpt is from chapter 5:

~~~

In 1988, President Ronald Reagan issued Executive Order 12631 establishing the President’s Working Group (PWG) on Financial Markets. The goal of the PWG was to “enhance the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets while maintaining investor confidence.” (Once again with the psychology.)

Twenty years later, it remains a secretive organization, one whose formalized meetings keep no minutes and whose functions are poorly understood. There is surprisingly little academic publishing on this body. Due to its secretive nature, the PWG’s workings are often described in market folklore as “they,” as in “They won’t let the market drop, they were in buying today.”

It wasn’t until 1997 that the PWG received the name by which they are best know today: the Plunge Protection Team (PPT). That was the headline of a Sunday Washington Post article by staff writer Brett D. Fromson.3

For our purposes, the PPT is an irrelevant footnote.

Why? First off, it is hard to imagine a secret cabal manipulating markets, deploying billions or even trillions in capital, with a nary a shred of evidence ever surfacing. The Bush White House couldn’t illegally fire nine U.S. attorneys without the political motivation being discovered and a major investigation launched.4 Could the markets be supported via massive trading, and no one anywhere would ever see proof and come forward? It’s hard to imagine that big a secret being kept for so long.

Second, and more important, the PPT, well, they really suck at their jobs. If the conspiracy theorists are correct and this group is supposed to prevent market meltdowns, they are not exactly hitting the cover off the ball. The late George Carlin had a routine on American Indians’ military organizational structure. They weren’t bad fighters, he said, just because they started out defending Massachusetts and ended up in Santa Monica.

And so it is with the PPT.

How is their fighting prowess? Well, consider that starting in 2000, the NASDAQ fell from over 5,100 to about 1,100—a plunge of nearly 80 percent in about two and a half years. And in 2008, the PPT performed even more miserably. Bloomberg reported that as of November 19, 2008, markets were suffering from “the worst annual decline in the Standard & Poor’s 500 index since 1931.”5 The carnage “dragged down every industry in the benchmark gauge and 96 percent of its stocks.

Four hundred eighty-two companies slipped as the 500-stock index slumped 46 percent, poised for its biggest yearly retreat in eight decades.” And after the major indexes ended 2008 down more than 40 percent for the year, the first 10 weeks of 2009 saw the markets fall another 22 percent.

Worst annual decline in eight decades? Down another 22 percent in two months? Geez, how incompetent must a secret market-manipulating organization be before someone gets fired?

>

Sources:
Plunge Protection Team
Brett D. Fromson
Washington Post, February 23, 1997, H01

http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm

Report Shows White House Engineered U.S. Attorney Firings
Zachary Roth
TPM, October 1, 2008

http://tpmmuckraker.talkingpointsmemo.com/2008/10/report_shows_white_house_engineered.php

S&P 500 Index Drop Leaves 64 Industries with Losses
Lynn Thomasson and Eric Martin
Bloomberg, November 21, 2008

http://www.bloomberg.com/apps/news?pid=20601213&sid=aL6HV7ahiGHM&

Category: Bailouts, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

86 Responses to “PPT: The President’s Working Group on Financial Markets”

  1. Mannwich says:

    Maybe the only agenda of the “PPT” (or some variation of that) isn’t just up markets (or supporting the markets) all the time? Maybe they have other goals and therefore allow it to crumble (read: bailouts and theivery on a mass scale) when it suits their other, ahem, “needs”?

  2. Paul Jones says:

    The Fed et al. have pumped trillions of dollars into the markets right in front of you and you say there is no PPT? No. There is.

    ~~~

    BR: Secret cabal? hardly! I wrote there is no SECRET PPT.
    And the public one we have — the Fed — hasn’t stopped the market from getting cut in half.

  3. Mannwich says:

    @Paul Jones: Don’t waste your time. You won’t get market diehards to admit because they are IN the game and have to drink the kool aide, or at least take intermittent sips.

  4. HarryWanger says:

    BR: I was saying in March exactly the same thing, if the PPT existed, they did a terrible job allowing the markets to crash. That being said, I don’t find it all out of the question or even conspiracy theory to suggest a government that’s thrown trillions in stimulus wouldn’t also buy some equities.

  5. HCF says:

    I don’t doubt the existence of the PPT, though I doubt the greatest traders in the world would work for the government unless there was something in it for them. Most likely, the PPT is just incompetent above anything.

    HCF

  6. MayorQuimby says:

    The PPT is 100% real. I’ve known about this for over a decade. I have multiple independent trader buddies on the street and well – it is simply a fact. It really isn’t much of a ‘team’ however. Just TPTB trying to control things (what else is new). For them, the ends justify the means (same with any one at ‘the top’). They do not have infinite power of course so at times, the market gets uncontrollable.

    ~~~

    BR: You are describing something else entirely.

    As the conspiracists see it, the PPT is a government entity, working thru the NY Fed, buying SPX futes to goose the markets.

  7. chancee says:

    Barry, I’m going to have to strongly disagree with you. I’ve been trading markets around the world for 20+ years, and I can assure you this market is unbelievably manipulated. Whether it’s happening via the primary dealers -GS, etc. – with instruction from the Fed/Treasury, or the Fed alone, it’s happening. If you can’t analyze a 2 month, 15 min volume/price chart of SPY and clearly see that… I’m not sure why you feel you’re qualified to comment on the stock market. A market functioning under ‘natural’ forces doesn’t post the majority of its gains in the after-hours futures market.

    And it’s obvious to me why they didn’t prevent the 2000 or 2008 declines… they didn’t see them coming, just like most people. After all, why would the PPT be on high alert during what seemed like a raging bull market? But once they ducks in a row, evaluated what needed to be done – they did it. Tinkering with interest rates after the 2000 crash mostly did it last time, but obviously more was needed this time. Enter: directly manipulating the markets. Plenty of past references by the Fed itself to this possibility have been posted across the blogosphere. I’m sure you’ve seen them.

    ~~~

    BR: They didn’t see the 2000 bubble? After the first drop from 5100 Nazz to nearly 3000, then back to near 4000 — a 40% swing in just 2000 alone — wasn’t that a clue? That left them 2 more years to stop the next collapse. I guess they didn’t see it coming.

