Saturday, October 02, 2010

Stock Market Manipulation

During the past week I heard allegations on talk radio on Tuesday that the government was propping up the market by funneling funds to banks to buy stock in advance of the election. Interestingly, that day the market had started down fairly sharply and appeared to be pushing farther down when it reversed to move up fairly abruptly. I have no idea of the truth of the assertion, but it certainly would not surprise me if it were true. On one hand, markets do turn during the day without manipulation. On the other hand, elections are almost upon us and a healthy looking stock market would certainly be an asset to those in power. A market moving up at least gives the illusion that the economy is improving. Nevertheless, I have to come down on the side of Warren Buffet who was recently quoted as saying that this recession isn't over yet. A manipulated market could well give a very false impression.

What troubles me is that I could even consider the possibility of elements of the government underhandedly manipulating the market for the personal gain of those elected to represent the people. Perhaps I am overly naive to say that the markets can only work if there is integrity, but that is what I believe. It is a crime for private citizens to secretly attempt market manipulation so why should our government that is supposed to represent the people undertake any covert market manipulation. Let me be clear that I am not making any accusation because I simply do not know. My problem is that for quite some time I have watched as at least some politicians lie, cheat, steal, and manipulate their way into power at the expense of their electorate. If we are to have a market in which the participants can trust, it absolutely must be as free as possible of covert manipulation by anyone, particularly our government.

For quite some time in these articles I have studiously avoided political comment. Now, however, I believe it is a necessity to comment if there is even the appearance of impropriety with the possibility of governmental manipulation of the markets. Such manipulation would undermine the trust of the participants and without trust in the integrity, we can have no viable markets. Such a manipulation would serve only the interests of the manipulators and not the honest interests of those whom they were elected to serve. If our markets and our country are to survive, we the people must not allow such manipulation. Government of the people, by the people, and for the people appears near death and market manipulation would be a serious symptom of the illness leading to the ultimate demise.

Anyway, that's my opinion. I'm sure you'll share yours.

by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved


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To comment on Bill's article click on the "comments" link below.

47 comments:

sportsrep said...

I couldn't agree with you more Bill. The question is.........what do we do about it?

Leland said...

What a bunch of unsubstantiated crap. Sounds more like something from a conspiracy theorist like Glenn Beck. If anything, I would say that big fat rich investors are the ones manipulating the market for their benefit at the expense of poor people having their life savings go down the drain and into the pockets of the rich.

USN67 said...

Those who have never been out there tend to think...Is it manipulation? Many of the rest tend to think..When is it not? (They tend to do it thru the big fat rich investors, the favor of course to be returned later.)
It is a big big deal beyond our imaginations which one of the two controls the power. Do you really believe the Watergate breakin was that different from what normally goes on? Would our government lie?Search the Pueblo incident and tell me what you read about the sub. You didn't read anything did you?

elimarco said...

Of course, manipulation designed to mislead, obfuscate, or distort market decisionmaking (theoretically between and among wel- informed participants)is wrong. The present recession came about as a result of ill-informed decisions regarding risks inherent in various levels of debt. The information being provided to banks, lenders, borrowers, and regulatory agencies was grossly incorrect, frequently deliberate, and often understood by the disseminators to be misleading. Those disseminating the information were without doubt the following: Ratings agencies (Moody, S&P, Fitch, etc.), investment banks creating CDO's, commercial banks promoting and writing mortgages to sub-prime borrowers, mortgage brokers, commercial lenders (credit card companies, "pay-day lenders", etc.)
Blaming the oversight agencies is like blaming the police agencies for the drug trade, smuggling, burglaries, etc. Government officials proposing and promoting tax cuts ($700 billion), mortgage insurance for terribly risky mortgages, and transfer of administrative responsibility for Medicare (so called Medicare Advantage programs) to private hands resulting in 13 % increase in costs, as well as forbidding government negotiating for drug prices in Medicare Part D< should also shoulder some of the "blame". However, those last errors by Congress in particular were in furtherance of response to the needs of important constituencies, notably the top 1 % of citizens on the wealth scale, the pharmaceutical companies, the investment banks and others similarly situated.

