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JT,
You and the Washington Post give way too much credit to the Feds. Government
by nature is inherently incompetent. Can you imagine a bunch of bureaucrats
trading the markets? Rather, please consider that I have previously posted that
the Lunar aspects tend to kick in one hour before they are exact. Tuesday, 4/ 4,
there was a New Moon at 2:12 PM and I believe the S&Ps bottomed at 1:13 PM. I
think the cosmos do a much better job of timing the market turns than does the
government.
Cosmically,
Norman
James Taylor wrote:
> Looks like I am not the only one who believes that the bubbleoneans at the
> wheel (the US Federal Reserve) were bailing water with both hands on
> Tuesday. If they wouldn't have let this market get so far out of control
> in the first place with their reckless monetary and fiscal policies they
> wouldn't be against the wall now. I do not want a prolonged depression in
> this country, but I do sincerely hope that Greenspan is exposed for what he
> is -- the greatest damn fool the Federal Reserve has ever seen. The harm
> that will come to the millions of innocents will be his fault. I do
> believe the markets are bigger than they are, and that their manipulations
> will only make things worse in the long run. Always has, always will.
>
> New York Post Article
> ----------------------------------------------------------------------------
> -----
> HOW STOCKS TURNED BACK FROM THE ABYSS
>
> SOMETHING happened at around 1 p.m. our time yesterday that pulled the stock
> market back from the edge of the cliff.
>
> Traders say it was almost like divine intervention. One minute the Nasdaq
> was down 11 percent -- say it out loud, "Eleven percent in one day" -- and
> then it suddenly rallied several hundred points in the matter of an hour.
>
> The Dow followed suit. Down 500 points around mid-day, the blue chip index's
> decline -- along with the horrible showing of over-the-counter stocks -- was
> destined to make yesterday's market an unqualified disaster for investors
> and the country.
>
> Then, traders said, someone started buying large amounts of stock index
> futures contracts through two major brokerage firms -- Goldman Sachs and
> Merrill Lynch. These transactions are usually done on the QT so we don't
> really know how many of these contracts were purchased.
>
> And unless the brokers tell, there is no way of knowing which of their
> clients were making the purchases. Goldman wouldn't comment on this and
> Merrill did not return a call for comment.
>
> But traders said enough were bought to catch everyone's attention. In fact,
> the buyers seemed to want people to know they had an appetite for stocks.
>
> Then the market rebounded.
> It didn't go all the way back. At the end of the day the Dow Jones index had
> still lost lost 56 points or half a percent on the day. And the Nasdaq lost
> another 74 points, or the equivalent of a 1.77 percent drop. Yesterday's
> loss by over-the-counter stocks nearly put the Nasdaq index back to ground
> zero for the year -- in two days all but 2 percent of its gain for the year
> was gone.
>
> It was real nice of Goldman and Merrill to stick their necks out like that.
> In fact, it was downright uncharacteristic for Wall Street outfits to put
> the thought of possible losses aside for the greater good.
>
> Because of the purely unselfish nature of what went on, traders are
> naturally suspicious. Hell, so am I.
>
> "I think some one or more persons saved the market today. There was a
> suspicious urge to buy stocks at an opportune time," says one trader. "Why
> drive the Dow up 350 points in a half hour? That's never serious buying.
> That's someone trying to establish prices," he adds.
>
> I'm especially suspicious when the market suddenly rebounds at nearly the
> very same moment that a member of the Clinton administration -- economic
> advisor Gene Sperling -- is on TV telling investors not to worry.
>
> And there's the obvious connection between Goldman Sachs and the
> administration, the Wall Street firm having given Robert Rubin to the
> Clinton administration as its Treasury Secretary.
>
> Plus, what better way to make investors not worry than by having the stock
> market recover a lot of the ground it had just lost. That gesture almost
> makes a guy want to buy some stock -- bottom fish, if you are into sporting
> analogies.
>
> I'm not saying that government intervention in a collapsing market is wrong.
> In fact -- except for the obvious contradictions with the free-market
> system -- it is politically and socially a very right thing to do.
>
> I've written about this before. And I've mentioned that Washington has had a
> secretive group call the Working Group on Financial Markets, made up of
> investment industry and government people, that would be in just the right
> position to rescue the market.