    And this time, they must have missed it also — the Bear Stearns hedge fund falll in June 07, the December 2007 peak and reversal, the collapse of Bear in March 08 — none of these things put the PPT on alert ? Nothing done?

    I cannot believe you actually wrote — “Why would the PPT be on high alert during what seemed like a raging bull market?” — and expect anyone to believe you are a trader. Puh-leeze~! Traders know better.

    Finally, if you “are not sure why I feel qualified to comment on the stock market”, then you simply have not been paying attention . . .

  8. MayorQuimby says:

    One more thing – anyone that thinks the “law” means anything to TPTB is naive. All laws are simply an illusion. Finally – TPTB are the ones flourishing now and THEY have a good thing going (with regards to them). They will fight tooth and nail to keep the value of their assets high. Rich people OWN. Poor people GAMBLE.

  9. Transor Z says:

    Barry, I’ll always be in the Amen Corner when you argue that gov’t can’t keep a secret because of all of the political ambitions, personal animosities, and human frailties in play.

    Having said that, I firmly believe that artificially reinflating the Boomers’ retirement portfolios by jacking up the market without regard to fundamentals has been going on since March 09.

    I understand your point that the market was deeply oversold at its 3/09 lows, but the relentless upward movement has been … bizarre. Where’s the volatility? Is value investing dead and buried forever? WTF?

    Fine. There’s no PPT/star chamber/cabal/illuminati — whatever. That’s not saying much. The question remains though: WTF is going on with this market being so disconnected from fundamentals?

  10. peter north says:

    Barry, as always, you make good points. But IMHO, a President that got elected at least partly on the promise of more transparency, ought to be straight with the people if the PWG is operating in the financial markets. Being open about which markets they are participating in and what their rules of engagement/goals are would be even better.

  11. Uchicagoman says:

    Hmmm….

    $630 Billion big ones over night…

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a9MTZEgukPLY

    If that isn’t PPT, I dunno what is…

    ~~~

    BR: Its not –its the Fed doing publicly announced repos and liquidity injections

    It is not a secret cabal buying stock futures . . .

  12. HarryWanger says:

    Remember when Obama told everyone in March it was a good time to buy stocks? Talk about the ultimate insider trading!

  13. Mannwich says:

    Don’t forget about the O man’s “stocks are a good buy” call DAYS before this latest 60+% run up. As Transor notes, it was IMPERATIVE for boomer’s retirement portfolios to be “fixed” or else we’d really see some social unrest.

    That’s one of the hidden bailouts many boomers haven’t seemed to notice, although I’ve talked with some who seem inclined to believe that this rally was indeed designed in part to bail out their retirement accounts.

    ~~~

    BR: Its too bad W didn’t think of it first!

    Hey , why didn’t the prior administration goose the market? Why didn’t a GOP President, Treasury Secretary and Fed Chair simply make the market simply go higher?

  14. Mannwich says:

    @HW: I posted mine simultaneously with yours. If there was ever a “buy” call to listen to, it was that one.

  15. SteveC says:

    There is a plunge protection team, its called Tarp and TBTF. I trade the markets daily and I see no evidence of a hidden hand. One of the major keys for the market is sentiment, which may explain why people may feel there is a secret PPT. They can’t understand why the market rises when they are pessimistic about the future. But that’s what markets sometimes do.

    ~~~

    BR: How hidden was that ?

  16. call me ahab says:

    “All laws are simply an illusion”

    . . .awesome point- here’s some sage advice from a great mind regarding our “precious” rights-

    You Have No Rights

  17. V says:

    I find it hard to believe the government could organise such a stealthy method of market manipulation, nobody has a gun to your head forcing people to buy stocks. Clearly whilst the volume is below average there is still buying sufficient to bid up prices going on.

    I think this is akin to people seeing patterns in random numbers, part of a human need to find an explanation for everything. We simply don’t have the capability of recording every individuals thinking wrt the S&P in real time, which is essentially what you’d need to do to prove/disprove these sorts of theses.

    Also isn’t this meant to be the same government that shuts down airports over a passenger carrying honey, and the same government that hasn’t balanced a budget in how long?

  18. Steve Barry says:

    Barry’s points are so logical, but he ran right by a the conclusion that makes sense to me…the fact that there may be a PPT that tries to manipulate markets is exactly what DOES trigger those major declines periodically…because if the PPT exists, it is surely misguided if it believes it can manipulate markets only up. They manipulate when necessary and worry about the blow ups later…just like the Fed does with blowing bubbles…just like the Federal Gov’t does with deficits….just like Americans do with thir retimrement…just like we do withh SS and Medicare. It is the real American Way…party hard until the bill comes due and try to kick the can as much as possible.

  19. kmckellop says:

    They don’t need a PPT when they have the Government CAFR wealth shell game to play with.

    http://video.google.com/videoplay?docid=6703413885850200097

  20. Mannwich says:

    Great point, Steve. Perhaps all the manipulations since ’87 have partially CAUSED these crashes since then. They’ve certainly played a big role in recent bubbles and busts but maybe that was their INTENTION, since it are the insiders who usually know when to get out in time, leaving the Sheeple to hold the steaming bag again and again. It’s really a legalized form of theft. The elite won’t be happy until they have everything at these expense of the Sheeple. They do, after all, deserve it and need something to brag about at their black tie charity events.

  21. Jeff,

    BR can’t think that way (@11:26), but this whole thing(post/thread) misses expounding on “The goal of the PWG was to “enhance the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets while maintaining investor confidence.” (Once again with the psychology.)”

    If anyone wants to understand “What the PWG” was set-up to do, they need to start there.

    Markets dropping by a 1/4 (of their ‘Value’), and Clearing Systems dealing in Paper, by the Wheelbarrow, with Brokers not being able to handle (phone)call volume..is no way to ‘run a Railroad’..

    Clearing+Communications=Computers, Computers, and more Computers.

    then add: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Verizon+AT%26T+deep-packet+sniffing+EFF

    It’s All about the Information flows..
