Plunge Protection Team to the Rescue

I had read about some group called the Plunge Protection Team but not being one to believe in conspiracy theories I dismissed it. But now I am having second thoughts because some of the stock market moves have defied logic.

On occasion the markets have moved hundreds of points up for their lows of the day just an hour or so before the close. Why and how?

The only logical explanation is some kind of market manipulation. The amount of money involved has to be so large only the US government could do it.

Right now the markets are enjoying their longest rally in months even though nothing has really changed with the US Banks and the mortgage situation. Citi annoucing it has made a profit which cannot be verified seems to me not enough to drive this bear market rally.

Maybe it is in anticipation of the massive stimulus package. Or maybe it is President Obama deciding he was too negative and needed to get confidence back in the markets so called in the plunge protection team.

So I began to Google “Plunge Protection Team” and found out that it is in fact a real entity. It’s official title is, “Working Group on Financial Markets”. It was Brett D Fromson who coined the term “Plunge Protection Team in a Washington Post Article in 1997.

Working Group on Financial Markets — the secretary of the treasury and the chairmen of the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission.”

So today it comprises Timothy Geithner (Treasury Secretary), Ben Bernanke (Chairman of the Federal Reserve) Other FED Board members, Mary Shapiro (SEC Chairman), the CFTC Chairman will be Gary Gensler if confirmed I believe.

The Working Group’s main goal is to,

“keep the markets operating in the event of a sudden, stomach-churning plunge in stock prices — and to prevent a panicky run on banks, brokerage firms and mutual funds. Officials worry that if investors all tried to head for the exit at the same time, there wouldn’t be enough room — or in financial terms, liquidity — for them all to get through. In that event, the smoothly running global financial machine would begin to lock up.”

Whether it is all a conspiracy or not, strange things are happening. If you have no idea what is happening in the markets, unless you are a trader, you should stand aside. That applies to Baby Boomers unless they have spare cash they can afford to lose.

Here is another article that is worth reading. Then make up your own mind and plan accordingly. It’s called, “The Not-So-Invisible Hand – How The Plunge Protection Team Killed The Free Market” and it talks about the Plunge Protection Team lead by Henry Paulson.

“….Don Coxe, strategist for the Bank of Montreal. In a weekly conference call on September 5, 2008, he described what has been going on in the markets since July as “the most massive intervention of government into the capital markets or the financial system since Roosevelt closed the banks back in 1933.”

According to the British Globe and Mail, Coxe is “no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America.”

Ignoring the socialist references there may be a case to answer regarding the Plunge Protection Team. But one thing it definitely is not is capitalism as it is truly defined. This is market manipulation by government and generally for the good of the rich and powerful at the expense of baby boomers and other small investors.

I like the last statement in the article,

“As one talk show commentator quipped recently, “I’m fully diversified. I’ve got some under the mattress, some under the floor boards, some in the backyard.”

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