Calling Bull on the Bulls, Fake Rallies and Awww Broken Piggy Banks
I especially appreciate this line from the Yahoo ETFguide.com piece: "The winning streak... has pushed the major indexes to new recovery highs. Those recovery highs coincide with a number of oddities that are hard to explain, even concerning."
Oddities? That's a polite way to put it. The last time I spoke to Financial Armageddon's Michael Panzner about this bizarre, uh, movement beginning March 2009, he sounded like someone who had just seen a massive car wreck. "What the fuck?!" is usually the first thing that comes to my mind as well when I think about it. He also stated he'd underestimated how people will act when you give them free money. Like these guys?
TrimTabs founder and CEO Charles Biderman, added further evidence to suspicions many have had for a while. TrimTabs is a research firm that tracks money flows into the market.
Here's what Mr. Biderman had to say: 'We cannot identify the source of the money that pushed stock prices up so far so fast.' More specifically, the source of about $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified.'
Biderman continues, 'We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market and the banks and brokers. Why not support the stock market as well? The money did not come from traditional players.
One way to manipulate the stock market would be for the Fed or the Treasury to buy a nominal $60 to $70 billion of S&P 500 stock futures each month for as long as necessary. Depending on margin levels, as little as $5 billion to $15 billion per month was all that was necessary to lift the S&P 500 by 67% (statement was made on January 6, 2010).'
I can identify the source: it's seedy, secretive, and run by the dude with the neckbeard. But wait! There's more! You can't have a good PPT run without the help of the SEC, the agency that repeatedly fails to find the real criminals and has taken instead to these massive (and useless) cluck missions.
The Securities and Exchange Commission is looking at a rule that would make it more difficult for asset managers to create exchange-traded funds that cover esoteric, illiquid investments.
The rule would hold ETF pro-viders to their claims that an ETF traded at or close to its net asset value. It is unclear how exactly the rule would do that, however.
“It may be a tool to deal with some of the newer iterations [of ETFs] that are coming up,” Andrew J. “Buddy” Donohue, director of the SEC's Division of Investment Management, said last week at an Investment Company Institute conference in Phoenix.
When an ETF trades at a persistent premium or discount to its NAV, authorized participants have an advantage over retail investors be-cause they are the only ones who can profit from arbitrage opportunities.
It is an advantage that “can work to the detriment of small investors who don't ... have the ability to get the net asset value of the fund,” Mr. Donohue said.
The number one rule of market manipulation: not even the Fed has the sort of firepower required to play both sides. The market is a picky lover, you know, and will not put up with being assaulted indefinitely from behind while simultaneously getting cockslapped by asshat with the neckbeard from the front.
So suck on that, those of you who have been gripping yourselves desperately over this farce of a "rally" that relies on magic math and the same made-up money that ran the market into the ground in the first place.
I'm not accusing the Fed of market manipulation, that would be ignorant. What do you think their job really is? If it's price stability and maximum employment as they and Congress claim, they've failed miserably. Must be doing something right if Chris Dodd is handing over the keys. Or did the Senate Banking Committee merely sneak through the Fed's backdoor to get some action for themselves?
The piggy bank is empty but the looters keep sniffing at the broken ceramic hoping to find a few pennies.