The Plunge Protection Team

[chiggerbit]

I've been wondering lately if this program has been involved in any way with the financial crisis, whether it was useed so much that it got used up, or what.

First, here's an old article:

http://www.washingtonpost.com/wp-srv/bu ... plunge.htm

Plunge Protection Team
By Brett D. Fromson
Washington Post Staff Writer
Sunday, February 23, 1997; Page H01
The Washington Post


It is 2 o'clock on a hypothetical Monday afternoon, and the Dow Jones industrial average has plummeted 664 points, on top of a 847-point slide the previous week.

The chairman of the New York Stock Exchange has called the White House chief of staff and asked permission to close the world's most important stock market. By law, only the president can authorize a shutdown of U.S. financial markets.

In the Oval Office, the president confers with the members of his 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.

The officials conclude that a presidential order to close the NYSE would only add to the market's panic, so they decide to ride out the storm. The Working Group struggles to keep financial markets open so that trading can continue. By the closing bell, a modest rally is underway.

This is one of the nightmare scenarios that Washington's top financial policymakers have reviewed since Oct. 19, 1987, when the Dow Jones industrial average dropped 508 points, or 22.6 percent, in the biggest one-day loss in history. Like defense planners in the Cold War period, central bankers and financial regulators have been thinking carefully about how they would respond to the unthinkable.

An outline of the government's plans emerges in interviews with more than a dozen current and former officials who have participated in meetings of the Working Group. The group, established after the 1987 stock drop, is the government's high-level forum for discussion of financial policy.

Just last Tuesday afternoon, for example, Working Group officials gathered in a conference room at the Treasury Building. They discussed, among other topics, the risks of a stock market decline in the wake of the Dow's sudden surge past 7000, according to sources familiar with the meeting. The officials pondered whether prices in the stock market reflect a greater appetite for risk-taking by investors. Some expressed concern that the higher the stock market goes, the closer it could be to a correction, according to the sources.

These quiet meetings of the Working Group are the financial world's equivalent of the war room. The officials gather regularly to discuss options and review crisis scenarios because they know that the government's reaction to a crumbling stock market would have a critical impact on investor confidence around the world.

"The government has a real role to play to make a 1987-style sudden market break less likely. That is an issue we all spent a lot of time thinking about and planning for," said a former government official who attended Working Group meetings. "You go through lots of fire drills and scenarios. You make sure you have thought ahead of time of what kind of information you will need and what you have the legal authority to do."

In the event of a financial crisis, each federal agency with a seat at the table of the Working Group has a confidential plan. At the SEC, for example, the plan is called the "red book" because of the color of its cover. It is officially known as the Executive Directory for Market Contingencies. The major U.S. stock markets have copies of the commission's plan as well as the CFTC's.


Going to Plan A

The red book is intended to make sure that no matter what the time of day, SEC officials can reach their opposite numbers at other agencies of the U.S. government, with foreign governments, at the various stock, bond and commodity futures and options exchanges, as well as executives of the many payment and settlement systems underlying the financial markets.

"We all have everybody's home and weekend numbers," said a former Working Group staff member.

The Working Group's main goal, officials say, would be 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.

This sort of liquidity crisis could imperil even healthy financial institutions that are temporarily short of cash or tradable assets such as U.S. Treasury securities. And worries about the financial strength of a major trader could cascade and cause other players to stop making payments to one another, in which case the system would seize up like an engine without oil. Even a temporary loss of liquidity would intensify financial pressure on already stressed institutions. In the 1987 crash, government officials worked feverishly -- and, ultimately, successfully -- to avoid precisely that bleak scenario.

Officials say they are confident that the conditions that led to the slide a decade ago are not present today. They cite low interest rates and a healthy economy as key differences between now and 1987. Officials also point to SEC-approved "circuit breakers" that were introduced after 1987 to give investors timeouts to calm down.

Under the SEC's rules, a drop of 350 points in the Dow would bring a 30-minute halt in NYSE trading. If the Dow declined another 200 points, trading would cease for one hour. No additional circuit breakers would operate that day, but a new set would apply the next trading day.

Despite these precautions, today's high stock market worries officials such as Fed Chairman Alan Greenspan, who in a speech in early December raised questions about "irrational exuberance" in the markets. Because the market declined following Greenspan's speech, government officials have become even more reluctant to comment on these issues for fear of triggering the very event they wish to forestall, according to policymakers.


A Brewing Concern

Greenspan had expressed similar thoughts a year ago at a confidential meeting of the Working Group. Treasury Secretary Robert E. Rubin and SEC Chairman Arthur Levitt Jr. also are concerned about the stock market's vulnerability, according to sources familiar with their views.

The four principals of the group -- Rubin, Greenspan, Levitt and CFTC Chairwoman Brooksley Born -- meet every few months, and senior staff get together more often to work on specific agenda items.

In addition to the permanent members, the head of the President's National Economic Council, the chairman of his Council of Economic Advisers, the comptroller of the currency and the president of the New York Federal Reserve Bank frequently attend Working Group sessions.

The Working Group has studied a variety of possible threats to the financial system that could ensue if stock prices go into free fall. They include: a panicky flight by mutual fund shareholders; chaos in the global payment, settlement and clearance systems; and a breakdown in international coordination among central banks, finance ministries and securities regulators, the sources said.

As chairman of the Working Group, Rubin would have overall responsibility for the U.S. response, but Greenspan probably would be the government's most important player.

"In a crisis, a lot of deference is paid to the Fed," a former member of the Working Group said. "They are the only ones with any money."

"The first and most important question for the central bank is always, 'Do you have credit problems?' " said E. Gerald Corrigan, former president of the New York Federal Reserve Bank and now an executive at Goldman Sachs & Co. "The minute some bank or investment firm says, 'Hey, maybe I'm not going to get paid -- maybe I ought to wait before I transfer these securities or make that payment,' then things get tricky. The central bank has to sense that before it happens and take steps to prevent it."