>
> Informally the folks on Wall Street call this the "Plunge Protection Team."
> In February 1997, the Washington Post did a piece on this team, just in case
> you don't believe it exists.
>
> And while I can't swear that Goldman and Merrill are captains of that team,
> they sure acted like it yesterday.
>
> -------------------------------
> Washington Post Article
> -------------------------------
>
> Plunge Protection Team
>
> White House Group Shapes Plans to Ensure Any
> Market Free Fall Is Contained
>
> By Brett D. Fromson
> Washington Post Staff Writer
> Sunday, February 23, 1997 ; Page H01
>
> It is 2 o'clock on a hypothetical Monday afternoon, and the Dow Jones
> industrial average has plummeted 664 points, on top of a 847-point slide
> the
> previous week.
>
> The chairman of the New York Stock Exchange has called the White House
> chief of staff and asked permission to close the world's most important
> stock market. By law, only the president can authorize a shutdown of U.S.
> financial markets.
>
> In the Oval Office, the president confers with the members of his Working
> Group on Financial Markets -- the secretary of the treasury and the
> chairmen of the Federal Reserve Board, the Securities and Exchange
> Commission and the Commodity Futures Trading Commission.
>
> The officials conclude that a presidential order to close the NYSE would
> only add to the market's panic, so they decide to ride out the storm. The
> Working Group struggles to keep financial markets open so that trading
> can
> continue. By the closing bell, a modest rally is underway.
>
> This is one of the nightmare scenarios that Washington's top financial
> policymakers have reviewed since Oct. 19, 1987, when the Dow Jones
> industrial average dropped 508 points, or 22.6 percent, in the biggest
> one-day loss in history. Like defense planners in the Cold War period,
> central bankers and financial regulators have been thinking carefully
> about
> how they would respond to the unthinkable.
>
> An outline of the government's plans emerges in interviews with more than
> a
> dozen current and former officials who have participated in meetings of
> the
> Working Group. The group, established after the 1987 stock drop, is the
> government's high-level forum for discussion of financial policy.
>
> Just last Tuesday afternoon, for example, Working Group officials
> gathered
> in a conference room at the Treasury Building. They discussed, among
> other topics, the risks of a stock market decline in the wake of the
> Dow's
> sudden surge past 7000, according to sources familiar with the meeting.
> The officials pondered whether prices in the stock market reflect a
> greater
> appetite for risk-taking by investors. Some expressed concern that the
> higher the stock market goes, the closer it could be to a correction,
> according to the sources.
>
> These quiet meetings of the Working Group are the financial world's
> equivalent of the war room. The officials gather regularly to discuss
> options
> and review crisis scenarios because they know that the government's
> reaction to a crumbling stock market would have a critical impact on
> investor confidence around the world.
>
> "The government has a real role to play to make a 1987-style sudden
> market
> break less likely. That is an issue we all spent a lot of time thinking
> about
> and planning for," said a former government official who attended Working
> Group meetings. "You go through lots of fire drills and scenarios. You
> make sure you have thought ahead of time of what kind of information you
> will need and what you have the legal authority to do."
>
> In the event of a financial crisis, each federal agency with a seat at
> the table
> of the Working Group has a confidential plan. At the SEC, for example,
> the
> plan is called the "red book" because of the color of its cover. It is
> officially known as the Executive Directory for Market Contingencies. The
> major U.S. stock markets have copies of the commission's plan as well as
> the CFTC's.
>
> Going to Plan A
>
> The red book is intended to make sure that no matter what the time of
> day,
> SEC officials can reach their opposite numbers at other agencies of the
> U.S. government, with foreign governments, at the various stock, bond and
> commodity futures and options exchanges, as well as executives of the
> many payment and settlement systems underlying the financial markets.
>
> "We all have everybody's home and weekend numbers," said a former
> Working Group staff member.
>
> The Working Group's main goal, officials say, would be to keep the
> markets operating in the event of a sudden, stomach-churning plunge in
> stock prices -- and to prevent a panicky run on banks, brokerage firms
> and
> mutual funds. Officials worry that if investors all tried to head for the
> exit at
> the same time, there wouldn't be enough room -- or in financial terms,
> liquidity -- for them all to get through. In that event, the smoothly
> running
> global financial machine would begin to lock up.
