Wednesday, January 6, 2010

MarketWatch: The Rally of 2009 Was Due to the Fed and Treasury Buying Stocks

So says Charles Biderman, chief executive of TrimTabs Investment Research, in an article on MarketWatch.

The theory fits with the news that the Fed has hundreds (it was hiring 400 traders in August) traders and was actively hiring last year. That would make it very easy to prove Mr. Bernanke's theories as right. We know that P/Es are absurd, prices do not justify the share prices.

The market is rigged says MarketWatch: "is the latest and most credible person to charge that the Federal Reserve and the Treasury (in league with top Wall Street firms) is rigging the stock market on a daily basis."

Mr. Biderman says that the only logical explanation for the extent of the rally and the $6 trillion increase in U.S. stock-market cap in 2009 can only be explained by secret buying by the PPT, Plunge Protection Team. he says that the usual sources of funds such as mutual funds, direct retail investment, pension funds, hedge funds or foreign purchases cannot.

The PPT, says MarketWatch, was established by President Reagan in 1988 after the 1987 stock crash to coordinate such events. It consists of the Fed chairman himself, the Treasury secretary, the head of the Securities and Exchange Commission and the head of the Commodity Futures Trading Commission. Wow, what a group.

"Biderman acknowledged that he had no direct evidence that the Fed and other agencies have intervened in the stock market. But he worried about what will happen to the market if the PPT has been buying and suddenly stops.

It's hard to believe that the Fed could keep such a conspiracy a secret for 20 years or more.


But the Fed has never said it is buying equities or equity futures. Doing so would likely violate the Federal Reserve's investment policies, and could violate federal law if not disclosed properly.


Yet Biderman's accusation of PPT market manipulation is another argument in favor of a complete public audit of the Fed's books. As any casual reader of this site's community boards knows, there is a widespread belief that the PPT does manipulate stock prices on a daily basis to enrich its pals and screw individual investors.

It would be useful to prove them wrong. And if they are right, the PPT should be put out of business. "

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