    With that, everything else is obvious..

  22. constantnormal says:

    When people talk about the PPT — which is real, Barry cites the presidential directive creating it — there are as many ways to look at it as the blind men describing the first elephant they encounter. I suspect that there are VERY few who think of it in the manner that Barry chooses to paint everyone who uses the PPT as a euphemism for “market intervention/manipulation”.

    And BR, for you to imply that there is no manipulation in the markets fits right in there with the efficient market dreamers.

    What most people think of as the actions of “the PPT” is the propping up that comes at the beginning and end of the trading days, with pretty much no activity once the markets have achieved their targets for the day. The current state of the equities markets (maybe others, I don’t have a clue there) does NOT match that of an equities market that is tied to the performance of the underlying companies, even when we adjust for the nonsensical realm of zero-cost money for some, and no money for others.

    The reason that this is associated with the PPT (the goobermint’s only publicized mechanism that is designed solely to manipulate securities prices), is that the goals of the PPT would fit in with the direction of these daily “interventions”. Whether this activity is being performed at the behest of the goobermint, or as a fringe benefit for the perps is not knowable, but the fact that the markets are being shoved around by large players seems obvious. If they were doing it with solely a profit motive in mind, one would expect to see the occasional “dump”, instead of the reliable “pump”.

    It has nothing to do with whether or not the people pointing to the “PPT” got behind BR when he made his prescient market turn call. It’s all about manipulation, and the undeniable picture of bankrupt (morally or actually) companies’ stock making 300% gains when profitable firms struggle to make gains of a fraction of that.

    The “PPT” is just the handle used to describe the shadowy “manipulators”.

    ~~~

    BR: I am NOT saying there is NOT manipulation –between the TARP, the Stimulus, the Fed, various hedge funds, my buds on GS’ prop desk — there is a TON of manipulation going on.

    What I DID say was that there is that there isn’t a secret government cabal buying stocks/futures, and no one has ever demonstrated proof.

  23. Steve Barry says:

    The whole gov’t acts like an open PPT…printing money to buy treasuries??? Are we bailing ourselves out here? Even Erin Burnett, called this a ponzi!!! And this is all they can muster…a jobs report where, by my estimation, if they used an accurate B/D model, is 400,000 jobs (at minimum) below where we need to be to provide jobs for the incoming workforce? Not to mention the massive number out of the workforce…if they should start looking for work, instead of sucking money off the rest of us, it will cause U3 to soar.

  24. call me ahab says:

    “And BR, for you to imply that there is no manipulation in the markets fits right in there with the efficient market dreamers.”

    no doubt-

    BR is all in on EMH when he makes the right call I guess

    ~~~

    BR: What does one thing have to do with the other?

  25. SteveC says:

    Barry, my point exactly. The so-called PPT is operating right in plain sight, for all to see. In my opinion, they’re lousy traders with a fat pocketbook, with the law of intended consequences lurking over their shoulder.

    ~~~~

    BR: If they are in plain site, they aint the PPT !

  26. Mannwich says:

    @Hoffer: Great points. “Confidence” in what, exactly? Certainly not in transparence or that it’s an unrigged playing field. That markets are always supposed to go up regardless of the underlying fundamentals? These markets have been manipulated in one form or another for at least two decades now. It seems to me the actual GOAL is to blow bubble after bubble. The PPT certainly doesn’t control the markets per se but all this intervention adds up to a shadow PPT of sorts that can guide the market (upwards) at times.

  27. Moss says:

    Well since the market and trading is primarily a transfer system, as evidenced by the extreme volatility and bubbles over the last ten years one can’t claim markets are NOT manipulated. The mechanisms may not be evident nor explicit but one is naive to think they are not manipulated. Moral Hazard alone is proof of that.

  28. Mannwich says:

    All illusions die eventually. Just ask anyone who believed in any institution over the past few decades. The market is no different, IMO.

  29. constantnormal says:

    a related item … take a look at these two charts …

    http://quotes.ino.com/chart/?s=NYBOT_DX&v=s

    http://quotes.ino.com/chart/?s=FOREX_XAUUSDO&v=s

    I found it interesting that the “significant” movement from USD to gold began about 10-15 minutes ahead of the release of the BLS employment report. One would think that this would represent some large sums of money, which ought to limit the playing field a bit — and also limit it to parties that might have an inside pipeline into the goobermint.

    A pity things didn’t work out the way it was apparently intended … which I suppose makes someone’s point that the insiders are not terribly effective, and that the markets are not completely controlled.

    But wouldn’t it be nice if suspicious activity like this were investigated, and the perps occasionally fined and (preferably) jailed?

  30. Steve Barry says:

    Funny too, that right after this group formed, the P/E on the S&P, even with the crashes, has rarely been below its 50 year median.

    http://bigpicture.typepad.com/comments/2005/12/pe_vs_sp_500_50.html

  31. MayorQuimby says:

    “BR: You are describing something else entirely.

    As the conspiracists see it, the PPT is a government entity, working thru the NY Fed, buying SPX futes to goose the markets.”

    It’s not ‘an entity’ f course. But the order flow does come through the NY Fed and then the i-banks themselves. Timmy and Greenspan practically admitted it over the past few months when they publicly bragged about “reliquifying the system”. Many Americans wouldn’t even mind – after all – up is good right?! Higher prices are good right?! Steroids = more home runs is good right?! We live in very messed up times. Expect more Banana-Republic-like behavior in all aspects of life – more crime, volatility, social issues and market mvmts.

  32. R.D. says:

    I listen to the SNP pit guys in chicago who gave out

    a NUMBER a few years ago for a trader with no name(TPTB) that was doing all

    the snp futures biz for the gov. They don’t have a stock service

    with a lot of clients ,so a bias is minimal.

  33. hr says:

    HarryWanger Says:
    January 8th, 2010 at 11:13 am
    “Remember when Obama told everyone in March it was a good time to buy stocks? Talk about the ultimate insider trading!”

    But our very own Barry was listening, he repeated it on Yahoo’s Tech Ticker!!