1987: A Case Study

The Fed's reaction to the 1987 market slide, which Corrigan helped oversee, is a case study in how to do it right. The Fed kept the markets going by flooding the banking system with reserves and stating publicly that it was ready to extend loans to important financial institutions, if needed.

The Fed's actions in October 1987 read like a financial war story.

The morning after the 508-point drop on Black Monday, the market began another sickening slide. Corrigan and other Fed officials strongly discouraged New York Stock Exchange Chairman John Phelan from requesting government permission to close the market. Phelan was concerned that if the market continued to erode, the capital of the NYSE member firms would disappear. Corrigan feared a shutdown would cause more panic.

"It was extraordinarily difficult around 11 o'clock," Corrigan recalled. "The market was at one point down another 250 points, and that's when the debate with Phelan took place."

Simultaneously, Corrigan and other central bank officials spoke privately with the big banks and urged them not to call loans they had made to Wall Street houses, which were collateralized by securities that could no longer be traded and whose value was in question.

A final critical moment came that day when the Fed decided not to shut down a subsidiary of the Continental Illinois Bank that was the largest lender to the commodity futures and options trading houses in Chicago. The subsidiary had run out of capital to provide financing to that market.

"Closing it would have drained all the liquidity out of the futures and options markets," said one former top Fed official involved in the decision. Investors use stock futures and options to hedge positions in the underlying stock market.

Recognizing the crucial role of banks if another financial crisis should strike, the Office of the Comptroller recently conducted an internal study of what damage a market decline would inflict on U.S. banks. The OCC declined to discuss the study or its conclusions.

At the SEC, one big worry is how to cope with an international financial crisis that begins abroad but quickly rolls into U.S. markets.

"We worry about a U.S. brokerage firm that is dealing with a Japanese insurance company, where we don't know how they are run or regulated," a SEC source said. To improve its ability to react in a crisis, the SEC and the Fed have begun joint inspections with their British counterparts of U.S. and British financial institutions with global reach.

The most drastic -- and probably unlikely -- move the SEC could take in a crisis would be to propose a market shutdown to the president. That would require a majority vote of the commission. If a quorum couldn't be mustered, the chairman could designate himself "duty officer" and go to the president or his staff.

"Closing the market is, of course, the last thing the commission wants to do," said a source familiar with the SEC's planning. "During a time when people are extremely worried about their investments, you are cutting them off from taking any action. . . . The philosophy of the commission is that markets should stay open."


Just the Facts

Gathering accurate information would be the first order of business for federal regulators.

"Intelligence gathering is critical," Corrigan said. "It depends on the willingness of major market participants to volunteer problems when they see them and to respond honestly to central bank questions."

The SEC, CFTC and Treasury have market surveillance units. They monitor not only the overall markets, but also the cash positions of all the major stock and commodity brokerages and large traders.

The regulators also are hooked into the "hoot-and-holler" system used to notify participants in all financial markets of trading halts. The hoot-and-holler system alerts traders and regulators when a halt is coming.


Relying on Quick Action

In the event of a sharp market decline, the SEC and CFTC would be in constant contact with brokerage and commodity firms to spot early signs of financial failure. If they concluded that a firm was going down, they would try to move customer positions from that firm to solvent institutions.

At least this team of crisis managers already has been through the Wall Street wars. Greenspan was Fed chairman in October 1987. Rubin has served as the co-head of investment bank Goldman Sachs & Co. Levitt has been both a Wall Street executive and president of the American Stock Exchange.

"I think the government is in good shape to handle a crisis," said Scott Pardee, senior adviser to Yamaichi International (America) Inc., a Japanese brokerage subsidiary, and former senior vice president at the New York Fed. "A lot depends on personal relationships. You have a number of seasoned people who have gone through a number of crises. So if something happens, things can be handled quickly on the phone without having to introduce people to each other."

Consider what happened at 11:30 p.m. Dec. 5, when Greenspan made his comments about irrational exuberance. Alton Harvey, head of the SEC's Market Watch unit, was called at home by officials of Globex, a futures trading system owned by the Chicago Mercantile Exchange. U.S. stock futures trading in Asia had fallen to their 12-point limit, they said.

Harvey immediately alerted his direct superior as well as his opposite number at the CFTC. More senior SEC and CFTC officials were informed as well. But there wasn't much to be done until the morning. So Harvey went back to sleep.


REACTING TO A PLUNGE

After the market crashed on Oct. 29, 1929:

* The Federal Reserve provided loans and credit to financial systems.

* President Hoover met with business, labor and farm organizations to encourage capital spending and discourage layoffs; he also promised higher tariffs.

* Federal income taxes were reduced by 1 percent by the end of the year.

After the market dropped 22.6 percent on Oct. 19, 1987, the Federal Reserve:

* Encouraged the New York Stock Exchange to stay open.

* Encouraged big commercial banks not to pull loans to major Wall Street houses.

* Kept open a subsidiary of Continental Illinois Bank that was the largest lender to the commodity trading houses in Chicago.

* Flooded the banking system with money to meet financial obligations.

* Announced it was ready to extend loans to important financial institutions.

What would happen today during a stock drop would depend on the particulars. Here are current guidelines:


* If the Dow Jones industrial average falls 350 points within a trading day, NYSE trading would be halted for 30 minutes.

* If the DJIA falls another 200 points that day, trading would stop for one hour.

* If the market declines more than 550 points in a day, no further restrictions would be applied.