I would hope that you, the economomic and investment commentator, would subscribe to the same standards you propose for others---honesty, clarity, disclosure of all relevant facts, and, of course, disclosure of bias or predisposition re conclusions.

But then, that would be expecting a great deal.

elimarco@comcast.net

Anonymous said...

Market manipulation (of various kinds)is as old as the markets,usually conducted by small groups with specific targets and objectives in mind. The Rothschild tale of Wellington's "defeat" comes to mind. Over the last 10/15 years,almost all markets seem to be increasingly controlled,in ALL manner and form, by entities that can be traced back to the Federal Reserve. This international cabal has the money power and therefore the power to control members of congress etc. and by extension whole governments. Their motive.... is TOTAL CONTROL of US. We can see this same pattern of a slow,creeping tyranny unfolding in all aspects of our lives.
Bill, your suspicions are correct. You may find listening to a few Alex Jones(PrisonPlanet.com) broadcasts to be enlightening.
--

Anonymous said...

ah but you see it's the fed & not the gov. doing the manipulaton, so yo ca trust the gov. lol. the PPT exists & now the fed's new ongoing market participation buying smaller amounts of debt on a ongoing basis.

Anonymous said...

First the Fed is not the Government. This is simply nonesense and for you to write it in your column gives me a different perspective of you. This seems to be more lies the Republicans spread and the use of "fear" - none of which have worked. What you are saying has completely no bases - so STOP spreading rumors that are false and spread fear. If there is anyone to be concerned about manipulating it is the Greed of the Wall Street crooks. Our Government works well for the people - you sound like a ridulous "tea partyer". Get with it and please, please, stay out of politics when you don't what you are speaking about.

Anonymous said...

we have a government of the duponts, for the lockheeds and by the goldman saks; in other words, a plutocracy that has been manipulating markets and congress and whatever else they want to control for a long time.
get rid of the lobbyists and maybe government can start representing people again.

Anonymous said...

Bill, I respected your writing a lot until this article. You started with a rumor without any proof and proceeded to discuss how government should not manipulate the market as if the government is doing it. Shame on you.
YPCheng, San Jose, California.

Anonymous said...

....So this is the start of yet another perfect rumor. It all depends on the bias of the radio station be it democratic or republican. This entire discussion or comment posting should be considered an exercise on creating 'REALITY OUT OF RUMOR.'
The thinking process in the US is pretty self centered and righteous?

Anonymous said...

Yes, I also believe it's the Fed - together with the big banks. Computers and programmed trading are the enablers. They understand that by "juicing" the markets (and certain stocks) to hit pre-programmed buy signals it creates a melt up.
It's still on relatively low volume, however, so there's a kind of Ponzi scheme in the making. Once the selling starts, and I believe it will, the pre-programmed sell stops will kick in with a vengence.
The Fed and the big banks have destroyed trust and confidence in the market. Even the average fund manager and investment advisor looks foolish as the rug gets pulled out from underneath them over and over again. The real victims - the teachers, policeman, 401K holders i.e. you and I, whose money is being siphoned off to recapitalize monstrously incompetent behavior - by stealth.
Somebody needs to go to jail.

Anonymous said...

I have no idea about stock market manipulation but consider this.....the government has admitted to trying to manipulate home prices in many ways. They just don't call it manipulation. They will not let prices fall to a free market price to clear the foreclosed properties because it will cause major banks to fail. It does not take a conspiracy theorist to see that is what is happening.

Anonymous said...

I totally feel there is an intervention why would a market every day that started to trade down all of a sudden at 10am do a reversal and then again the same at approximately 2-3pm for anyone who needs proof just go back and look at the spy etf on a 1 minute or 30 second tick over the last month.Or just look over the last 18 months.Then compare the last 10 years it's obvious and arrogant

Anonymous said...