>
> This sort of liquidity crisis could imperil even healthy financial
> institutions
> that are temporarily short of cash or tradable assets such as U.S.
> Treasury
> securities. And worries about the financial strength of a major trader
> could
> cascade and cause other players to stop making payments to one another,
> in which case the system would seize up like an engine without oil. Even
> a
> temporary loss of liquidity would intensify financial pressure on already
> stressed institutions. In the 1987 crash, government officials worked
> feverishly -- and, ultimately, successfully -- to avoid precisely that
> bleak
> scenario.
>
> Officials say they are confident that the conditions that led to the
> slide a
> decade ago are not present today. They cite low interest rates and a
> healthy
> economy as key differences between now and 1987. Officials also point to
> SEC-approved "circuit breakers" that were introduced after 1987 to give
> investors timeouts to calm down.
>
> Under the SEC's rules, a drop of 350 points in the Dow would bring a
> 30-minute halt in NYSE trading. If the Dow declined another 200 points,
> trading would cease for one hour. No additional circuit breakers would
> operate that day, but a new set would apply the next trading day.
>
> Despite these precautions, today's high stock market worries officials
> such
> as Fed Chairman Alan Greenspan, who in a speech in early December
> raised questions about "irrational exuberance" in the markets. Because
> the
> market declined following Greenspan's speech, government officials have
> become even more reluctant to comment on these issues for fear of
> triggering the very event they wish to forestall, according to
> policymakers.
>
> A Brewing Concern
>
> Greenspan had expressed similar thoughts a year ago at a confidential
> meeting of the Working Group. Treasury Secretary Robert E. Rubin and
> SEC Chairman Arthur Levitt Jr. also are concerned about the stock
> market's vulnerability, according to sources familiar with their views.
>
> The four principals of the group -- Rubin, Greenspan, Levitt and CFTC
> Chairwoman Brooksley Born -- meet every few months, and senior staff get
> together more often to work on specific agenda items.
>
> In addition to the permanent members, the head of the President's
> National
> Economic Council, the chairman of his Council of Economic Advisers, the
> comptroller of the currency and the president of the New York Federal
> Reserve Bank frequently attend Working Group sessions.
>
> The Working Group has studied a variety of possible threats to the
> financial
> system that could ensue if stock prices go into free fall. They include:
> a
> panicky flight by mutual fund shareholders; chaos in the global payment,
> settlement and clearance systems; and a breakdown in international
> coordination among central banks, finance ministries and securities
> regulators, the sources said.
>
> As chairman of the Working Group, Rubin would have overall
> responsibility for the U.S. response, but Greenspan probably would be the
> government's most important player.
>
> "In a crisis, a lot of deference is paid to the Fed," a former member of
> the
> Working Group said. "They are the only ones with any money."
>
> "The first and most important question for the central bank is always,
> `Do
> you have credit problems?' " said E. Gerald Corrigan, former president of
> the New York Federal Reserve Bank and now an executive at Goldman
> Sachs & Co. "The minute some bank or investment firm says, `Hey, maybe
> I'm not going to get paid -- maybe I ought to wait before I transfer
> these
> securities or make that payment,' then things get tricky. The central
> bank
> has to sense that before it happens and take steps to prevent it."
>
> 1987: A Case Study
>
> The Fed's reaction to the 1987 market slide, which Corrigan helped
> oversee, is a case study in how to do it right. The Fed kept the markets
> going by flooding the banking system with reserves and stating publicly
> that
> it was ready to extend loans to important financial institutions, if
> needed.
>
> The Fed's actions in October 1987 read like a financial war story.
>
> The morning after the 508-point drop on Black Monday, the market began
> another sickening slide. Corrigan and other Fed officials strongly
> discouraged New York Stock Exchange Chairman John Phelan from
> requesting government permission to close the market. Phelan was
> concerned that if the market continued to erode, the capital of the NYSE
> member firms would disappear. Corrigan feared a shutdown would cause
> more panic.
>
> "It was extraordinarily difficult around 11 o'clock," Corrigan recalled.
> "The
> market was at one point down another 250 points, and that's when the
> debate with Phelan took place."