SOURCE: The New York Stock Exchange, "The Crash and the Aftermath" by Barrie A. Wigmore

[chiggerbit]

Here's an August 2007 article, with lots of graphics that need to be viewed at the link:

http://www.marketoracle.co.uk/Article1771.html

The “Plunge Protection Team” Working Overtime to Save US Stock Market
Stock-Markets / Market Manipulation
Aug 09, 2007 - 11:34 AM

By: Gary_Dorsch

“Imagination is more important than knowledge”, the brilliant Albert Einstein used to say. Imagine for just a moment, that the Dow Jones Industrials has become a key instrument of national economic policy, and that by “actively managing” its direction, the government could impact the wealth of tens of millions of US households, and by extension, influence consumer confidence and spending.

Since the appointment of Henry Paulson to the helm at the US Treasury, the US stock market has always found a way to defy the law of gravity. During Paulson's short reign, the Dow Jones Industrials (DJI-30) broke an 80-year old record for the longest streak of gains with only three declining days in between. During the first seven months of his tenure, the S&P 500 did not decline by 2%, the second longest-period without a 2% correction since 1964.

The market savvy Treasury chief, who built a $730 million fortune at Goldman Sachs, is also the chairman of the Working Group on Financial Markets, commonly known as the Plunge Protection Team (PPT), created by Ronald Reagan to prevent a repeat of the Wall Street meltdown in October 1987. The PPT is empowered to intervene in stock index futures and the foreign currency markets in the event of a crash.



Paulson and his Plunge Protection Team are dealing with another tough challenge, trying to extend the S&P 500's all-time record for avoiding a 10% correction. It's been 52-months since the S&P 500's last slide of 10% or more, which took place from January 14 to March 11, 2003, when it lost 14 percent. Since then, the benchmark index has more than doubled without a similar drop.

“It's my job to be vigilant,” Paulson said on July 26th. “I've made this statement when the markets looked very good, and I've made it during times of volatility, but I will say that on global financial shocks, it's very hard to predict them. I am comforted by the fact that we have a strong global economy and very healthy economy in the US, but it's my job to be vigilant," Paulson said.

Federal Reserve chief Ben “helicopter” Bernanke is the US Treasury chief's right hand man, a key player controlling the US money supply. Since Paulsen's confirmation in July 2006, the broad M3 money supply has expanded at a 13% annualized clip, its fastest in 30-years, in a brazen effort to inflate the US stock markets, and keep the cost of borrowing low for corporate takeover artists.



The PPT's strategy is to offset weakness in the US housing market, with increased household wealth in the stock market, in order to avoid a recession. However, the weakness in housing has gone on longer and deeper than the PPT would like. Existing US single-family homes marked their eighteenth consecutive monthly price decline in May, bringing the annual loss to 3.4 percent.

US homebuilder sentiment slid in July to its lowest since January 1991, the National Association of Home Builders said on July 17th, as fallout from the housing slump and sub-prime mortgage crisis caused a glut of new homes. US home foreclosure filings rose 58% in the first six months of the year and could surpass 2 million this year as the housing market continues to deteriorate, RealtyTrac, said on July 30th.

The escalating foreclosure rate on US homes has badly shaken the $2 trillion sub-prime mortgage market, and the riskiest BBB- segment, has lost 65% of its market value to 35-cents on the dollar. The sudden aversion for risk spilled over into the high-yield junk bond market, where yields jumped 120 basis points, putting speculators on edge about the outlook for corporate takeovers and share buybacks, the two key catalysts of the market's rally to record highs.



The US junk bond market lost another source of liquidity, via the “yen carry” trade, after the dollar tumbled from 124-yen in June to as low as 118-yen. It was against this backdrop, that the skittish S&P 500 retreated 1.8% to close at 1,433 on August 3rd, bringing its string of losses since July 13th to 7.7%, it's third largest since May-June 2006, when it fell 8%, and from March 2004 to August 2004, when it fell by 8.7%. The fickle stock market switched its focus away from second-quarter profit growth of 11% for the S&P 500, or 2.5 times more than estimated in June.

But the PPT cannot afford to sit back and watch both the US housing market and the stock market sinking at the same time. That might spell the dreaded “R” word, - Recession. Recognizing the huge risks to the US economy, President Bush called for a special meeting of his economic advisors on July 27th, to discuss the stock market, which had plunged as much as 456-points the previous day.

Speaking from the Roosevelt Room, just 20-minutes after the opening bell of the NYSE on July 27th, President Bush said the US and world economy were strong after American gross domestic product jumped 3.4% in the second quarter. “The world economy is strong and I happen to believe one of the main reasons why is because we remain strong. The US economy is large, flexible and resilient.


Before his meeting with Bush, PPT chief Paulson spoke about the 381-point plunge of the Dow Jones Industrials on July 26th. “We're always going to have volatility. What we see going on right now is risk being re-priced and as we get a broad reassessment of risk we're getting volatility. We've had volatility as long as I've watched the markets,” he added. Did President Bush give the “Plunge Protection Team” the green light to intervene in the marketplace to prevent a stock market crash on July 27th?

After another volatile trading session on July 31st, when the Dow Jones Industrials gyrated within a 300-point range, from its early morning high of 13,500 to close sharply lower at its worst level at 13,185, PPT skeptics were asking, “Where is the mythical PPT now, with the stock market is teetering on the verge of collapse?

Just 24-hours earlier, shares of American Home Mortgage AHM.N, had plunged 87% to $1 per share, after the mortgage lender said it was unable to fund home loans and would have to liquidate its assets. The company commanded a 2.5% share of the US mortgage market, and specialized in prime and near-prime loans, otherwise known as Alt-A loans, which are now trading close to 63 cents on the dollar. The meltdown in AHM.N shares was largely blamed for the DJI's 240-point plunge on July 31st.