"... at least some politicians lie, cheat, steal, and manipulate their way into power at the expense of their electorate."

Correction - the statement should read as: ... a majority of politicians lie, cheat, steal, (swindle), ....

The point that you did not mention is the collusion between the govt. and the big boys of Wall Street; the absolute and complete incompetence of the manipulators who are supposed to govern the markets.

Like Las Vegas, Wall Street is run by crooks and no wonder those that manipulate are reigned in to make laws to fix the game in the first place. This happened post Depression when Kennedy (tsk, tsk, tsk) put in his two cents to fix the market with the uptick rule.

And before you consider my post as a gripe and call me a loser, let me tell you I trade regularly - for a reason - cheers!

Sujit

DrQuien said...

Until I read your blog/newsletter the though of market manipulation never really occurred to me. Now, however, I am not so sure and thing it has some merit.
Although I am not a conspiracy theory advocate, I do strongly believe someone (either the government or other ‘deep pocket’ entity) is manipulating the market. I use this system of trading called Ebb and Flow Trading Process . Basically it moves between SSO and SDS depending if the markets are going up or down. Now, according to the indicators I use (Trend, Momentum and Volume) the overall markets should have begun a correction late last week. “All the technical indicators are pointing to an overbought market eeking out the last gasps of an over extended trend.”
Thank you for your information and knowledge. Reading your blog is one of my regular weekend activities and you have helped me mold and improve the way I trade my account.
DrQuien

Bill Kraft, MarketFN.com said...

Thanks sportsrep. We can make ourselves heard through our votes and through our voices. Blogs, letters to the editor, letters and emails to our representatives and Senators. Speak out long, loud and hard and exercise your right to vote to show our desires at the polls.
Bill Kraft

Bill Kraft, MarketFN.com said...

While there is no need to respond to most bloggers this week, the one gutless anonymous writer who is afraid to identify himself and accuses me of knowing nothing about politics should be aware that I was a political science major at an Ivy League school who holds a doctorate degree. I have also run for, been elected, and served in public office. Maybe it is you who knows not of which he speaks.
Bill Kraft

Bill Kraft, MarketFN.com said...

YP, I clearly identified it as a rumor. The markets run on rumor. Would you have me put my head in the sand and ignore the fuel on which the markets run? Shame on you.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks for your comments, Sujit. I believe each of us is entitled to our opinions and only have a problem with the anonymous name callers.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks, DrQuien. I'm not a conspiracy theorist either. However, current market movement does give some reason to ponder.
Bill Kraft

Anonymous said...

I personally don't think the markets represent reality. It is manipulated and unfair to the average investor who is fed up with the low returns stocks have provided. The Dow is where it was 10 years ago. People I talk to are fed up with the actions of the government who's borrowing $1 trillion to run the country this year. All the politicians want to do is get re-elected and manipulation is part of their game plan! Yes,the goverment has their finger on the buy-stock button but they'll admit that!LOL

JKorhonen said...

I do not believe the federal government or any other entity has the power to manipulate the entire market through the banking system. However, it does appear certain entities that publish stock recommendations due manipulate individual stocks. I noticed last week one publication recommended PYTO. Those who bought in lost there investment as the stock went up briefly and then dropped below the level it was at when the recommendation went out. This appears to be common practice with penny stocks.
JKorhonen

Bill Kraft, MarketFN.com said...

JKorhonen, there is no doubt in my mind that penny stocks are extremely dangerous. They are cheap for a very good reason and doubtlessly are sometimes manipulated through advertisement and recommendations by persons in interest.
Bill Kraft

G. Obregon said...

Personally, you just lost all credibility, furthering this form of misinformation, and it does not excuse you to say you don't know. You belong in Fox News, who will distort the news to further their political agenda.

bill moseley said...

bill, I Don't have proof either,but I have heard rumors that corporate folks are holding back on hiring,lending,and are delaying signs of recovery until they can de-power Pres. Obamma and get a congress full of corporate puppets and right wing nut jobs.

