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alstry (< 20)

Is The Fed Artificially Pumping The Market



January 04, 2010 – Comments (5)

As the market has defied gravity rising on ever decreasing volume over the past 9 months....PEs reaching levels never seen before in market history..........and net outflows of money from equity funds over the past four has to ask, what invisible hand has been keeping the market up against a net selling environment and deteriorating fundementals?????

Here is a very interesting piece:

As I pointed out in December 2008, Nouriel Roubini wrote the month before that the government might buy U.S. stocks:

The Fed (or Treasury) could even go as far as directly intervening in the stock market via direct purchases of equities as a way to boost falling equity prices. Some of such policy actions seem extreme but they were in the playbook that Governor Bernanke described in his 2002 speech on how to avoid deflation.

Given that Roubini was previously a senior adviser to Tim Geithner, he probably knows what he's talking about.

Now, Charles Biderman, CEO of TrimTabs, argues that the government may, in fact, have been buying stocks to prop up the stock market.   Given that 25% of the top 50 hedge funds in the world use TrimTabs'
research for market timing, it is a credible source.

Specifically, Biderman

As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures.  Moreover, several officials have suggested the government should support stock prices. 

For example, former Fed board member Robert Heller opined in the Wall Street Journal in 1989, “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.” 

In a Financial Times article in 2002, an unidentified Fed official was quoted as acknowledging that policymakers had considered buying U.S. equities directly, not just futures.  The official mentioned that the Fed could “theoretically buy anything to pump money into the system.” 

Imagine what happens if the world finds out that the current value of the market is simply a result of the Fed covertly creating a new bubble?????

Can you conceive the reaction to a Fed that gives unlimited credit and liquidity to its Wall Street buddies and cuts off the private economy????

Anyone remember what happened after housing popped????  This bubble is structural in nature.

5 Comments – Post Your Own

#1) On January 04, 2010 at 10:59 AM, alstry (< 20) wrote:

Dartmouth College Seeks to Reduce Staff Size?

Large Law Firms - More than 12,000 Job Cuts in 2009

Instead of publishing the highly questionable unemployment figure......why doesn't the Fed simply publish an employment number identifying how many Americans are working and what is the total income of those working Americans.

The number should be very easilly verified through tax records.

Anyone want to bet it would paint a very different picture than the current perspective the Fed is trying to put forth.

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#2) On January 04, 2010 at 11:03 AM, alstry (< 20) wrote:

Another interesting question is what is the value of analyzing investing if in fact the market is simply a product of the Fed pumping dollars into index futures despite net selling of equities.

What happens to the stock market if the credibility of the market is lost?????

Since housing, office buildings, shopping centers, many private business valutions.........just about anything not Wall Street manipulated is crashing.....what happens to America if its population finds out that the value of their retirement account was simply a product of a Fed induced Ponzi scheme?????

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#3) On January 04, 2010 at 2:14 PM, freunddoggy (38.76) wrote:


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#4) On January 04, 2010 at 11:14 PM, MGDG (32.92) wrote:

I've always assumed, since I first caught wind of this in May, that they were doing it through GS and a few select investment banks.

 My only thought at the time was, when will they stop or when will the market/economic forces overwhelm the buying power of the futures?

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#5) On January 04, 2010 at 11:37 PM, tonylogan1 (27.51) wrote:

file this under "no s..."

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