Later that evening, Dow Jones Industrial futures were unusually volatile during Asian trading hours, extending their losses by 110-points, and the US dollar slumped to as low as 117.60-yen. The next morning, the US government reported that crude oil stocks had declined by 6.5 million barrels to 344.5 million, and Venezuela's mercurial kingpin Hugo Chavez was loudly telling his audience in Caracas, that “crude oil prices were headed straight to $100 per barrel.”




US light crude oil briefly shot-up to a new record high of $78.77 per barrel, and the DJI-30 sank further to 13,150. It was looking pretty grim for Wall Street bulls, with PPT chief Paulson, situated far away in Beijing, trying to head-off a trade war between the US Congress and China next year. And when the cat's away, the mice will play. Was the mythical PPT was asleep at the switch while Wall Street burned?

But then it happened! At around 3:20 pm EST on August 1st, the DJI-30 began to move up strongly and without hesitation. By the closing bell at 4:00 pm, the DJI-30 had skyrocketed by 230-points above its lows, to close 150-points higher on the day. The mainstream media pointed to the possibility of computer buy programs, which kicked into high gear, after the S&P 500 held above its 200-day moving average.

Did the Plunge Protection Team enter the marketplace in the final half-hour of August 1st to prevent the DJI-30 and S&P 500 from closing below key technical support levels? A former Federal Reserve member once suggested that “instead of flooding the entire economy with liquidity, and thereby increasing the risk of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole.”

However, PPT skeptics could argue that the 230-point surge for the DJI-30 in the last half hour of trading on August 1st was a delayed reaction to an earlier $2.50 per barrel plunge in crude oil to $76.20 /barrel. US Energy czar Samuel Bodman was “jawboning” OPEC, and publicly called on the oil cartel to open its spigots wider, to cap the price of oil, and move the US economy away from the danger zone.



Also in the background, the US dollar was building a “triple bottom” on the hourly charts at 118.40-yen, which meant the “yen carry” trade was down but not out. The late surge in the DJI-30 was enough to persuade currency traders to bid the dollar to 119-yen, which in turn, was enough to scare over zealous DJI-30 bears out of short futures positions, and pushed the stock market higher.



The following day, the DJI-30 held onto its late 230-point advance, see-sawing in a tight sideways range, and keeping short sellers in a hammer lock. Not knowing who delivered the late knock-out punch on August 1st, several short sellers folded their cards in the final half-hour, lifting the DJI-30 by 100-points to the 13,500 area. Yet during the trading session, the strength of the DJI-30 couldn't mask the underlying erosion in Wall Street power brokers, such as kingpin Goldman Sachs.

Goldman Sachs was swept lower by Bear Stearns, whose shares melted down by 25% since July 18th, after two of its hedge funds that bet heavily on risky sub-prime loans had dropped to 9-cents on the dollar. Traders are also nervous about investment banks that have underwritten $300 billion of high yield junk bonds that are unlikely to clear the market at a price they were bought at.

However, the PPT wouldn't stand idle and allow the panic swirling around the Wall Street power brokers to turn into a crisis. “The market understands, that the Fed will act in due time, if and when evidence accumulates that action would be appropriate,” said St Louis Fed chief William Poole on July 31st.



On the morning of August 3rd, the PPT was faced with a renewed assault on the stock market, when US dollar plunged 1-yen to as low as 118.20-yen in the first hour of New York trading, following a weak US jobs report in July. Traders reacted more severely to the private ISM Service sector index, which fell 8% in July, and tracks 85% of the US economy. ISM's service sector employment index fell 6% to the 51.7 level, dangerously close to stagnant job growth.

PPT spin-meisters began twirling the data. On August 3rd, the White House's top economic adviser Edward Lazear said, “Job growth continues, even in a period when we are seeing changes in the US economy, most of which were positive,” after data showed 92,000 new US jobs were created in July, the slowest in two years. But there is still much skepticism over the reliability of the employment figures.



Traders are puzzled over why the US Bureau of Labor Statistics has shown no change in the number of construction jobs from eighteen months ago, even though homebuilding activity has dropped dramatically. Sales of new homes in the US have tumbled 40% to annual rate of 834,000 from their peak, and are down 22.3% compared with June 2006. The sales pace in June and March was the lowest since 1999. Are homebuilders employing thousands of idle workers, to help the broad economy?

An alternative estimate, based on data used to develop the ADP National Employment Report, suggests that employment in the construction industry has already declined 156,000 from a recent peak, and is now 139,000 below the government's official estimates. ADP suggests that the construction sector will shed as many as 247,000 jobs thru the end of 2008, or about 14,000 per month.

Then dire comments by Bear Stearns Chief Financial Officer Sam Molinaro at 2:30 pm EST on August 3rd, unraveled the PPT's hard work. “The fixed income market environment we've seen in the last eight weeks has been pretty extreme, and is comparable to market events that include the debt crisis of the late 1990's,” he said.



Molinaro's confession left the Dow Jones Industrials in a shambles with a 281-point loss on August 3rd, closing below horizontal support at the 13,250 level, and knocked the S&P 500 below its 200-day moving average. DJI-30 futures extended their losses by 50-points on Sunday night, during Asian trading hours, when the dollar fell to 117.10-yen. But Nikkei-225 futures and DJI-30 futures recovered their losses when the dollar bounced back above 118.00-yen in London.

The PPT got a timely gift, when Barclays Bank formally launched its 65 billion euro ($89 billion) bid for ABN AMRO, on August 6th, in an attempt to beat a Royal Bank of Scotland-led consortium, in the biggest ever bank takeover. Pulling another rabbit out of the hat, US light crude oil opened $2 per barrel lower on the NYMEX, and extended its daily loss to 5%, igniting a 286-point DJI-30 rally, its best daily performance in five years.