  34. Jessica6 says:

    The main problem with the notion of a PPT is that it’s absurdly simplistic.
    Anyone who watches markets can see that there are some strange overnight gaps but that doesn’t mean the government is behind it.

    As for the March rally – it coincided pretty well with changes in FASB rules concerning Mark-to-market and low interest rates and other measures keep it going. There’s no need for a secret cabal – just need to count on the willingness of governments and central banks to ‘extend and pretend’ while hoping that at some point the real economy does begin to recover. I just wish I’d figure THAT out sooner.

    There just seems to be an ‘understanding’ in a mafia sort of way – the big banks keep the stock market propped up, they can carry on as they did before the crisis – whether it be the huge bonuses or the crazy risk-taking, etc. only with even lower odds of the SEC taking any action on insider trading, etc. unless zerohedge screams it from the top of a building first.

    The government manipulation comes more from GDP reports that are staggeringly different than later ‘revisions’ and so forth along with mainstream media

    ~~~

    BR: Thank you Jessica!

  35. dead hobo says:

    BR is just setting up a straw man when he narrowly defines what a PPT is and then claims it doesn’t exist, while at the same time admitting that there is tons of manipulation in the financial markets from numerous players. It’s either a deliberately phony argument or a curious sign that he can’t see the forest because the trees are in the way.

    He is also disingenuous when his straw man is assumed to be an example of perfection in all aspects of performance, and, since there has been no evidence of perfection then there can’t be a PPT.

    An audit of the Fed that includes public disclosure will settle the question about secret cabals.

    ~~~

    BR: I am saying they do exist, they do woek in secret — but they don’t prop up the market.

    Why is this so hard to understand?

  36. Steve Barry says:

    Quick question BR…what do you think goes on at PWG Meetings and why is that kept so secret?

    “Twenty years later, it remains a secretive organization, one whose formalized meetings keep no minutes and whose functions are poorly understood. There is surprisingly little academic publishing on this body. Due to its secretive nature, the PWG’s workings are often described in market folklore as “they,” as in “They won’t let the market drop, they were in buying today.””

    ~~~

    BR: I have no clue

  37. Mannwich says:

    I think Jessica6 nails it. There’s no all-controlling PPT, but all of these things add up to a sort of “shadow PPT” to keep the markets propped. The cartels know when the “all-clear” light has been lit.

  38. Ny Stock Guy says:

    Anyone who really has the power to secretly manipulate the market wouldn’t bother working for the government.

  39. Eric Davis says:

    Back in the day, countries tried to manipulate their currencies and it was an unmitigated disaster. But somehow it still persists that with a small amount of money relative to the market, then can Goose the market.

    Only to learn… “NOBODY IS BIGGER THAN THE MARKET”

    But just like “We need the Treasury to come in and buy stock, and stop these damn short sellers who are manipulating the market.” is a sign of impending bottom. “The PPT is Manipulating the market” is the Inverse indicator.

    but… break out the black Helicopters, and the UFO’s

  40. Mannwich says:

    I would also surmise that the collective BELIEF or perception the feds won’t allow a market crash (no matter how flawed that belief may be in reality) only fuels these bubbles to run even longer and bigger (since nobody wants to sell if there is a bubble, nudge, nudge, wink, wink, I’ll get out in time), hence the bigger blow ups in the end.

  41. JustinTheSkeptic says:

    The fact that the PPT, props the market up to tropisphere levels should be obvious to everyone. That a big sell-off ensues from such levels should be no surprise. Could not the PPT be working in a clandestine and overt manner? Our markets are not free!

  42. John Clarke says:

    I think these two latest articles have also raised some eyebrows regarding the ‘PPT’.

    1. http://www.zerohedge.com/article/trimtabs-asks-who-responsible-non-stop-market-rally-march-gives-some-suggestions

    2. http://jessescrossroadscafe.blogspot.com/2009/12/who-is-buying-all-these-us-treasuries.html

    This Rally since March of ’09 hasn’t made much sense to me either from a Fundamental Perspective… but when you consider the Wall of Liquidity that has hit these markets from every central bank in the world– working in collusion with the Federal Reserve– it does… whether it be QE to buy Treasuries, currency manipulation, manipulated Quant Programs from some of the Primary Dealers, etc.

    I would also ask how is this Rally much different than the ones that occurred after the ’29 crash and the 73-74 marke crash?? Duration?? Percentage Retrace??

    I’ve asked my Financial Advisor (whose been in the game a long time and has a “Facts only Please” mindsight like Barry’s) “What do you think the Federal Reserve (PPT) is going to do Next… What will be their Next Move..???

    He’s given me the same answer every time… “I don’t know… and I don’t care… Stick with Technical Analysis and use some common sense”.

    Right now, the “Mindsight/Game” of these Clowns at the Federal Reserve, the majorities in the House and Senate Finance / Banking committees, the Obama Administration (like the Administration before it) — in my view all considered to be a part of “The PPT’– is to INFLATE these Markets… and have the ‘Regulators’ look the Other Way (or pretend like they’re doing their jobs).
    Like someone posted above all these baby boomers want to retire with Nice Phat Pensions (at the expense of Future Generations).

    From a Trading Perspective I think it’s best to keep this “PPT Mindsight” in the back of your mind and stick with Technical Analysis.

    I also think we can make some reasonable assumptions about what the End Game of this Mindsight is going to be ….Higher Food and Energy Prices… or Higher Interest Rates…other (‘Unforseeable’) Market Distortions someplace else…

    Whatever the case T.A. will provide a Screaming Sell Signal when the Inevitable Market Correction comes ( and this year will probably be a good trading market).

  43. “I think Jessica6 nails it. There’s no all-controlling PPT, but all of these things add up to a sort of “shadow PPT” to keep the markets propped. The cartels know when the “all-clear” light has been lit.”

    I think so..x2

  44. dead hobo says:

    Mannwich Says:
    January 8th, 2010 at 12:34 pm

    I would also surmise that the collective BELIEF or perception the feds won’t allow a market crash

    reply:
    ————
    Logically, good fiscal policy would require a PPT like entity.

