The market is rigged? No : ‘Plunge protection’ behind market’s sudden recovery

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The “plunge protection team” (PPT) used to be something which was whispered about. Now it’s openly discussed in the New York Post. Hell will become a frost covered plain before the New York Times  will ever mention the PPT of course.

As I have written before, there is an understanding among traders post-2008. If the market heads into a nose dive the Fed will intervene. It will actively buy futures (and likely whatever else it has to) in the market to buoy the market.

The PPT is kind of like the Israeli nuclear program. No one acknowledges it officially but almost everyone thinks it exists and as such this impacts markets.

The Fed may have dropped a tactical nuke on an emerging bear market last week.

So isn’t this good news? The Fed came in and saved the day?

Well for some I suppose it is, at least at this exact moment. But overall it reflects an economy which it now has to be said really is centrally planned. The market mechanism is all well and good so long as markets go up. But when the market reflects inefficiencies, when the market dips to correct for inefficiencies, this is unacceptable. We must continue to fill in the cracks and holes with Fed printed paper mache.

The thing is, paper mache is not a long term solution and inevitably a rainy day will come and all that paper will melt and wash away.

Look at it this way, maybe you’ll die before that really rainy day comes. I know a lot of retirees are thinking along these lines. So good luck with that.

It’s not like we younger folks would like to pick up equities and houses after a real honest to God market correction. Better to keep the charade going for the Baby Boomers.

(From The New York Post)

But let me explain about the unknown forces in the market these days. Call it by a nickname — the Plunge Protection Team. Or call it the President’s Working Group on Financial Markets, the official name given to the group when it was formed by President Ronald Reagan after the market turbulence of 1989.

These forces may be working from a script in the “Doomsday Book,” which the US government recently fought to keep secret when it was brought up last week during the AIG trial in Washington.

Here’s the bottom line: Someone tried to rescue the market last Wednesday. And it’s becoming a regular occurrence.

Click here for the article.