zt 联邦政府操纵股市--The Stock Market's Da Vinci Code

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联邦政府操纵股市         --- The Stock Market's Da Vinci Code
       
                     
        http://registeredrep.com/mag/finance_stock_markets_da/

Is the Federal government manipulating the equity markets? For years, there have been whispers on Wall Street of secret government-backed actions — like stepping in to buy equity index futures to prevent investors from catastrophic plunges.

It sounds like a crazy conspiracy theory for sure, but it is one that has currency and won't go away. The conspiracy goes like this: There is a group of federal government officials — the Treasury secretary, the Fed chairman — plus senior NYSE officials who make up, the Plunge Protection Team. It is said they intervene to put a floor under stocks whenever they are at risk of penetrating important levels of technical support, such as when the 50-day moving average slips under the 200-day moving average. Technicians call this the Death Cross, because, when that happens, it can trigger a larger, steeper rout caused by ask-no-questions programmed selling, which can lead to outright panic selling.

The conspiracy theory holds that these officials buy S&P 500 index futures through major Wall Street trading desks, with money from the Exchange Stabilization Fund, a $38 billion Treasury Department account to buy currencies on the open market and secret government offshore accounts. Believers say these activities are coordinated out of the Fed's New York branch on Liberty Street in Manhattan, just a block from the NYSE.

True believers — many on the Internet, as might be expected — point to public statements by no less than Alan Greenspan. During a speech given on Jan. 14, 1997, at a university in Leuven, Belgium, Greenspan said: “We have the responsibility to prevent major financial market disruptions through development and enforcement of prudent regulatory standards and, if necessary in rare circumstance, through direct intervention in market events.”

Richard Russell, who has seen it all in his nearly 50 years of publishing the Dow Theory Letters, is no conspiracy theorist by any means. But even he has openly wondered about the remarkable ability of the indices he tracks so closely to recover so consistently from the technical trading fault lines they have flirted with so often in recent years.

Russell told his 12,000 subscribers in mid-October of last year that he has “never been a big believer in manipulation and the so-called ‘Plunge Protection Team.’” But, he proceeded to muse about the events of a trading day that month. “Manipulation? This morning's breadth on the NYSE was down by a big plurality of 1400, but the S&P and the Dow were actually higher? This was truly extraordinary, and I wondered whether possibly the Fed was buying S&P futures in an effort to put a floor under the market.”

The Invisible Hand
What? The U.S. Federal Reserve putting a “floor” on stocks? It has happened overtly in moments of crisis. In the days following the Oct. 19, 1987 debacle, the Fed flooded the banking system with money, announcing that it would be a willing lender of last resort for important financial institutions and “encouraging” banks and Wall Street houses to relax their loan covenants for a brief period. Fed officials do appear to have helped prevent things from getting worse. The 22.6 percent plunge in the Dow that day did not spread into the deeper catastrophe it could have become. The Fed's action and statements allowed cooler heads to start placing reasonable bets that a bottom was nigh.

H. Robert Heller, a Fed governor between 1986 and 1989, had a front-row seat to the stock market crash of 1987 and recalls what happened. “Everybody's attention was tightly focused on containing the damage and preventing a spread of the financial disruptions throughout the financial system,” Heller wrote years later. “Do not forget that at that time we were also dealing with a severe S&L crisis and almost 200 bank failures per year. Without swift supportive action on behalf of the Fed, the stock market crash could well have been the straw that broke the back of an already weak camel.”

But a surprising number of investors think the government's invisible hand is active even in the absence of obvious threats, like the blow up of Long-Term Capital Management in 1998 and the horrific Sept. 11 attacks. Specifically, diehard PPT believers claim that in three months in 2002 (June, July and October) and March 2003, and again in March, April and October 2005, equity indices were challenging widely followed technical supports — but miraculously recovered.