>
> Simultaneously, Corrigan and other central bank officials spoke privately
> with the big banks and urged them not to call loans they had made to Wall
> Street houses, which were collateralized by securities that could no
> longer
> be traded and whose value was in question.
>
> A final critical moment came that day when the Fed decided not to shut
> down a subsidiary of the Continental Illinois Bank that was the largest
> lender to the commodity futures and options trading houses in Chicago.
> The subsidiary had run out of capital to provide financing to that
> market.
>
> "Closing it would have drained all the liquidity out of the futures and
> options markets," said one former top Fed official involved in the
> decision.
> Investors use stock futures and options to hedge positions in the
> underlying
> stock market.
>
> Recognizing the crucial role of banks if another financial crisis should
> strike, the Office of the Comptroller recently conducted an internal
> study of
> what damage a market decline would inflict on U.S. banks. The OCC
> declined to discuss the study or its conclusions.
>
> At the SEC, one big worry is how to cope with an international financial
> crisis that begins abroad but quickly rolls into U.S. markets.
>
> "We worry about a U.S. brokerage firm that is dealing with a Japanese
> insurance company, where we don't know how they are run or regulated," a
> SEC source said. To improve its ability to react in a crisis, the SEC and
> the
> Fed have begun joint inspections with their British counterparts of U.S.
> and
> British financial institutions with global reach.
>
> The most drastic -- and probably unlikely -- move the SEC could take in a
> crisis would be to propose a market shutdown to the president. That would
> require a majority vote of the commission. If a quorum couldn't be
> mustered, the chairman could designate himself "duty officer" and go to
> the
> president or his staff.
>
> "Closing the market is, of course, the last thing the commission wants to
> do," said a source familiar with the SEC's planning. "During a time when
> people are extremely worried about their investments, you are cutting
> them
> off from taking any action. . . . The philosophy of the commission is
> that
> markets should stay open."
>
> Just the Facts
>
> Gathering accurate information would be the first order of business for
> federal regulators.
>
> "Intelligence gathering is critical," Corrigan said. "It depends on the
> willingness of major market participants to volunteer problems when they
> see them and to respond honestly to central bank questions."
>
> The SEC, CFTC and Treasury have market surveillance units. They
> monitor not only the overall markets, but also the cash positions of all
> the
> major stock and commodity brokerages and large traders.
>
> The regulators also are hooked into the "hoot-and-holler" system used to
> notify participants in all financial markets of trading halts. The
> hoot-and-holler system alerts traders and regulators when a halt is
> coming.
>
> Relying on Quick Action
>
> In the event of a sharp market decline, the SEC and CFTC would be in
> constant contact with brokerage and commodity firms to spot early signs
> of financial failure. If they concluded that a firm was going down, they
> would try to move customer positions from that firm to solvent
> institutions.
>
> At least this team of crisis managers already has been through the Wall
> Street wars. Greenspan was Fed chairman in October 1987. Rubin has
> served as the co-head of investment bank Goldman Sachs & Co. Levitt has
> been both a Wall Street executive and president of the American Stock
> Exchange.
>
> "I think the government is in good shape to handle a crisis," said Scott
> Pardee, senior adviser to Yamaichi International (America) Inc., a
> Japanese
> brokerage subsidiary, and former senior vice president at the New York
> Fed. "A lot depends on personal relationships. You have a number of
> seasoned people who have gone through a number of crises. So if
> something happens, things can be handled quickly on the phone without
> having to introduce people to each other."
>
> Consider what happened at 11:30 p.m. Dec. 5, when Greenspan made his
> comments about irrational exuberance. Alton Harvey, head of the SEC's
> Market Watch unit, was called at home by officials of Globex, a futures
> trading system owned by the Chicago Mercantile Exchange. U.S. stock
> futures trading in Asia had fallen to their 12-point limit, they said.
>
> Harvey immediately alerted his direct superior as well as his opposite
> number at the CFTC. More senior SEC and CFTC officials were informed
> as well. But there wasn't much to be done until the morning. So Harvey
> went back to sleep.
>
> REACTING TO A PLUNGE
>
> After the market crashed on Oct. 29, 1929:
>
> * The Federal Reserve provided loans and credit to financial systems.
