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Yes...your right...Dan was in error....the Fed has the role of providing
liquidity, well certainly in the monetary policy sense. The government
does something similar too you know though....ideally running up
deficits in times of recession and moving to surplus in times of
growth....this also helps in theory to mitigate the cycles..but this
starts to get off topic and moves into another entire realm.
Adrian
> -----Original Message-----
> From: Code 2 [mailto:Code2@xxxxxxx]
> Sent: Thursday, 20 November 2003 7:05 AM
> To: Realtraders List
> Subject: Re: [RT] Re: Fed supporting market
>
>
> Huh? The purpose of government is to provide services that
> are most effectively provided collectively, such as defence
> and security, and to provide a system of accepted and
> predictable law, like personal property rights.
>
> It's interesting how practices considered undesirable 70
> years ago have been renamed and sanitized. "Providing
> liquidity" means inflating the currency or, in other words,
> stealing from holders of the currency. Government "support"
> means appropriating and redistributing taxpayer wealth.
>
> When government's perceived role is to ensure a market
> exists, economies become distorted as political interests
> decide which markets or firms are worthy of support and which
> aren't. Supported markets or firms begin taking bigger and
> more unjustified risks when they know they cannot fail. The
> end result is an escalating reliance on government to support
> foolish risk.
>
> A free and unencumbered market can do a better job of
> deciding who should thrive and who shouldn't.
>
>
> ----- Original Message -----
> From: Dan Goncharoff
> To: realtraders@xxxxxxxxxxxxxxx
> Sent: Wednesday, November 19, 2003 10:44 AM
> Subject: Re: [RT] Re: Fed supporting market
>
>
> Because the purpose of the government is to ensure that the
> market exists the next day. That is why liquidity is provided.
>
> As you yourself point out, some players went bankrupt, even
> a big bank, and survived. As you also point out, the market
> stopped functioning, and there was no way to hedge.
>
> The specialists with negative balances were deciding to
> commit yet more capital, in a situation where they taken
> significant losses already, to 'provide a bottom'. How did
> they know it was the right decision to buy when they did?
> They were taking yet more risk, and could have been wrong.
>
> Regards
> DanG
>
>
>
> Ira wrote:
>
> During the Crash of 87 there were futures, the S&P was
> traded and options on futures as well as the OEX. As for
> being bankrupt, many broker dealers on the NYSE as well a
> market makers on the NASDAQ and on the options floors and
> Specialists were carrying negative balances. In fact a bank
> in Chicago did finally go belly up. There were many that
> didn't get the benefit of that very favorable government loan
> treatment and lost millions on that day. I personally know of
> one person that lost $80 million and another who lost $20
> million in a couple of hours. To lose a million on that day
> was no big trick. There was no way to hedge because every
> time you went to hedge they would stop trading that item.
> With unlimited borrowing power many specialist firms were
> allowed to stay in business with negative balances and
> provide a bottom to that market. Options on the OEX that
> were almost 100 points out of the money were quoted as high
> as $65 and there were no
> sellers for several hours. What happened to the American
> way then? Why
> not let those that took the unlimited risk go the way they
> should, bankrupt, and those that did have limited risk or
> those that were short reap the full benefit of their
> positions? Once again the government stepped in to protect
> the privileged and the political favoritism goes on. Will
> the Fed and Bush let the Dow go to 5000 in an election year?
> How much pressure is placed upon the Fed by the party in
> power? No one really knows except those in power. All I can
> relay is what I have seen happen. The rest is just guess
> work by those trying to find a reason.
>
>
> ----- Original Message -----
> From: "Adrian Pitt" <apitt@xxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Wednesday, November 19, 2003 1:53 AM
> Subject: RE: [RT] Re: Fed supporting market
>
>
> Ira,
>
> You're a well balanced and well educated person....therefore
> you should have no problem providing reference to the
> statements you made below.
>
> Such as what do you mean by unlimited credit? We all know
> central banks can print money...so what?
>
> Who went bankrupt? The Fed?
>
> Equity futures have only been around since early 80's so are
> you saying the fed went bankrupt sometime in the past 20 years???
>
> If they went to buy futures to make the market go up to help
> them from bankruptcy you must also be saying that their stock
> portfolio which you say they held was also a significant part
> of their assets??? Can you present a balance sheet please
> showing this in the relenvant year?
>
> This would be a fascinating insight for me, as it would show
> one of the most extraordinary events of the 20th century,
> with barely a murmur in the press about it, and show
> something radically different from every central bank balance
> sheet around the world.
>
> Adrian
>
> -----Original Message-----
> From: Ira [mailto:mr.ira@xxxxxxxxxxxxx]
> Sent: Wednesday, 19 November 2003 6:05 PM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] Re: Fed supporting market
>
>
> What do you think they did with the unlimited credit when
> they were bankrupt? They went out and bought futures and
> stock to support the market and increase the value of their
> portfolios.
> ----- Original Message -----
> From: Dan Goncharoff
> To: realtraders@xxxxxxxxxxxxxxx
> Sent: Tuesday, November 18, 2003 8:43 AM
> Subject: Re: [RT] Re: Fed supporting market
>
>
> Why is the Fed providing liquidity at a time of high risk,
> when free markets may otherwise no longer function properly
> in the short term, be worse than a branch of the government
> making an active decision to buy futures. Providing liquidity
> allows the market to function; buying futures favors one side
> of the market over the other. In my view, buying futures is
> as bad as selling futures -- it means the government is taking sides.
>
> Ensuring the proper functioning of the market is one of the
> stated functions of the financial markets is one of the
> purposes of the Fed.
>
> Regards
> DanG
>
> Ira wrote:
>
> I thought that it was aimed at government intervention in
> the markets. It may not be the same as buying futures, it is worse.
> ----- Original Message -----
> From: Dan Goncharoff
> To: realtraders@xxxxxxxxxxxxxxx
> Sent: Tuesday, November 18, 2003 7:18 AM
> Subject: Re: [RT] Re: Fed supporting market
>
>
> Providing liquidity to the markets is not the same as
> buying futures, which is the charge leveled in the original message.
>
> Regards
> DanG
>
> Ira wrote:
>
> The fact is it did happen in 1987. The fed told the
> banks to give unlimited credit.
> ----- Original Message -----
> From: Dan Goncharoff
> To: realtraders@xxxxxxxxxxxxxxx
> Sent: Tuesday, November 18, 2003 5:21 AM
> Subject: Re: [RT] Re: Fed supporting market
>
>
> Have you ever seen it claimed in a respected
> source? If so, I would be interested in the reference,
> because I have long sought such a mention in the established
> press, without success. AFAIK, it is just foolish gossip.
>
> Regards
> DanG
>
> BobsKC wrote:
>
> It is commonly accepted knowledge in the business world and
> while I most certainly have not personally observed the
> practice, I have no recall of the White House ever denying
> it, either. If the market tanks, so does Bush. Do you not
> believe that he has the means to prevent this?
>
> Bob
>
>
> At 02:57 PM 11/17/2003 -0800, you wrote:
> This is a strong statement, variations of which I've heard
> many times with no factual support. Is there any support here?
>
> regards,
>
> tbr
> > the Fed has shown in the past how it can hold up
> markets via futures purchases
>
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