The avoidance of a stock market meltdown has stumped the logic of many big-picture investors, too. The Economist magazine has been sounding an alarm for years about the U.S.'s current account deficit (now at a record 6 percent of GDP), the inevitable bursting of the worldwide real estate bubble and the overindebted U.S. consumer and government. More recently, rising interest rates and/or inflation, a declining rate of corporate earnings growth, soaring energy and commodity prices and enormously costly natural disasters have added to strains on stock prices. Despite all this, the market has rallied each time off its numerous, relatively recent technical fault lines. For market bears the market's resilience is literally unbelievable. So much so, that the only explanation is the existence of the Plunge Protection Team. (The PPT is also purported to be active in the gold markets, which has recently been setting record highs after being depressed for two decades. But that's a whole other story.)

The first mention of “The Plunge Protection Team” was in a February 1997 article in the Washington Post. But surf the Web and you will find numerous articles that treat the existence of the PPT as a given. A Lexis/Nexis search yields 78 references; Google “Plunge Protection Team,” and you'll see nearly one million references as of this writing — and it's growing quickly. The Web is home to lots of drivel, of course. But reputable sources wonder, too. The U.K.-based Guardian and Evening Standard newspapers are particularly ready to give the PPT credit for actively intervening in markets. There are plenty of other references, however, which tie together publicly available information to reach intriguing conclusions. For instance, an op-ed piece in the Wall Street Journal in 1989 by Heller argued that the Fed should intervene directly in the stock market to prop it up if faced with a potentially catastrophic collapse. Heller even specifically proposed using the leverage of stock index futures to give the Fed more bang for its market-saving buck. (Heller, who conspiracists claim is the PPT architect because of that article, chuckled when told of his supposed role; he says he'd never heard of it.)

The latest instance of suspected PPT intervention came in an August 2005 report by Sprott Management, a well-considered Canadian firm with CDN $2.5 billion under management : “It is time that market participants, the media and, most of all, the government acknowledge what should be blatantly obvious to anyone who reviews the public record on the matter: These markets have been interfered with on numerous occasions. Our primary concern is that what apparently started as a stop-gap measure may have morphed into a serious moral hazard situation, with market manipulation an endemic feature of the U.S. stock market.”

Based on Fact?
If there is a PPT, it may be hiding in plain sight. Following the 1987 crash, the Reagan administration looked for ways to formalize responses to economy threatening market movers. The U.S. Executive Order 12631, signed on March 19, 1988, by President Reagan, established the “Working Group on Financial Markets.” The order states the purpose of the group as being “… to identify and consider: 1) the major issues raised by the numerous studies on the events in the financial markets surrounding Oct. 19, 1987… ; and, 2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.”

Executive Order 12631 dictates that the Working Group be made up of the highest profile money types in the government, explicitly naming: the Secretary of the Treasury, the chairman of the Board of Governors of the Federal Reserve, the chairman of the SEC and the chairman of the Commodity Futures Trading Commission. To make sure this group has the resources to carry out its will, the order further made the Treasury responsible for providing the “support service” it needs-but only “to the extent permitted by law and subject to the availability of funds.” (No one at any of these agencies would comment for this article.)

So how did this team of crisis managers come to be viewed by some as a secretive fraternity of government and business interests, secretly manipulating stocks and gold and making a mockery of the concept of free markets? Brett Fromson, of the Washington Post, who went on to work for TheStreet.com and the Wall Street Journal, was the one who wrote the Washington Post story that came up with the PPT name. (He says a clever copy desk staffer came up with the name for a headline.) Fromson covered the Washington/Wall Street beat, which connected the ongoing relationship between the political and financial capitals. “I got the idea for the story after seeing that many of my sources were often in meetings together. I realized there was an enormous amount of planning going on.” He adds, “The story resulted from a lot of reporting and relied on the people I was talking with having a relationship of trust” with him. Fromson said no called him after the piece was published telling him that he got it wrong — or that he was insane.

Perhaps the only certainty about the PPT conspiracy theory is that it is not going away any time soon. While every rebound by the indices in the face of damning economic fundamentals and market technicals deepens the conviction of PPT believers; not even a market crash will likely convince them otherwise. After all, the market's massive slide from 2000 through 2002 didn't even unwind the theory. Either way, someone should make it into a movie. It might be called Wall Street's Da Vinci Code.

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zt  政府如何操纵股市 --- How Governments Manipulate Markets


http://rainman.typepad.com/almos ... pulate-markets.html

How Governments Manipulate Markets
Blatant government manipulation is another reason that securities markets often appear to be disconnected from the realities of the economy. Catherine Fitts explains how the game is rigged.