>
> * President Hoover met with business, labor and farm organizations to
> encourage capital spending and discourage layoffs; he also promised
> higher
> tariffs.
>
> * Federal income taxes were reduced by 1 percent by the end of the year.
>
> After the market dropped 22.6 percent on Oct. 19, 1987, the Federal
> Reserve:
>
> * Encouraged the New York Stock Exchange to stay open.
>
> * Encouraged big commercial banks not to pull loans to major Wall Street
> houses.
>
> * Kept open a subsidiary of Continental Illinois Bank that was the
> largest
> lender to the commodity trading houses in Chicago.
>
> * Flooded the banking system with money to meet financial obligations.
>
> * Announced it was ready to extend loans to important financial
> institutions.
>
> What would happen today during a stock drop would depend on the
> particulars. Here are current guidelines:
>
> * If the Dow Jones industrial average falls 350 points within a trading
> day,
> NYSE trading would be halted for 30 minutes.
>
> * If the DJIA falls another 200 points that day, trading would stop for
> one
> hour.
>
> * If the market declines more than 550 points in a day, no further
> restrictions would be applied.
>
> SOURCE: The New York Stock Exchange, "The Crash and the Aftermath"
> by Barrie A. Wigmore
>
> THE MARKET MANAGERS
>
> The Working Group was established after the 1987 stock drop to help
> guide financial policy during a market crisis. Only the president,
> however,
> has authority to close U. S. financial markets.
>
> ----- Original Message -----
> From: BruceB <bruceb@xxxxxxxxxxxxx>
> To: <jptaylor@xxxxxxxxxxxxxxx>; <realtraders@xxxxxxxxxxxxxxx>
> Sent: Thursday, April 06, 2000 6:07 PM
> Subject: Re: [RT] Re: US Govt. Manipulation of Stock Market
>
> > ----- Original Message -----
> > From: "James Taylor" <jptaylor@xxxxxxxxxxxxxxx>
> > Subject: [RT] Re: US Govt. Manipulation of Stock Market
> >
> >
> > > Well said.
> > >
> > > Like a mystery thriller movie, I can't wait to see if the government
> > indeed
> > > has all the right stuff to land this jet full of stary-eyed drunken
> > > screaming gamblers on the runway, given the fact that the jet is running
> > on
> > > fumes (margin debt at record pct levels,
> >
> > Oh yes, margin debt is a whopping 1.5% of outstanding stock (and is
> probably
> > much less after Tuesday). In 1929 it was over 30%...
> >
> >
> > > Wall Street pumping out new IPO
> > > issues at alarming rate,
> >
> > Oh yes, starting new companies, funding new technology, and increasing our
> > standard of living is such a terrible thing. Let's all just go back to
> > being farmers. Just for the record, all the new IPO's are simply a
> > reflection of the fact that Business America now gets its funding from the
> > stock market, and not from the banking system like it used to.
> >
> > > GSEs like Fannie Mae and Freddie Mac are issueing
> > > bond debt at astronomical levels,
> >
> > Oh yes, the highest rate of home ownership in history is such a terrible
> > thing. I think I'll sleep outside in my tent tonight to protest.
> >
> > > corporations have loaded their balance
> > > sheets with new debt and have bought back their own stock at these
> maniac
> > > levels),
> >
> > Oh yes, companies rewarding their stockholders with capital gains rather
> > than higher dividends is such a terrible thing. I'd much rather get the
> > dividends, which are taxed at a higher rate, because paying federal taxes
> is
> > my favorite pastime.
> >
> > > the run-way is damaged (any recession now will likely result in a
> > > prolonged one, or worse, depression, given the fragile nature of world
> > > economies and the noose of debt the government the Reagan/Bush admin has
> > > sown), and the landing gear is gone (past history has shown that there
> is
> > no
> > > 'soft landing' when a bubble is burst).
> > >
> >
> > Oh yes, let's look at past history. When the world economy did virtually
> go
> > into a depression in 1998, the US still turned in near record growth. In
> > 1990, when the ratio of national debt to GDP was far greater than it is
> > today, the recession we had lasted all but 2 quarters. Hmmm, looks like
> > past history doesn't support your case very much.
> >
> > Still waiting for the facts or historical evidence to support your
> claims,,,
> >
> > Bruce
> >
> >
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