Anonymous said...

I believe that market manipulation is only a short term deal only available in times where there is no significant trend. During times of consolidation there are opportunities to manipulate but it seems to me that the impatience of market participants eventually leads to cleaning out this short term views. The overall market is much bigger than any one entity or a handful of collaborating ones. Soros vs Bank of England comes to mind. If I know what the governments going to do then I will certainly find a way to take their money.

Anonymous said...

Sorry - if you don't believe that the market is being manipulated right now. Listen to this technical strategist on CNBC Europe

http://www.cnbc.com/id/15840232?video=1601032652&play=1

He suggests that this is the Fed trying to let the market down slowly rather than a tumble - but it will go down. You have a chance - protect yourself.

Anonymous said...

Re: your political comments of 10-20-10 SHOUT IT FROM THE ROOF TOPS, SHOUT IT AT EVERY POLLING STATION & call the funeral directors.!!! Unless there is a tsunami of a change on Election day, America ,as we knew it, is dead & awaiting burial.
A disheartened American

Anonymous said...

I'm sorry but I started investing in the market maybe 14 years ago & my life savings are deeply in the red. If you think for 1 minute that the word "integrity" & wall street belong in the same sentence, well, I totally disagree wholeheartedly. If there is manipulation it is the Republicans as much or more as the democrats, both being guilty,imo.
Now that we've bailed everyone else in the world out but me & GW Bush drained the coffers of excess monies left to him to run the country & started a "mission accomplished" 3 trillion $ war that we will never ever be able to get away from. It will literally drain us.
Greenspan & his bubbles & his low interest rates & now the same have literally ruined most seniors lucky enough to have a few $$ in a CD, is null/void now. It's purely disgusting.
We've literally ruined baby boomer investing & 401k's & there isn't 1 iota of trust w/most of my friends of 60 yrs of age. Most now have lost their jobs & their money in the stock markets & now the Republicans want to take our Social Security away that I paid into my whole life. I get nothing from no 1 & it's not cheap for a woman alone to run a household.
I personally just cashed in 1 other investment in the market chunk so as to fix up my house so I @least have a roof over my head. I don't want anything I don't have some control over in this market ever again, & will not ever again. When my friends ask me & are interested & younger people, I tell them the same thing. Either learn something about the stock market & use protection in your investments or don't trust all your eggs in 1 basket. I'm sorry I've ever heard of wall street & will be as long as I live.

I'm a very sad American w/the status quo just the last 12-15 years that i've seen & read & know about politics & wall street.
A stock market scalper.

Anonymous said...