Wall Street's mantra is that markets move randomly and reflect the collective wisdom of investors. The truth is quite opposite. The government's visible hand and insiders control markets and manipulate them up or down for profit - all of them, including stocks, bonds, commodities and currencies.

It's financial fraud or what former high-level Wall Street insider and former Assistant HUD Secretary Catherine Austin Fitts calls "pump and dump," defined as "artificially inflating the price of a stock or other security through promotion, in order to sell at the inflated price," then profit more on the downside by short-selling. "This practice is illegal under securities law, yet it is particularly common," and in today's volatile markets likely ongoing daily.

Why? Because the profits are enormous, in good and bad times, and when carried to extremes like now, Fitts calls it "pump(ing) and dump(ing) of the entire American economy," duping the public, fleecing trillions from them, and it's more than just "a process designed to wipe out the middle class. This is genocide (by other means) - a much more subtle and lethal version than ever before perpetrated by the scoundrels of our history texts."

Fitts explains that much more than market manipulation goes on. She describes a "financial coup d'etat, including fraudulent housing (and other bubbles), pump and dump schemes, naked short selling, precious metals price suppression, and active intervention in the markets by the government and central bank" along with insiders. It's a government-business partnership for enormous profits through "legislation, contracts, regulation (or lack of it), financing, (and) subsidies." More still overall by rigging the game for the powerful, while at the same time harming the public so cleverly that few understand what's happening.

Market Rigging Mechanisms - The Plunge Protection Team

On March 18, 1989, Ronald Reagan's Executive Order 12631 created the Working Group on Financial Markets (WGFM) commonly known as the Plunge Protection Team (PPT). It consisted of the following officials or their designees:

the President;
the Treasury Secretary as chairman;
the Fed chairman;
the SEC chairman; and
the Commodity Futures Trading Commission chairman.
Under Sec. 2, its "Purposes and Functions" were stated as follows:

(2) "Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence, the Working Group shall identify and consider:

1. the major issues raised by the numerous studies on the events (pertaining to the) October 19, 1987 (market crash and consider) recommendations that have the potential to achieve the goals noted above; and

2. ....governmental (and other) actions under existing laws and regulations....that are appropriate to carry out these recommendations."

In August 2005, Canada-based Sprott Asset Management (SAM) principals John Embry and Andrew Hepburn headlined their report on the US government's "surreptitious" market interventions: "Move Over, Adam Smith - The Visible Hand of Uncle Sam" to prevent "destabilizing stock market declines. Comprising key government agencies, stock exchanges and large Wall Street firms," this group "is significant because the government has never admitted to private-sector membership in the Working Group," nor is it hinting that manipulation works both ways - to stop or create panic.

"Current mythology holds that (equity) prices rise and fall on the basis of market forces alone. Such sentiments appear to be seriously mistaken....And as official rhetoric continues to toe the free market line, manipulation has become increasingly apparent....with the active participation of selected investment banks and brokerage houses" - the Wall Street giants.

In 2004, Texas Hedge Report principals Steven McIntyre and Todd Stein said "Almost every floor trader on the NYSE, NYMEX, CBOT and CME will admit to having seen the PPT in action in one form or another over the years" - violating the traditional notion that markets move randomly and reflect popular sentiment.

Worse still, according to SAM principals Embry and Hepburn, "the government's unwillingness to disclose its activities has rendered it very difficult to have a debate on the merits of such a policy," if there are any.

Further, "virtually no one ever mentions government intervention publicly....Our primary concern is that what apparently started as a stopgap measure may have morphed into a serious moral hazard situation."

Worst of all, if government and Wall Street collude to pump and dump markets, individuals and small investment firms can get trampled, and that's exactly what happened in late 2008 and early 2009, with much more to come as the greatest economic crisis since the Great Depression plays out over many more months.

That said, the PPT might more aptly be called the PPDT - The Plunge Protection/Destruction Team, depending on which way it moves markets at any time. Investors beware.