On August 3rd, US Energy czar Sam Bodman had loudly voiced concern the US economy was “in the danger zone” and would suffer if oil prices did not fall soon. “We are going to need more oil and I'm hopeful that the OPEC ministers at their Sept 11th meeting will agree to that. I am concerned that we are operating in the ranges approaching $80 per barrel,” Bodman said.


An hour later, the UAE's oil chief Mohammed al-Hamli, signaled a possible increase in OPEC oil production next month. “We are concerned about the higher price, because we don't want to go through a recession,” he said, quickly knocking $2 a barrel off crude prices. Expectations of an OPEC decision in September to pump more oil has already flushed out bullish speculators, and shaved about 8% off the peak oil price set on July 31st.

There's a good chance Riyadh might heed the call for more oil, after the Bush administration said it will ask the US Congress to approve an arms-sale package to Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman, that may total more than $20 billion. The package includes advanced satellite-guided bombs, fighter-aircraft upgrades and new naval vessels. Bush wants to lock in the 10-year deal for the US military-industrial complex, before he leaves office.


OPEC has already boosted its oil output by 250,000 bpd since April to 26.75 mil bpd today. In a surprising move on August 6th, Saudi Arabia lowered the price for its best blend, Extra Light crude by $4 per barrel to US customers. Still, Riyadh may wait for confirmation that the president's “Arms for Oil” deal can pass through the Democratic led US Congress, before committing to a formal increase in oil output in September. So far OPEC “jawboning” has done the trick of knocking crude oil off its all-time highs.

The DJI-30's powerful rallies on August 1st and August 6th might have been linked to expectations of sharply lower oil prices. That would be a replay of July 2006, the last time crude oil topped out at $78 per barrel, before an extended slide of $28 per barrel to $50 /barrel, and helped jettison the Dow Industrials 10% higher, while keeping Treasury bond yields low.



If one suspects the DJI-30's powerful 550-point rally from the August 6th low to the August 8th high was fueled in part by the 8% slide in crude oil prices, how does one explain how Exxon Mobil, led the DJI-30 rally, climbing 10% to as high as $87.90 /share. Similarly, the S&P Energy Spider-XLE, rebounded by 7% above its early August 6th low, tracking the DJI-30 higher.



On August 7th, the Federal Reserve held the fed funds rate steady at 5.25%, despite downside risks to the US economy from the sub-prime mortgage meltdown and frozen junk bond market. The Fed's hands are tied right now, because rate cuts could hammer the US dollar. “The Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. High levels of resource utilization can sustain inflationary pressures,” the Fed said.



The knee-jerk reaction to the Fed's statement was bearish. The DJI-30 quickly lost 150-points in 20-minutes to as low as 13,350. The initial interpretation of the Fed's statement meant the central bank could not ease the plight of Wall Street power brokers by pumping dollars into the money markets. Yen carry traders panicked, when the Fed said “downside risks to economic growth have increased”, and quickly dumped the dollar to as low as 118-yen.

But the carnage came to an abrupt halt, when PPT chief Paulson said “a strong dollar is in the nation's best interest. We welcome foreign investment.” Within a half-hour of Paulson's comments, the US dollar jumped 0.90-yen to 118.90-yen, and the Dow Jones Industrials skyrocketed 250-points in a flash. With the Fed ruling out rate cuts in August and September, “yen carry” traders figured it was safe to dive back into the DJI-30, especially after Paulson's wink and nod



The US stock market got a big shot of adrenalin, when Bear Stearns (BSC.N) rose 24% above its August 8th low, within the span of 48-hours. On August 3rd, Standard and Poor's had lowered its outlook on Bear to negative, which prompted BSC's stock price to plunge by 14% to as low as $99.75 /share. Then on August 6th, S&P said market's bearish response was a “vast overreaction. We still expect the company to be profitable in the current quarter and thereafter. Its liquidity is strong,” S&P said.

Later on, the media began to sprinkle rumors that Fannie Mae and Freddie Mac were seeking authority to bid for badly battered sub-prime mortgage debt, a quasi government bail out of Wall Street power brokers. Jigging the market higher, Wells Fargo announced the buyback of another 50 million shares, while Merrill Lynch's stock was upgraded by fellow banker UBS, which said the stock's beaten down price already reflects risks the company faces in the sub-prime mortgage market.



On August 8th, the DJI-30 was humming on all cylinders, up 550-points above its August 6th low, reaching 13,700, before word spread that Bush was holding a important meeting with PPT chief Paulson at the Treasury department, amid talk that China was dumping US bonds, in retaliation to US sanctions aimed at the yuan. The DJI-30 plunged 200-points over the next hour.

PPT chief Paulson spoke to reporters to extinguish the rumors. “I think it's absurd, frankly. What the Chinese hold in Treasuries is less than one day's trading volume in Treasuries. We have a broad, liquid market. If you've got a hundred things to worry about, I'd worry about that last,” he said. Bush told Fox News Channel's Neil Cavuto, “It would be foolhardy for China to sell US dollar assets”

Soon after remarks by Bush and Paulson, the DJI-30 soared 150-points, “micromanaging” the market on every significant pullback or downturn. Nowadays, “Investing” in the stock market seems like a crap shoot, rolling the dice on the next piece of “hot news” to roll across the computer screen.

Is the “Plunge Protection Team,” Myth or Reality?

Is the legendary PPT just a myth, conjured up by a bunch of conspiratorial nuts? Former president Clinton advisor, George Stephanopoulos told “Good Morning America” on Sept 17, 2001, “There are various efforts going on in public and behind the scenes by the Fed and other government officials to guard against a free-fall in the market, what is called the “Plunge Protection Team.”