Such a manipulation would serve only the interests of the manipulators and not the honest interests of those whom they were elected to serve. If our markets and our country are to survive, we the people must not allow such manipulation. Government of the people, by the people, and for the people appears near death and market manipulation would be a serious symptom of the illness leading to the ultimate demise . The allegations are worse per economic system . How do banks buy stocks . I was not aware they were allowed to do this per reserve regulations etc. Please explain. Yes some bank do own stock of other companies , but they are related to the banking business and they are held as a holding company . eg BAC and ML . I think that Federal Reserve Policy is driving the market . Most investors know that the US is through as a third class corrupt county base upon the people not taking back the constitional rights from two Royal parties , that advertise themselve by lies into office and then steal . And so what because you can call these thieves thieves and have proof of it , and it is all a game to them . We all die of sin , these individual make sure the whole county die because of them .
Others call them Hitlerites or betrayer of American or of treason , but again who cares as HItler rose to power as a phophet of the reglory of the Hun and revenger of the inflation placed upon them by war reperation of France . The same hyper inflation we might have if the rest of the world did not have debt . China has to stop selling us products that can be made in the United States, but quite frankly , the Chinese have a society of sharing and family , we don't . Henry Ford , taught men to work as machines , but now there is no career for a man to work as a machine , and China know this and has maybe 10x the amount of engineers we have willing to work at cheap labor . OK , why then should a US student study engineering Doctor get paid no where the amt of US Doctors .
Lawyer are not needed as much as Chinese law is plain and favors the State . Criminal get swift justice . The corrupt state is assumed to be the Chinese politician who has to stay in business like a Mafia leader which means no cheating and conforming to a Plan that can be implemented by the leaders. Real leadership is at the top , unlike here , who make decisions that can lose him his permanent job , not his 4 year job. The idea here of an unlimited term actually worked with FDR and somehow this had to change to make patronage an equal activity . Ike idea of a military industial complex became an accomplished fact . The politician like in Florida running for Senate are accused of misappropriation of funds ( Meaks etc.) and no one arrests them . It goes on and on.
As LONG AS THE UNITED STATES DOESNT HAVE TO PAY BIG BUCKS ON THE DEBT US ECONOMY WILL BE OK. THE US DOLLAR HAS TO SINK TO NOTHING TO DO THIS , SO THAT THE US IMPORT OF OIL HAS TO INCREASE IN PRICE . THE ASSHOLE OBAMA , IS PAYING OFF POLITICIAN BY SO CALLED ROAD PROJECTS . THIS WAS GOOD IN THE 1920 AND NOT NEEDED NOW . THIS IS THE RESPONSIBLITY OF THE STATES . -ROADS . OBAMA CLEANING UP THE GULF SOUNDS GOOD BUT THE RESPONSIBILITY NOW IF FOR BP TO DO THIS PER THEIR DAMAGES . THE KILL ZONES OF POLLUTIONS ARE POISONING FISH SO AS TO KILL THE US CIT POPULATIONS WITH CANCERS THAT THE US SPONCERS PLACE LIKE WAL MART IMPORT FISH , INSTEAD OF GETTING IT FROM KNOW KILL ZONES The people news social stuides courses in school is HOW CORRUPT IS THE UNITED STATES SYSTEM, AND WHY WE LOST OUR FAVOR WITH G-D AND NATIONS.

Anonymous said...

I believe the rumor is probably referring to the Fed rolling the funds back into the markets through their POMO activities. Similar to the Fed's quantitative easing that pumped up the markets.
M.

Anonymous said...

Come on Bill, this has been going on for YEARS,,,FED's ppt ,,job....Congressman Ron Paul will concur....

Anonymous said...

Wow Bill, All these years I respected your writing and your opinion. I've even considered buying one of your books to try and hone my trading skills.

Not now!! Anybody who would stoop to spreading rumours gets no respect from me. I don't know what your agenda is with that editorial but your should reconsider your objective.

I'm not going to unsubscribe but only because the rest of the newsletter is still worth reading.

Grant Johnston, Chico, CA

Bill Kraft, MarketFN.com said...

Mr. Obregon did you fail to read the part where I specifically identified it as a rumor and where I specifically said I had no idea whether it was true or not? It seems from your liberal bias you just decided I was claiming a truth you didn't like. May I suggest you read all the words.
Bill Kraft

Bill Kraft, MarketFN.com said...

Just as what I wrote, Mr. Mosely, because we heard it doesn't make it true. In each case, it simply exposes the possibilities as food for thought. Personally I think thought is good. What about you?
Bill Kraft

Bill Kraft, MarketFN.com said...

My goodness, Grant, I don't get it with you. I specifically identified it as a rumor although subsequent information tends to confirm it and in no way indicated it was a truth. Though now it looks like it is. I see you only want what's free in life. You say the rest of the newsletter is worth reading but my books are not, now that's a smart approach.
Bill Kraft

Anonymous said...

Bill, Wall Street is full of rumors. I recall hearing some old saying about "Buy on the rumor, sell on the news"? When you helped spread that rumor you let your political stripes show. I get enough rumors about market manipulation withou getting them from some one I've come to trust. Go back and count the number of post who disagreed with you. That's the percent of readers you disapointed. The reason I'm reconsidering a book purchase is because I've lost respect for you, the person who wrote it. Grant Johnston, Chico, ca

Bill Kraft, MarketFN.com said...