Manipulating markets is commonplace and as old as investing. Only the tools are more sophisticated and amounts involved greater. In her book, "Morgan: American Financier," Jean Strouse explained his role in the Panic of 1907, the result of stock market and real estate speculation that caused a market crash, bank runs, and hysteria. To restore confidence, JP Morgan and the Treasury Secretary organized a group of financiers to transfer funds to troubled banks and buy stocks. At the time, rumors were rampant that they orchestrated the panic for speculative profits and their main goals:

the 1908 National Monetary Commission to stabilize financial markets as a precursor to the Federal Reserve; and
the 1910 Jekyll Island meeting where powerful financial figures met in secret for nine days and created the private banking cartel Federal Reserve System, later congressionally established on December 23, 1913 and signed into law by Woodrow Wilson.
Morgan died early that year but profited hugely from the 1907 Panic. It let him expand his steel empire by buying the Tennessee Coal and Iron Company for about $45 million, an asset thought to be worth around $700 million. Today, similar schemes are more than ever common in the wake of the global economic crisis creating opportunities to buy assets cheap by bankers flush with bailout cash. Aided by PPT market rigging, it's simpler than ever.

Wharton Professor Itay Goldstein and Said Business School and Lincoln College, Oxford University Professor Alexander Guembel discussed price manipulation in their paper titled "Manipulation and the Allocational Role of Prices." They showed how traders effect prices on the downside through "bear raids," and concluded:

"We basically describe a theory of how bear raid manipulation works....What we show here is that by selling (a stock or more effectively short-selling it), you have a real effect on the firm. The connection with real value is the new thing....This is the crucial element," but they claim the process only works on the downside, not driving shares up.

In fact, high-volume program trading, analyst recommendations, positive or negative media reports, and other devices do it both ways.

Also key is that a company's stock price and true worth can be highly divergent. In other words, healthy or sick firms may be way-over or under-valued depending on market and economic conditions and how manipulative traders wish to price them, short or longer term.

The idea that equity prices reflect true value or that markets move randomly (up or down) is rubbish. They never have and more than ever don't now.

The Exchange Stabilization Fund (ESF)

The 1934 Gold Reserve Act created the US Treasury's ESF. Section 7 of the 1944 Bretton Woods Agreements made its operations permanent. As originally established, the Treasury ran the Fund outside of congressional oversight "to keep sharp swings in the dollar's exchange rate from (disrupting) financial markets" through manipulation. Its operations now include stabilizing foreign currencies, extending credit lines to foreign governments, and last September to guaranteeing money market funds against losses for up to $50 billion.

In 1995, the Clinton administration used the fund to provide Mexico a $20 billion credit line to stabilize the peso at a time of economic crisis, and earlier administrations extended loans or credit lines to China, Brazil, Ecuador, Iceland and Liberia. The Treasury's web site also states that:

"By law, the Secretary has considerable discretion in the use of ESF resources. The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s....the Secretary (per) approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities."

In other words, ESF is a slush fund for whatever purposes the Treasury wishes, including ones it may not wish to disclose, such as manipulating markets, directing funds to the IMF and providing them with strings to borrowers as the Treasury's site explains:

"....Treasury has often linked the availability of ESF financing to a borrower's use of the credit facilities of the IMF, both to support the IMF's role and to strengthen assurances that there will be timely repayment of ESF financing."

The Counterparty Risk Management Policy Group (CRMPG)

Established in 1999 in the wake of the Long Term Capital Management (LTCM) crisis, it manipulates markets to benefit giant Wall Street firms and high-level insiders. According to one account, it was to curb future crises by:

letting giant financial institutions collude through large-scale program trading to move markets up or down as they wish;
bailing out its members in financial trouble; and
manipulating markets short or longer-term with government approval at the expense of small investors none the wiser and often getting trampled.
In August 2008, CRMPG III issued a report titled "Containing Systemic Risk: The Road to Reform." It was deceptive on its face in stating that CRMPG "was designed to focus its primary attention on the steps that must be taken by the private sector to reduce the frequency and/or severity of future financial shocks while recognizing that such future shocks are inevitable, in part because it is literally impossible to anticipate the specific timing and triggers of such events."