“The Federal Reserve, big major banks, representatives of the New York Stock Exchange and the other exchanges have an informal agreement to come in and start to buy stock if there appears to be a problem. They acted more formally in 1998, during the Long term Capital Crisis, and propped up the currency markets. And, they have plans in place if the markets start to fall.”

On August 8th, 2007, President Bush hinted at government intervention in the US stock market. “Treasury secretary Paulson and his advisors are paying close attention, as the market begins to readjust its assessment of risks and are watchful for any downturn,” he said. “There is a lot of liquidity in our system and liquidity will provide the capacity for our system to adjust,” Bush added, alluding to the Fed's tolerance of double digit M3 money supply growth.

The big question is whether US Treasury chief Henry Paulson and Fed chief Bernanke are pursuing a more active interventionist policy than what was originally mandated for the PPT? The turnover of interest rate, currency and stock index derivatives rose 24% to $533 trillion in the first quarter, and that's a big time bomb that can blow-up at anytime. It requires constant surveillance and “vigilance” over the world's greatest casinos. Warren Buffett calls derivatives “weapons of mass destruction.”

If correct, then the PPT is “watching the markets closely”, (Japanese code words for intervention) and Paulson and Bernanke aim to prevent a 10% correction at all costs. There are glaring signals in the marketplace that indicate when the PPT appears to be intervening in stock index futures, and these signals were revealed in the August 3rd edition of Global Money Trends, with plenty of cool charts. If you expand your imagination, as Einstein suggests, and accept the notion that the PPT is “managing the markets,” you might become more successful in trading.

The Global Money Trends newsletter provides insights and analysis on the global commodity, currency, and bond and stock markets that are not found in the mainstream media, to help readers make better investment decisions. Each edition contains lots of cool charts, and is published 44 times per year on Friday's, with special alerts when unexpected events unfold.

By Gary Dorsch,
Editor, Global Money Trends newsletter
http://www.sirchartsalot.com

This article is just the Tip of the Iceberg, of what’s available in the Global Money Trends newsletter! Here's what you will receive with a subscription, Insightful analysis and predictions for the (1) top dozen stock markets around the world, Exchange Traded Funds, and US home-builder indexes (2) Commodities such as crude oil, copper, gold, silver, the DJ Commodity Index, and gold mining and oil company indexes (3) Foreign currencies such as, the Australian dollar, British pound, Euro, Japanese yen, and Canadian dollar (4) Libor interest rates, global bond markets and central bank monetary policies, (5) Central banker "Jawboning" and Intervention techniques that move markets.

GMT filters important news and information into (1) bullet-point, easy to understand analysis, (2) featuring "Inter-Market Technical Analysis" that visually displays the dynamic inter-relationships between foreign currencies, commodities, interest rates and the stock markets from a dozen key countries around the world. Also included are (3) charts of key economic statistics of foreign countries that move markets.

A subscription to Global Money Trends is offered at only $150 US dollars per year for “44 weekly issues”, including access to all back issues. Click on the following hyperlink, to order now, http://www.sirchartsalot.com/newsletters.php Call toll free from USA to order, Sunday thru Thursday, 2 am to 4 pm EST, at 866-576-7872.
Mr Dorsch worked on the trading floor of the Chicago Mercantile Exchange for nine years as the chief Financial Futures Analyst for three clearing firms, Oppenheimer Rouse Futures Inc, GH Miller and Company, and a commodity fund at the LNS Financial Group.
As a transactional broker for Charles Schwab's Global Investment Services department, Mr Dorsch handled thousands of customer trades in 45 stock exchanges around the world, including Australia, Canada, Japan, Hong Kong, the Euro zone, London, Toronto, South Africa, Mexico, and New Zealand, and Canadian oil trusts, ADR's and Exchange Traded Funds.

He wrote a weekly newsletter from 2000 thru September 2005 called, "Foreign Currency Trends" for Charles Schwab's Global Investment department, featuring inter-market technical analysis, to understand the dynamic inter-relationships between the foreign exchange, global bond and stock markets, and key industrial commodities.

Copyright © 2005-2007 SirChartsAlot, Inc. All rights reserved.
Disclaimer: SirChartsAlot.com's analysis and insights are based upon data gathered by it from various sources believed to be reliable, complete and accurate. However, no guarantee is made by SirChartsAlot.com as to the reliability, completeness and accuracy of the data so analyzed. SirChartsAlot.com is in the business of gathering information, analyzing it and disseminating the analysis for informational and educational purposes only. SirChartsAlot.com attempts to analyze trends, not make recommendations. All statements and expressions are the opinion of SirChartsAlot.com and are not meant to be investment advice or solicitation or recommendation to establish market positions. Our opinions are subject to change without notice. SirChartsAlot.com strongly advises readers to conduct thorough research relevant to decisions and verify facts from various independent sources.

[chiggerbit]

Can anyone tell me what part of this Wiki article was modified this month?

http://en.wikipedia.org/wiki/Working_Gr ... al_Markets

Working Group on Financial Markets - Wikipedia, the free encyclopedia The term "Plunge Protection Team" was originally the headline for an article in The ... This page was last modified on 16 September 2008, at 01:57

[Jeff]

If you click on the wiki history tab, you can compare selected versions of the page.

If I'm reading it correctly, this was dropped:

An article written by former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opining that "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." is used as proof that in fact that is what the Fed actually did. Mainstream analysts call those claims a [[conspiracy theory]], explaining that such claims are simplistic and unworkable.<ref>{{Cite book| last=Phillips | first=K. | year=2008 | title=Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism | publisher=Viking | isbn=978-0670019076 }}</ref><ref>Bennett, ''The Boston Globe''.</ref>

Substituted by this:

Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "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." His statement has been used to claim that the Fed actually did act in that way. Mainstream analysts call those claims a [[conspiracy theory]], explaining that such claims are simplistic and unworkable.<ref>{{Cite book| last=Phillips | first=K. | year=2008 | title=Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism | publisher=Viking | isbn=978-0670019076 }}</ref><ref>Bennett, ''The Boston Globe''.</ref>

[chiggerbit]

Note the date here:

http://tinyurl.com/ykv4eq

TREASURY'S PAULSON PLAYS WITH THE PLUNGE PROTECTORS October 26, 2006 -- PAY attention!