Cutting off your nose to spite your face, right Grant. Wouldn't consider learning something about trading from someone with whom you disagree politically. Very wise sir.
Bill Kraft

Anonymous said...

Bill,
What a hornet's nest. Such contraversy(sp?). People have such heartfelt opinions and political beliefs. These differences make the market work, for every seller there must be a buyer somewhere. Is the market manipulated? The "Flash Crash" comes to mind and is rather widely recognized as a reason that individual investors are leary of getting into the market. I am surprised and disappointed at the number of people that did not understand your original comments. They read only so far and their personal biases were triggered. The proof is clear that their political beliefs are very important to them, regardless of what is really true.
Bill, Ignore those that attempt to critize you or belittle you. You, at least, had the courage to broach a very contraversial subject and provide a formum for discussion ( I regret that Spell Check will not help me on this Blog) and debate. For what it is worth, I hold you in high regard and respect your experience. No other newsletter, paid or free, is as helpful as yours.
The Old Trader
Dean Blissman, Pittsburgh, Pa.

Anonymous said...

The rumor is true:

POMO results a nice 5.190 billion of liquidity pumped in.

http://www.newyorkfed.org/markets/pomo/display/index.cfm

Bill Kraft, MarketFN.com said...

Thanks, Dean. Your comments are sincerely appreciated. It amazes me how nasty folks can get about their political opinions. It really demonstrates how emotion overtakes thought.
Bill Kraft

Anonymous said...

I am not going to substantiate this but I will tell you something that is absolutely true that pertains to this post.

Years ago and early in my career when I was wet behind the (y)ears I worked as an editor for a small newsletter publishing company. The owner (and publisher) was an extraordinarily talented copywriter -- one of the top copywriters of the decade, in fact.

But he had a glitch in his soul....

One of his sidelines -- a lucrative one -- was heavy promotion of penny-stock companies on behalf of clients. The game was -- you guessed it -- drive the price of the stock into the stratosphere then dump.

BTW, the publisher never clued me in on any of his sideline activities. I learned about them from another person in the company plus I was able to put two and two together. HOWEVER, the experience taught me a valuable lesson which I'll share with Bill's readers: stick to buying real companies producing real products that trade in millions of shares a day. It's too hard (probably impossible) to manipulate biggies like that.

Subsidiary lesson: pay attention to position size.

Usually I sign my name when I post. This time I'm going to remain anonymous for obvious reasons.

Bill Kraft, MarketFN.com said...

Thanks for sharing that information about the manipulation of the penny stocks, Anonymous. It could be important to many readers.
Bill Kraft

Anonymous said...

And Bill, you can see the overwhelming influence emotion can have on trading decisions. We have commented about this before and I feel emotions are responsible for more than 50% of losses for traders.
Beware of: "Oh, I'll wait, it will come back up." These are the most dreadful words to run through any trader's mind. But how do we defeat the emotional response? Training? Discipline? Those are fine until you have Your Real Money in the trade. Many people have a very difficult time selling a declining position, possibly because they cannot stand to "feel" like they were wrong or made a mistake.
Some people must realize that they are not mentally and emotionaly suited to trading. Perhaps they should consider a good mutual fund or Bank CDs.

The Old Trader
dsb

Bill Kraft, MarketFN.com said...

Great point, Old Trader. Thank you. When I hear "it'll come back" I always wonder when, or, for that matter, whether.
Bill Kraft

Anonymous said...

The markets are absolutely manipulated by the Fed, the big banks, large institutional traders, HFT, etc. Anyone who believes otherwise is a fool and deserves to have their ass handed to them by the market. It is what it is and you can either accept it and use it to your advantage, or be eaten alive.
Steve

Bill Kraft, MarketFN.com said...

That's the point, Steve. Thanks.
Bill Kraft