TrimTabs suggests government manipulated stocks

Discussion in 'Wall St. News' started by jnorty, Jan 5, 2010.

  1. jnorty


    TrimTabs suggests government manipulated stocks
    Analysts say government's financial rescues have fueled conspiracy theoriesExplore related topics
    S&P 500 Index Story

    NEW YORK (MarketWatch) -- 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.

    Are foreign stocks the way to go in 2010?Jonathan Auerbach, managing director of Auerbach Grayson, discusses the performance of foreign stocks in 2009 and their outlook for 2010. He talks with Kelsey Hubbard about which overseas funds are a good bet for investors.
    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 Index on a monthly basis.

    Conspiracy theories on the rise?
    Market analysts, however, were quick to debunk the theory. Yes, the government had a heavy hand in rescuing the financial system and the economy as the system started collapsing in late 2008 and throughout 2009. But the huge boosts of liquidity through the system found their way to stocks by the usual means, they said.

    "The idea that this is magic is nonsense," said Barry Ritholtz, market strategist at Fusion IQ and a market veteran. "This was a normal behavior in a recessionary bear market. We saw the Dow plunge 5,000 points in 6 months, which had never happened before and created a dramatically oversold market."

    Yes, the Federal Reserve slashed interest rates to near zero and Congress allowed banks to keep their bad loans off their books, allowing them to pretend they were solvent, he said.

    But "you can't short stocks when the Fed is at zero," Ritholtz said. "Our own institutional clients came on board" as did other big institutional investors, he said.

    Conspiracy theories about the so-called "plunge protection team," or PPT, have been on the rise ever since the U.S. government started to bail out financial institutions in late 2008 under the administration of then-President George W. Bush, according to Dan Greenhaus, market strategist at Miller Tabak.

    The PPT is a nickname given by some to a group established by President Ronald Reagan in 1988 after the 1987 stock crash to coordinate governmental response to market meltdowns.

    Noting that the Fed has been buying Treasurys and mortgage-backed securities to keep interest rates low and support the economy, even firms such as Sprott Asset Management have started to accuse the U.S. government of running a Ponzi scheme.

    "There's a lot of backlash against the government right now and the hate for the Fed has gone into overdrive" in some corners, Greenhaus said. "The fact that the government stepped into the abyss [angered] a lot of people, and the fact that things are better a year later flies in the face of some long-held beliefs about free markets."

    As to the scale and power of the 2009 rally, it actually trailed previous recoveries from bear markets, according to research from Miller Taba.While the absolute percentage gain off the recent lows has been more powerful than anything since the Depression era, there is no denying that historical rallies in the equity market have recouped a greater percentage of the declines from the highs," Greenhaus wrote in a
  2. S2007S


    Pumping trillions into the market to prop everything up is called manipulation. It will only last so long before the system collapses again.
  3. sumfuka


    Oh really, the government wouldn't do that. Would they? :D

    I thought it was just a very wealthy individual bought a lot of stock at the last 15-20 mins everyday before closing time during the panic. So that must have been the government all along.

    Thats it, I'm applying for a job at the IRS, they probably pay the peons with s&p shares. And who knows once you upgraded to manager level, you can probably buy shares of IRS, I heard that company has better earnings than Goldman Sachs :)
  4. Exactly, those that attempt to "debunk" this "conspiracy theory" fail to realize that setting ZIRP and having the president come on TV and say "Now is a good time to buy" is essentially about as blatant as they can be. Manipulation doesn't mean that Obama and Berneke are sitting in back rooms on a phone with order tickets all over the floor.

    What maroons. The point is that this market upswing is not structurally sound.