In fact, the "private sector" creates "financial shocks" to open markets, remove competition, and consolidate for greater power by buying damaged assets cheap. Financial history has numerous examples of preying on the weak, crushing competition, socializing risks, privatizing profits, redistributing wealth upward to a financial oligarchy, creating "tollbooth economies" in debt bondage according to Michael Hudson, and overall getting a "free lunch" at the public's expense.

CRMPG explains financial excesses and crises this way:

"At the end of the day, (their) root cause....on both the upside and the downside of the cycle is collective human behavior: unbridled optimism on the upside and fear on the downside, all in a setting in which it is literally impossible to anticipate when optimism gives rise to fear or fear gives rise to optimism...."

"What is needed, therefore, is a form of private initiative that will complement official oversight in encouraging industry-wide practices that will help mitigate systemic risk. The recommendations of the Report have been framed with that objective in mind."

In other words, let foxes guard the henhouse to keep inventing new ways to extract gains (a "free lunch") in increasingly larger amounts - "in the interest of helping to contain systemic risk factors and promote greater stability."

Or as Orwell might have said: instability is stability, creating systemic risk is containing it, sloping playing fields are level ones, extracting the greatest profit is sharing it, and what benefits the few helps everyone.

Michel Chossudovsky explains that: "triggering market collapse(s) can be a very profitable undertaking. (Evidence suggests) that the Security and Exchange Commission (SEC) regulators have created an environment which supports speculative transactions (through) futures, options, index funds, derivative securities (and short-selling), etc. (that) make money when the stock market crumbles....foreknowledge and inside information (create golden profit opportunities for) powerful speculators" able to move markets up or down with the public none the wiser.

As a result, concentrated wealth and "financial power resulting from market manipulation is unprecedented" with small investors' savings, IRAs, pensions, 401ks, and futures being decimated from it.

Deconstructing So-Called "Green Shoots"

Daily the corporate media trumpet them to lull the unwary into believing the global economic crisis is ebbing and recovery is on the way. Not according to longtime market analyst Bob Chapman who calls green shoots "Poison Ivy" and economist Nouriel Roubini saying they're "yellow weeds" at a time there's lots more pain ahead.

For many months and in a recent commentary he refers to "the worst financial crisis, economic crisis and recession since the Great Depression....the consensus is now becoming optimistic again and says that we are going to go from minus 6 percent growth to positive growth in the second half of the year....my views are much more bearish....The problems of the financial system are severe. Many banks are still insolvent."

We're "piling public debt on top of private debt to socialize the losses; and at some point the back of (the) government('s) balance sheet is going to break, and if that happens, it's going to be a disaster." Short of that, he, Chapman, and others see the risks going forward as daunting. As for the recent stock market rise, they both call it a "sucker's rally" that will reverse as the US economy keeps contracting and the financial system suffers unexpected or manipulated shocks.

Highly respected market analyst Louise Yamada agrees. As Randall Forsyth reported in the May 25 issue of Barron's Up and Down Wall Street column:

"It is almost uncanny the degree to which 2002-08 has tracked 1932-38, 'Yamada writes in her latest note to clients.' " Her "Alternate Hypothesis" compares this structural bear market to 1929-42:

· "the dot-com collapse parallels the Great Crash and its aftermath," followed by the 2003-07 recovery, similar to 1933-37;

· then the late 2008 - early March 2009 collapse tracks a similar 1937-38 trajectory, after which a strong rally followed much like today;

· then in November 1938, the market dropped 22% followed by a 26% rise and a series of further ups and downs - down 28%, up 23%, down 16%, up 13%, and a final 29% decline ending in 1942;

· from the 1938 high ("analogous to where we are now," she says), stock prices fell 41% to a final bottom.

Are we at one today as market touts claim? No according to Yamada - top-ranked among her peers in 2001, 2002, 2003 and 2004 when she worked at Citigroup's Smith Barney division. Since 2005, she's headed her own independent research company.

She says structural bear markets typically last 13 - 16 years so this one has a long way to go before "complet(ing) the repair process." She calls the current rebound "a bungee jump," very typical of bear markets. Numerous ones occurred during the Great Depression, 8 alone from 1929 - 1932, some deceptively strong.

Expect market manipulators today to produce similar price action going forward - to enrich themselves while trampling on the unwary, well-advised to protect their dollars from becoming quarters or dimes.