Someone - and I don't know who - wants us all to know that since July Henry Paulson, the new secretary of the U.S. Treasury, has spent a lot of time on a little known Washington operation called the President's Working Group on Financial Markets.

That was the major message in a prominent piece this past Monday in The Wall Street Journal.

The big mystery is why do these people want us to know this? And why now? I wrote about the Working Group on Financial Markets back in June when Paulson left Wall Street powerhouse Goldman Sachs to accept the top job at Treasury.

As I documented in a series of half a dozen columns, the mysterious Working Group had been formed in 1988 by an executive order signed by President Reagan and was manned by the heads of various stock exchanges and top government officials in charge of those markets.

The group was supposed to - ya' know - solve financial problems, although the scope of its authority and its powers were never clearly defined.

The group soon became known as the Plunge Protection Team, and for those who were following its stealthy pursuits, the Working Group seemed to be using a blueprint set down by a former Federal Reserve official named Robert Heller.

Soon after Heller had left his government job in 1989 he gave a widely disbursed speech proposing that the Fed be given authority to rig the stock market in case of emergencies.

The Plunge Protection Team - a. k. a. Working Group - probably remained mostly dormant during the good years. But there were sneaking suspicions that it came out of its shell a couple of times, especially after 9/11.



So it's interesting that now - seemingly out of the blue and far removed from any obvious crisis - Paulson is activating the Plunge Protection Team and someone wants us to know about it.

The Journal's Monday piece started: "With just two years to make his mark, new Treasury Secretary Henry Paulson is focusing much of his attention on making American financial markets more competitive . . .

"Since taking the reins in July, the Wall Street veteran has reinvigorated the President's Working Group on Financial markets, which had languished." The article went on to say that before Paulson's arrival, the group met every few months, and sometimes only once a quarter. Now Paulson is insisting that it meet every six weeks.

Among other things, Paulson and the Plunge Protection gang discuss the problems that might occur with hedge funds and derivatives, plus the "government's ability to respond to a financial crisis," according to a source quoted by the paper.

Since the Federal Reserve is the group that would lower interest rates in an emergency, the Plunge Protectors would probably be the ones who'd fix the problem. In other words, they'd throw money at it.

Stocks have been moving steadily upward since July, when Paulson took over the Plunge Protection Team (and the Treasury). And one of the reasons could be that - as I mentioned back then - there is less risk in stocks if the government is providing a safety net.

Less risk, that is, until something bad happens.

john.crudele@nypost.com

[chiggerbit]

http://tinyurl.com/4e6kr2
Bush convenes Plunge Protection Team

By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 4:13PM BST 22 Sep 2008

Comments 17 | Comment on this article

Hank Paulson has faced an economic slowdown since leaving Wall Street
Bears beware. The New Deal of 2008 is in the works. The US Treasury is about to shower households with rebate cheques to head off a full-blown slump, and save the Bush presidency.

On Friday, Mr Bush convened the so-called Plunge Protection Team for its first known meeting in the Oval Office. The black arts unit - officially the President's Working Group on Financial Markets - was created after the 1987 crash.

Read more from Ambrose Evans-Pritchard
Crisis may make 1929 look a 'walk in the park'
Financial outlook 2008: The experts' views
It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils.

The team is led by Treasury chief Hank Paulson, ex-Goldman Sachs, a man with a nose for market psychology, and includes Fed chairman Ben Bernanke and the key exchange regulators.

Judging by a well-briefed report in the Washington Post, a mood of deep alarm has taken hold in the upper echelons of the administration. "What everyone's looking at is what is the fastest way to get money out there," said a Bush aide.

Emergency measures are now clearly on the agenda, apparently consisting of a mix of tax cuts for businesses and bungs for consumers. Fiscal action all too appropriate, regrettably.

We face a version of Keynes's "extreme liquidity preference" in the 1930s - banks are hoarding money, and the main credit arteries of the financial system remain blocked after five months.

"In terms of any stimulus package, we're considering all options," said Mr Bush. This should be interesting to watch. The president is not one for half measures. He has already shown in Iraq and on biofuels that he will pursue policies a l'outrance once he gets the bit between his teeth.

The only question is what the president can manage to push through a Democrat Congress.

The Plunge Protection Team - long kept secret - was last mobilised to calm the markets after 9/11. It then went into hibernation during the long boom.

Goldman Sachs joins the US recession bandwagon
Wall Street backs the wrong horse in fight for The White House
Larry Summers bets on Harvards's Big Think
Mr Paulson reactivated it last year, asking the staff to examine "systemic risk posed by hedge funds and derivatives, and the government's ability to respond to a financial crisis", he said.

It seems he failed to spot the immediate threat from mortgage securities and the implosion of the commercial paper market. But never mind.

The White House certainly has grounds for alarm. The global picture is darkening by the day. The Baltic Dry Index has been falling hard for seven weeks, signalling a downturn in bulk shipments. Singapore's economy contracted 3.2pc in the final quarter of last year, led by a slump in electronics and semiconductors.

The Tokyo bourse kicked off with the worst New Year slide in more than half a century as the Seven Samurai exporters buckled. The Topix is down 24pc from its peak. If Japan and Singapore are stalling, it is a fair bet that China's efforts to tighten credit are starting to bite. Asia is not going to rescue us. On the contrary.