    Tax revenues from capital gains fall in a down market. It’s in Uncle Stupid’s interest to keep it pumped. Likewise, if the markets were allowed to stay down, transfer payments would grow and potentially skyrocket to even higher levels. Without a pumped market, the wealth effect would lower spending even more and make the recession even more spectacular. Both Obama and Bernanke have commented on the positive aspects of the wealth effect.

    Thus, asset inflation is good public policy at this time from a fiscal perspective.

    Unfortunately, the pump chases away cash from real investment since nobody knows the actual price of anything and many fear anything that is pumped up can fall if the pressure stops.

    PS. when you know economics, you can talk real pretty like this. I didn’t drop my class (even got a BS in it). Thus, I can associate trees and forests with ease.

  45. Mannwich says:

    @dead hobo: But isn’t that precisely WHY it’s bad policy, not good? As we’ve seen, these manipulations constantly cause bubbles and busts and far more damage in the end. Once they get in, they seem to have to do more and more and all that tinkering seems to have played a role in these big messes that past 20 years. How is that “good policy”? It might be if they could truly control it. I don’t think they can, and as you mention, it usually just causes a giant mis-allocation of capital.

  46. Mannwich says:

    I would also add that paper gains and money aren’t “real wealth”, thus no real “wealth effect” has taken place (a wealth transfer or theft has, for sure). Real wealth is derived from producing something of real value.

  47. call me ahab says:

    manny-

    real wealth requires people to actually make something-

    entirely unacceptable- especially when the Chinese are there to do it for us

  48. Uchicagoman says:

    @BR

    Yeah, I suppose that is true about the Fed liquidity etc….

    But… I guess that is what is at the heart of the matter.

    The Fed, is the Fed,.. is the Fed.
    Person of the year. (and a follower of “Chicago-School” saint himself Milton Friedman I might add)

    Where would we be without it?

    With or without the PPT in existence…

  49. DL says:

    I find it amazing how many otherwise intelligent people can believe in a secret PPT. Certainly,
    I have no trouble believing that the US government could throw a few billion dollars around here and there without the media finding out about it. But it would take hundreds of billions, even trillions of dollars to hold the market up in the face of millions of determined sellers. That amount of money could not be spent in secret. Furthermore, if it WERE possible for Obama to spend, e.g., $500B without the MSM finding out about it, the last thing he would do with it is put it into the stock market.

  50. Outstanding debate !

    I appreciate the divergent perspectives and shared views . . .

  51. Moss says:

    The single most important aspect of the fiat regime, the cost of money, is controlled by a Central Bank who works on behalf of the politicians and member banks. The whole thing is rigged, it simply becomes a guessing game, as to what everybody else, who relies on the market for a living, is going to do.

  52. Darkness says:

    No no no, the PPT LETS the market fall sometimes, but only after Joe Consipiracytheory buys in. You missed that subtly about the theory in your summary.

    Free money and ridiculous leverage for the financial behemoths helps blow bubbles. The feds are blowing another one right now in a vain attempt at softening the bottom of the current plunge. The secret society comes into this, where?

  53. call me ahab says:

    BR-

    you are hypocritical-

    regardless of your market position- you seem to be opposed to many of the measures that the Fed/USG have embarked on which have helped your bottom line- programs designed to support asset prices- such as-

    tax credits for home buyers

    government support of banks/GSA’s- shares still trading- though bankrupt as they were/are- bondholders kept whole-

    QE and ZIRP

    MBS purchases by the fed- i.e.- more QE- to artificially lower mortgage rates w/ newly created money-

    all bad news- but good for the markets in the near term-

    much as Colbert said- paraphrasing- you will defend capitalism unless you can profit from its demise

    that the market will do its thing- regardless of any possible manipulations-

  54. Mannwich says:

    @ahab: Good point, but is BR’s JOB to make money for his clients under the system and “rules” that are in place. You either choose to play under that system (and its “rules”) or pack up and go home. BR chooses to play, as do others. “Investing” in actual companies today is dead. It’s all g@mbling now. The profession should never be called “investment” management again. That’s not what it is, IMO

  55. DeDude says:

    I think that part of the issue is how far government will go to manipulate the market. I agree that direct government purchase of stocks to regulate the value of the stock market is extremely unlikely for the reasons mentioned. More likely would be the government calling some of the big market participants and push then to do certain things, including bying stocks. However, a lot of those big guys are more than willing to do things on their own initiative if it can help them rip some money out from under the nose of regular investors or day traders. They know what you know and don’t know, and sometimes even what your intend to do in certain situations (stops and things). If inforation is released at 4PM they know about it no later than 2PM and can trade on it ahead of everybody else. The other part is the not so secret manipulations of markets by things like oil reserves and the Fed purchase of bonds. That is actually just government doing its job and trying to counter market forces from having negative effects on the daily lifes of people.

  56. Steve Barry says:

    “Quick question BR…what do you think goes on at PWG Meetings and why is that kept so secret?

    BR: I have no clue”

    fair enough…a follow on question:

    Does this worry or anger you that there is such a lack of transparency to this high-level group?

  57. call me ahab says:

    manny-

    understand completely- but its akin to living on food stamps and sec 8 housing all the while railing against “social” programs-

    but- I guess– in all fairness- BR could may have played the market differently had different government actions taken place-

    in any event- my motto from here on out- I stand by capitalism- unless I can make a buck or two on its collapse and failure

  58. MayorQuimby says:

    For ANY doubters I give you this (read up on the Fed Funds Discount Rate first):

    http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

    “At 1 p.m. on the same day (October 24), several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.[12] The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers’ financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market.”

    “on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further.”[4] William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the slide. The DJIA lost another 12% that day. The ticker did not stop running until about 7:45 that evening. The market lost $14 billion in value that day, bringing the loss for the week to $30 billion.”

    So today – they’ve simply gotten better and more efficient at handling crashes. They have lots of experience lol. We also have a MUCH more ignorant public today. People in ’29 understood the NEED to ‘run on the bank’. Today – people only believe what they are told and are therefore very easily manipulated. For TPTB – higher equities = WIN WIN WIN for everyone. But in reality – they are destroying the foundation of the capital markets – TRUST.

