Conspiracy? Is Goldman Sachs Running the Plunge Protection Team?
Is the current stock market rebound based on fundamentals, or are more sinister forces at work? Tyler Durden, one of the best financial bloggers around, have found some circumstantial evidence that suggests the mysterious Plunge Protection Team (PPT) has recently been boosting the stock market. And some might say Goldman Sachs is running the show...
The Working Group on Financial Markets, known colloquially as the Plunge Protection Team (PPT), was created in 1988 by Ronald Reagan, in response to the Black Monday stock market crash in 1987. Their operations have always been shrouded in secrecy, with a Washington Post article from 1997 writing that the group aims to prevent the "smoothly running global financial machine" from locking up.
Conspiracy theorists have long claimed that the PPT manipulates U.S. stock markets by using government funds to buy stocks in the event of market dislocation, but skeptics argue that such an operation would be unworkable.
Durden, author of the ZeroHedge blog, thinks he found some evidence of the PPT's interference with the market. He cites an unusual piece of data on program trading, a part of the stock market that is controlled by mysterious computer programs that use mathematical formulas to buy and sell stocks.
According to the New York Stock Exchange, last week's volume of program trading was 8% higher than the 52 week average. It's strange that program trading volume would be increasing so sharply when overall market volume is declining, says Durden. It's even stranger to note that principal trading, which occurs when a brokerage buys or sells stocks for its own account, is running 21% above 52 week average. New York Stock Exchange weekly volume, on the other hand, is running about 9% below 52 week average.
"A very interesting data point, also provided by the NYSE, implicates none other than administration darling Goldman Sachs in yet another potentially troubling development," writes Durden. "Key to note here is that Goldman's program trading principal to agency+customer facilitation ratio is a staggering 5x, which is multiples higher than both the second most active program trader and the average ratio of the NYSE, both at or below 1x."
The implication is that Goldman Sachs trades much more often for its own (principal) benefit. "In this light, the program trading spike over the past week could be perceived as much more sinister," he says. "For conspiracy lovers, long searching for any circumstantial evidence to catch the mysterious "plunge protection team" in action, you should look no further than this."
My colleague at Kapitall, David Neubert, disagrees with the conspiracy theory. David was the head of program trading at Morgan Stanley from 1996 to 2002 (both Global and U.S.), which, at the time, was the NYSE volume leader. "Program trading volume on a proprietary basis can come from many things, all of which make pushing the entire market higher difficult to nearly impossible," he writes.
"The only thing that can drive a market higher is buyers willing to pay more than current market prices," writes Neubert. "Among the many financial market abuses that have occurred in the past few years, portfolio (program) trading is not among them."
Is the PPT a Wall Street fairy tale? I don't know the answer. But it's interesting that Goldman Sachs recently announced a $5 billion stock issue plan. Come on, conspiracy lovers, tell us what you think. Did the PPT push stock market prices higher so that Goldman could get a better price for their stock offering?
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I thought that Goldman Sachs was the FEDS, in light of that, your observation is right on. Now hook up Rockafeller, and you will be crusing down the river of no return. The Buldiberg meeting meets to analyse the global progress on the 16th. I venture to say the dots are connecting. By the time (we the people) can comprehend whats going on, it will be all over but the crying.
Goldman+JPM=PPT=Recognize that the FED is a TOOL for Harvesting Profits for the ELITES!
WHY IS GEITHNER FIGHTING THE LOGICAL SOLUTION?
Banking industry grew from 10% of our Economic Profits to 40% by manufacturing Toxic Debts.
Now it must shrink back to its support role in a Production and Service Economy and automate its many mathematical and database functions to become a slim and trim service oriented industry!
Why is Geithner trying to fight this important trend by pumping up the Zombie Banks? Let them downsize and automate like they should be doing!
The PPT is not a myth. The Fed openly publishes how this system works (http://www.newyorkfed.org/aboutthefed/fedpoint/fed04.html). Part of their temporary open market operations is to give loans to banks like Goldman Sachs to buy stock index futures. There are several articles here explaining how this works:
http://www.gamingthemarket.com/category/trading/ppt-trading
Isn't it interesting that after WWII a family could survive, even prosper, with one wager-earner. Then it became necessary for both parents to work to achieve middle-class. Then both wager-earners had to use more and more debt to do so. Now the debt has ballooned to the point of being unsustainable. Where has the wealth of the wealthiest nation on earth gone then? Everyone knows that information flow is what makes money in the markets - who gets it first, who gets it correctly, and who disseminates false leads to better their own position. Wealth is relative, and it is not only who gets more, it's who can be made poorer by comparison that makes the divide and power shift even more pronounced. So - mission accomplished!
I believe GS is privy to a lot of valuable information from Treasury. They know ahead of the general public the details of specific, government plans and programs and which sectors/companies will benefit. They position their trades and clean up when it is officially "announced." As far as manipulation, JP Morgan was caught doing this in Poland. They bid up the heaviest weighted stocks(Big Caps like our Exxon, Proctor) in the polish index during the last fifteen minutes of trading. Their massive purchases were able to move that index about 10% in a short time. I suppose no one does that in the US.
More likely a conspiracy theory cooked up by this guy calling himself "Tyler Durden." Maybe part of his "Project Mayhem?
Please listen to David. He's right.
We don't need conspiracies to get at the real issue here: the middle class has been hollowed out for the past 30 years, and have increasing relied on debt to keep afloat. Another "jobless recovery", will be the real tragedy.
BUt a conspiracy IS the real issue, this didn't happen by accident.
Do you really believe everything you see or hear on the news media? Goldman Sachs is a farce, a company thats hip deep in their own consiracy. You dont have to be a conspiracy nutcake to see whats happening. Just open up your peepers, and take a good long hard look, it will embarrass you to think, that they think, you are so stupid. If it didn't hurt so many innocent people, it would be laughable, and considered a big joke.
Sinister, mysterious conspiracy? No, the stock market manipulations are a scam and nothing more.
Whatever makes you feel better. But your wrong.
You want people to guess at something they know nothing about, in order to do what?
A secret program that may or may not exist run by someone to do what exactly?
We have enough real problems with this fake economic crisis and the criminals on Wall Street and in DC who caused it. There's plenty of villains we know by name in this rip off. Let's stick with what we know.
In simple terms, ISDA, which is the only effective supervisor of the Over The Counter CDS market, is giving its blessing for trades to occur (cross) below where there is a realistic market bid, or higher than the offer. In traditional equity markets this is a highly illegal practice. ISDA is allowing retrospective arbitrary trades to have occurred at whatever price any two parties agree on, so long as the very vague necessary and sufficient condition of "market quotations may be difficult to obtain" is met. As anyone who follows CDS trading knows, this can be extrapolated to virtually any specific single-name, index or structured product easily.
In essence, ISDA gave its blessing for below the radar fund transfers of questionable legality. The curious timing of this decision and the alleged abuse of CDS transaction marks by and among AIG and the big banks, is striking to say the least.
http://seekingalpha.com/article/128390-exclusive-big-banks-recent-profitability-due-to-aig-scam
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