  59. catman says:

    BR – You really know how to stir the pot! LOL

  60. catman says:

    Didnt take Karnak to know that Mannwich would be the first one in the pool.

  61. Transor Z says:

    Another way to frame Jessica6′s nice comment above:

    [I]t’s not a conspiracy, because they all think alike. They all go to the same prep schools, they go to the same colleges, they see each other, same boards of directors, same clubs. And they stay out of the news.

    -Gore Vidal in a 1996 interview with former Calif. gov. Jerry Brown for “We the People.”

    http://www.wtp.org/archive/transcripts/gore_vidal.html

  62. Show me some proof~!

    When Larry Kudlow asked me for proof of the energy market being manipulated, I tracked down the Goldman Sachs Commodity Index being re-weighting away from Oil.

    Show me any proof — and not “I know a guy who knows a guy, and that guys say.”

    Calling All Conspiracy Theorists! (September 29th, 2006)
    http://www.ritholtz.com/blog/2006/09/calling-all-conspiracy-theorists/

    Here Comes the Commodity Index Rebalancing (January 7th, 2009)
    http://www.ritholtz.com/blog/2009/01/here-comes-the-commodity-index-rebalancing/

    Friends in High Places?
    http://themessthatgreenspanmade.blogspot.com/2006/10/friends-in-high-places.html

  63. MayorQuimby says:

    There is no proof and there never will be. But they did it in ’29, formalized it in ’87 (the actual “President’s Working Group”) and implemented it in ’99 and ever since. It’s no big deal really. It’s not as if this is something new!

  64. Myr says:

    Most of the chatter about about a PPT occurred during the downturn, not during the upturn. Whenever the market was at a critical breakdown point, Geithner, Bernanke, and co. would come out and make comments(and propose policies) to try to support the market. This was fairly obvious to all. Obviously, these obvious attempts to manipulate the markets failed to stop the ultimate plunge to 667, but they did work in the very short term. I don’t think the Fed/Treasury was out there buying futures, but their words and deeds were all aimed at goosing the stock market.

  65. Gator81 says:

    Seems to me there’s a bit of divergence in the discussion. Plunge protection is not price or market support, though the difference may be in shades. I don’t think any entity (except possibly the Fed via free money) can support market prices; that’s just too big a load. It’s the plunge, i.e, the panic, that’s to be tamed, not the eventual settling of markets at some lower price. Mr. Ritholtz says we should be looking for proof. I’d agree, the gov’t has no history of such doings without lots of evidence lying about. But I think was can see some evidence here. Perhaps not rising to the level of proof, but evidence nonetheless.
    In the first 8 months of ’08, average daily volume in the S&P500 ran under 5 billion shares. A big day might have seen 7 billion shares. And the CBOE volatility index (VIX) ranged between 17 and 31. Then in Sept., things got a little dicy, and in one 4-day span in early Oct., the S&P500 index fell over 10% – that looks like a “plunge” to me. Not the fact that prices fell 10%, but that it happened in 4 days. The VIX hit 70, and volume shot up to over 11 billion shares in one day.
    Now, if I were the head dude, and I had a PPT, I would tell them that what I wanted them to do was NOT to support unsupportable market prices, but to be prepared to open the doors of the theatre if some idiot starts yelling “fire!”, i.e., buy what they are demanding to sell at any price. Allow as orderly a departure as possible of the frightened masses to lessen the damage that panics cause. People and institutions sold 11 billion shares that day, many at losing prices. Somebody bought ‘em. And the plunge ended.
    Don’t know if there is a PPT, or how organized it might be. But if there was one at work, that’s what it would look like.

  66. kmckellop says:

    Proof? There never will be proof….Once you’re suspected you’re out of business- “Lucky “Luciano’s Law

  67. rootless_cosmopolitan says:

    Barry,

    “Show me some proof~!”

    The proof is that there isn’t any proof for the market being controlled by the THEM, because it’s so secret! And if you think THEY must have done a bad job then, it only shows how well THEIR deception works! Perhaps, you are even one of THEM, since you try to convince others THEY didn’t exist, using well reasoned arguments. This is already very suspicious. Back in March, you probably had some insider knowledge that THEY are going to start a market rally.

    rc

  68. Mike in Nola says:

    BR, you seem to have hit on a hot topic :)

    Just because they are not two competent and wind up spending many tens of billions after a crash they didn’t anticipate doesn’t mean there isn’t one. However, there is no need to assume it is secret, most of the stuff going on has been out in the open. Give GS et al enough money and they can drive the markets to the sky.

  69. max says:

    If the conspiracy theorists are correct and this group is supposed to prevent market meltdowns, they are not exactly hitting the cover off the ball.

    Oh, I doubt the PPT has much effect, other than to provide ‘confidence’. No, if there’s a cabal of guys working to keep the markets elevated, working to maintain confidence, with power (if needed, and it has been used over the last year) to pour money into the market… well, you don’t need to be a cabal to operate right out in the open. And we have such an organism and it is called the Federal Reserve.

    max
    ['They aren't very good at keeping their moves secret, no. They're pretty good at obfusticating their motives though.']

  70. TakBak04 says:

    Perhaps we can say “A Silent Hand” if the PPT is offensive to some.

    I’ll give a hat tip to poster “Jessica,”…because from my observation what she says is true to a great extent….but other posts, particularly these three also have merit. BR seems to be arguing semantics in a way. A Govt. Cabal sitting in a dark room manipulating markets is not what many of us who believe in “PPT” really believe.

    “Plunge Protection Team” is an observation many of us have made about the markets since the Tech Bubble popped. The markets should have stayed down for awhile after that and investors should have focused back on “value/PE ratios” that were realistic. When Greenspan and then Bernanke started doing the interest rate lowering something “different” seemed to be going on in the markets for those of us who watched carefully. At first some of us thought it was the “collars” that were put in after the ’87 Crash that kept the market from going down too far on bad news that was coming in the 2000′s. The 90′s seemed more normal but the “collars” seemed to come into play more after the Tech Bubble Crash and then after “9/11″ the markets needed to be goosed for the health of the country. (Ha! sort of like after the Banking Crisis) We don’t hear much about “collars” anymore….even though I remember Art Cashin mentioning them in his reports frequently in the 90′s.

    Anyway….Shadow Hand that keeps the markets from going down over bad news might be better than PPT…but as a value/buy and hold invester….I’ve seen the manipulation. BR might feel it’s the programmed traders, computers and GS that are doing it. And, BR, (being younger) can understand that computer trading is what the markets are these days compared to even before “9/11″ and after ’87 when the collars were put in place. So…one could say “computer/black box” trading might have had some leveling effect.

    But, I still say “Silent Hand/PPT” and that there is some intervention even if it isn’t a few guys sitting in a room in the Govt. It’s a controlled thing… so “Shadow Hand,” might substitue for the “PPT”…..but the effect of manipulation is there for close watchers and some of us older who aren’t traders can even see it.

    —————————

    # Mannwich Says:
    January 8th, 2010 at 11:48 am

    @Hoffer: Great points. “Confidence” in what, exactly? Certainly not in transparence or that it’s an unrigged playing field. That markets are always supposed to go up regardless of the underlying fundamentals? These markets have been manipulated in one form or another for at least two decades now. It seems to me the actual GOAL is to blow bubble after bubble. The PPT certainly doesn’t control the markets per se but all this intervention adds up to a shadow PPT of sorts that can guide the market (upwards) at times.

    ———————
    # Moss Says:
    January 8th, 2010 at 11:48 am

    Well since the market and trading is primarily a transfer system, as evidenced by the extreme volatility and bubbles over the last ten years one can’t claim markets are NOT manipulated. The mechanisms may not be evident nor explicit but one is naive to think they are not manipulated. Moral Hazard alone is proof of that.

    ———
    # Mannwich Says:
    January 8th, 2010 at 11:50 am

    All illusions die eventually. Just ask anyone who believed in any institution over the past few decades. The market is no different, IMO.

  71. Ny Stock Guy says:

    I’m sure the Templars and the Freemasons are behind this.

  72. dnarby says:

    Holy crap Barry! How naive can you get?!

    We have MOTIVE. A deflationary credit crisis.

    We have MEANS. High frequency trading.

    We have OPPORTUNITY.

    And we have THE ‘REASONING’ BEHIND IT ALL: Horribly confused thinking! – http://thetaildoesnotwagthedog.blogspot.com/2009/07/in-end-tail-does-not-wag-dog.html

  73. dnarby says:

    OK… I went off half-cocked. Delete that if you would. Sorry!

  74. TakBak04 says:

    @Ny Stock Guy Says:
    January 8th, 2010 at 6:38 pm

    I’m sure the Templars and the Freemasons are behind this.

    ——-

    Typical “Troll Comment” a hit and run…pretending a Profound Comment that’s supposed to “Blow Away” more reasonable, thoughtful comments on this post.

    LOL’s: Just so you know I have ancestors who were “Knights Templars”……..so I found you post profoundly funny. You don’t know SHIT and you are picking up RW MEMES!

  75. Ny Stock Guy says:

    IT IS A JOKE!

    I am making fun of all you conspiracy theory people. I agree with BR. I don’t think the market is being SECRETLY manipulated.

    But I’m pretty sure the CIA killed Kennedy.

  76. Thor says:

    TakBak04 -

    “I have ancestors who were “Knights Templars”

    Have you done any research into what percentage of the European descendant population can trace their lineage back to the Knights Templars? I’ll give you a hint – it’s higher than 50%

    While you’re at it, look up how many can trace their ancestry to Charlemagne.

    Frankly, if you’re going to try to brag about something irrelevant I’d go with Charlemagne.

    Just so you know

  77. TakBak04 says:

    LOL’s….it’s as absurd as the Troll.. But, being a person who does know family history…back to Charlemagne. Maybe we are related? 1066? Ring a Bell.

    Whatever that shit is just for folks like us who like to research.

    The person was trying to say folks were “Conspiracy Theorists” tied into “Knights Templar.” Give me a break from the disruption.

    BUT…maybe WE ARE RELATED if you know Charlemagne!

  78. DuchessGateau says:

    Mr Ritholtz,

    Sorry this seems to be a sore topic with you, but I’m not certain I understand what you are saying. I read your book, and I read your blog, but your point of view IS a little hard to understand. I would say that we don’t know what the Presidential Working Group does, so all options are on the table. Speculate freely. Some ideas make more sense than others. The Bush administration, in particular, did a great many things secretly, but you are adamant that the government would never secretly prop up the markets, despite all the other market manipulation they do in the open. You just don’t think it works that way?

    You think the PWG is an advisory group who discusses market health, but doesn’t have the power to spend money, and that’s the job of Treasury and the Fed? Wouldn’t Geithner be a member of this PWG? Even though the Treasury apparently uses the same power as Congress to spend freely from our treasury, that’s when they’re wearing a different hat? Are you saying that Paulson only took money to benefit specific banks, and would never prop up the markets to benefit all? Is it unthinkable for our government to secretly interfere in the markets? If they do it openly, wouldn’t they also do it secretly if they thought it was needed?

    We have don’t know exactly what this group does, but you are absolutely certain that is does not do anything to prop up the market, because… exactly why are you certain of this? You think they’re Fed and ex-Fed types who advise the president impartially, with no thought to interfere in the markets? Warren Buffet and others?

    I will believe you if you say you can just tell by the way markets behave. You do not need to offer proof, as you demand of the skeptics. I will just believe you.

  79. V says:

    With all this talking of propping up of the stock market it stuck me how similar the stock market is to a jenga tower.

    Following a collapse there’s plenty of pieces to build it up again (especially if the fed can provide more pieces free of charge to the banks). Once the rest of the market sees the tower growing they are keen to join, but in this game you’re not sure when supply of pieces will get thin and when/where participants will start to take out their pieces. The tower can still grow, but the footing isn’t as solid. Of course what we saw in 08 was quite a few pieces removed from near the bottom.

  80. All I can say is:

    Blue Horseshoe loves Anacott Steel.

    You ask how they couldn’t avoid a big market crash if there is no PPT.

    What appears to me is that the crash ushered in a lopsided administration that was leaning enough to one side to bring in a huge change in US public health care. This was a change that has been resisted for decades. Coincidence? Not in my mind. :)

    Are the markets manipulated? Who cares? As I have said before here: Never worry about what you can’t control. That is what hell is for

  81. TakBak04 says:

    @DuchessGateau Says:
    January 8th, 2010 at 8:32 pm

    Mr Ritholtz,

    Sorry this seems to be a sore topic with you, but I’m not certain I understand what you are saying. I read your book, and I read your blog, but your point of view IS a little hard to understand. I would say that we don’t know what the Presidential Working Group does, so all options are on the table. Speculate freely. Some ideas make more sense than others. The Bush administration, in particular, did a great many things secretly, but you are adamant that the government would never secretly prop up the markets, despite all the other market manipulation they do in the open. You just don’t think it works that way?

    You think the PWG is an advisory group who discusses market health, but doesn’t have the power to spend money, and that’s the job of Treasury and the Fed? Wouldn’t Geithner be a member of this PWG? Even though the Treasury apparently uses the same power as Congress to spend freely from our treasury, that’s when they’re wearing a different hat? Are you saying that Paulson only took money to benefit specific banks, and would never prop up the markets to benefit all? Is it unthinkable for our government to secretly interfere in the markets? If they do it openly, wouldn’t they also do it secretly if they thought it was needed?

    ——-

    Dutchess you have an incredibly melodious voice that comes across even in your spoken word on this blog. A lovely post…much what you say is also worth folks reading and thinking about.

    Nice!

  82. mark mchugh says:

    You’ve crossed into a whole new realm of mush-minded reasoning….

    ” The Bush White House couldn’t illegally fire nine U.S. attorneys without the political motivation being discovered and a major investigation launched”

    Ooooo a major investigation. What you witnessed was the crippling of our Justice department, in a very in-your-fat-face manner. The objective was achieved and no one prevented the desired outcome for the perps. (in other words – they got away with it, who the fuck cares that you heard about it).

    Now, you’re looking at about $4Trillion dollars of unaccounted for “mystery” dollars that have flowed into US equities over the last ten months, coupled with an equally inexplicable, insatiable demand for US Government debt and you think it’s insightful to say, “It’s not the PPT”? Who the fuck cares “WHO” it is? You walk away from a crooked card game, and you don’t get points for figuring out who rigged it. What guys like you haven’t figured out yet is that Main Street ain’t comin’ back, no matter how awesome the Ponzi looks.

    Seriously, it’s no wonder we can find millions to unquestioningly buy into global warming, despite the coldest December on record and accept that Saudi Arabia wasn’t involved in 911, despite 15 of the 19 hijackers being Saudi. All’s someone has to do is label the truth “conspiracy theory” and every mush-minded fool that’s afraid of being exposed for what they truly are will go running the other direction.

    Way to go, America!

  83. mark mchugh says:

    I mean, geez, since when is secrecy a criterion for conspiracy? Remember how the Nazi’s “secretly” conspired against Jews? me neither.

    The President himself called the market bottom….it was almost like he knew something…..

  84. torrie-amos says:

    Has anyone ever read the book, “The Stock Market and The Government”, no, because it doesn’t exist. Now, how many have read a hundred or more books on Jesse’ Livermore, Buffet, Murphy, Williams, etc. I have. My whole life I’ve had about as much interest in government in as Womans Basketball, yeah, I know the game, how it’s played, etc. yet couldn’t tell you any players or teams. I feel that is a good analogy.

    The fact is, we are all finding out how powerful a force they are, mainly because they can change laws.

    We hear about, this broker house, or that guy, saying they are concerned about some arcane law coming up for a vote, FSB-5150 or whatever………..and we pay zero attention.

    Mea Culpa, in march the accounting changes, and in the summer the earnings upped to 75 bucks, fly in the face of all logic unless you understand the government, which I did not.

    From a logical business standpoint, those two items did not change the basics of business, and thus I stood aside for the most part. Well, I was flat wrong, government has the total power to change laws at a whim when the want too, which changes the rules.

    It’s kind of like a Black Swan in reverse. So, shame on me for not knowing, which is how I treat all business setbacks.

    So, yeah, I believe in manipulation, how and why and knowing it when you see it is key.

    If you go back to the inception of the PPT, by Regan, what was he doing at the time. Getting the Saudi’s to lower the price of oil to bankrupt the Soviet Union who had invaded Afganistan.

    IMHO, certain folks always view everything as a war. Buffet talked about Pearl Harbor, as a reference to put it in perspective. War is a tough ass thing, most do not want to deal with, as I grow, I feel it’s not a bad mindset to take.

  85. rktbrkr says:

    Why wouldn’t there be conspiracy theories with all the secretive US/Fed manipulations on unprecedented scales? Bernanke says the Bloomberg FOIL disclosures would destroy the markets, whats do damaging about the truth?

    What if Fed & banksters engineered a plan to “stabilize” the markets by buying S&P options while waiting for ligh buying volume to sell into and this has continued month after month waiting for that buying volume. The referees have become players without any disclosure, think this will affect public confidence?

  86. red_pill says:

    “PPT” or called something else is just semantics; the gov’t uses a “the ends justifies the means” patronizing philosophy (see BOA/Merrill and AIG/Geithner) which justifies opaqueness and hurting a few stakeholders for the good of the masses. That is best case – at worst, they are unethical and corrupt. Is our gov’t corrupt? Well, let’s see, writing a check for 100 cents on the dollar on derivative instruments when you have tremendous leverage to structure better terms…not setting bonus and other limits…what is the strongest political lobby in the world, what ultimately motivates politicians – greed and power or doing the right thing? anyone who wants power is unqualified to rule.

    BR’s insight that many of those complaining now were fighting the tape all year is dead on. separate trading from logic.