Keep an eye on Japan, still the world's top creditor by far, with $3 trillion in net foreign assets. The Bank of Japan has been the biggest single source of liquidity for the global asset boom over the last five years. An army of investors - Japanese insurers and pension funds, housewives and hedge funds borrowing at near zero rates in Tokyo - have sprayed money across the Antipodes, South Africa, Brazil, Turkey, Iceland, Latvia, the US commercial paper market and the City of London.

The Japanese are now bringing the money home, as they always do when the cycle turns. The yen has risen 13pc against the dollar and 12pc against sterling since the summer. We are witnessing the long-feared unwind of the "carry trade", valued by BNP Paribas in all its forms at $1.4 trillion.

The US data is now relentlessly grim. Unemployment jumped from 4.7pc to 5pc - or 7.7m - in December, the biggest one-month rise since the dotcom bust and clear evidence that the housing crunch has spread to the real economy.

"At this point the debate is not about a soft land or hard landing; it is about how hard the hard landing will be," said Nouriel Roubini, professor of economics at New York University.

"Financial losses and defaults are spreading from sub-prime to near-prime and prime mortgages, to commercial real estate loans, to auto loans, credit cards and student loans, and sharply rising default rates on corporate bonds. A severe systemic financial crisis cannot be ruled out. This will be a much worse recession than the mild ones in 1990-91 and 2001," he said.

Sovereign wealth funds stand ready to rescue banks, as they have already rescued Citigroup and UBS. But as Moody's pointed out this week, the estimated $2,500bn in lost wealth from the US house price crash is more than the entire net worth of all the sovereign wealth funds in the world.

Add fresh losses as the property bubbles pop in Britain, Ireland, Australia, Spain, Greece, The Netherlands, Scandinavia and Eastern Europe, as they surely must unless central banks opt for inflation (which would annihilate bonds instead, with equal damage), and you can discount $1,500bn in further attrition.

Not even a Bush New Deal can hold back the post-bubble tide that is drawing in across the globe. What it can do is buy time. Fortunately for America - and the world - the US budget deficit is a healthy 1.2pc of GDP ($163bn). Washington has the wherewithal to fund a fiscal blitz.

Britain has no such luxury. Our deficit is 3pc of GDP at the top of the cycle. Gordon Brown has shut the Keynesian door.

[chiggerbit]

http://www.commondreams.org/view/2008/09/15-4

[chiggerbit]

Thanks, Jeff.

What I'm scratching my head about is what the final cost to taxpayers is going to be when this is over:

-Banks(how many at this point?);

-AIG;

-Plunge Protection Team.


How many other hidden costs are there, and will we keep taking over failing banks, etc., even after the bailout goes into effect? Did I leave anything out?

[vigilant]

Thanks, Jeff.

What I'm scratching my head about is what the final cost to taxpayers is going to be when this is over:

-Banks(how many at this point?);

-AIG;

-Plunge Protection Team.


How many other hidden costs are there, and will we keep taking over failing banks, etc., even after the bailout goes into effect? Did I leave anything out?

You left a little out...


chiggerbit wrote:
I've been wondering lately if this program has been involved in any way with the financial crisis, whether is was used so much that it got used up, or what.

It can't be used up because it is a strategy and not tangible resources such as money that create "opposite" moves in the market. Capitalizing on shifts in direction is the method of extracting objects of desire from the market. The plunge protection team isn't a group of people using shovels to throw money into the furnace hoping it helps until the money is gone. Running out of money is something that would be incredibly difficult for them to do since they create the shifts in direction. Money is only a substance, applied with levers, that creates pain and agony in its victims when the market shifts, until they seek relief in the future in some already known way. And beside the trail they use as an escape route waits the tiger, for he knew, all along, that they would come... he always knows...


Buried and hidden in this next sentence, and yet also blatantly obvious, are the answers to many financial conondrums, shrieks of agony in the middle of the night in households the world over, and various painful scenarios...


It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils.

The market is a rabbit hole and a world of opposites. For those people that have not yet fallen into the rabbit hole of existence, found themselves sitting with Alice staring through the two way looking glass, and had to traverse the world of opposite meanings in an effort to find their way back to solid ground, the sentence above will hold absolutely no "true" meaning. Those who have never fallen into the rabbit hole won't even understand this paragraph i'm typing. We have "many" rabbit hole travelers in this forum though and they know exactly what I mean.

For those that do not understand what indexs, shorts, credit levers, and most importantly "futures" are, the above sentence will hold absolutely no "true" meaning. Fundamental definitions of these terms do not qualify as "understanding". Why do you think they are called "futures"? Levers do specific things. Levers apply pressure where needed. Pressure is painful and it creates a known and desired outcome in the future.

Knowledge jumps to conclusions, understanding finds the answers, and realizes at the same time that much of it might not be real anyway, and that living in a constant state of paradox creates flexibility and is the rule of the day.

Often heard:...."Don't tell me what a "short" and a "futures contract" is because I "know" what it is and people don't use and manipulate the market to the degree you believe possible because if they did we would all know it !"

Me: "Oh really, what is a market, a short and a futures contract?"

Heard: "A short allows you to make money when things go down, and a futures contract is a way to participate in commodoties and things like that."

Me: "Thats a dangerous bit of "knowledge" you have. You told me what it is, but what does it "do"?

Heard: "I told you what it did, I told you exactly."

Me: "You told me what it is, not what it does."


Two men are asked their opinion of tigers. One lives in New York City and says, "A tiger is a large powerful furry animal with teeth and claws that eats meat."

A man in India says: "A tiger is a dispossessed soul and a demon that drags our children into the night, while we listen to its shrieks of agony and horror, as the tiger rips its legs and face from its body and eats the child before its very own eyes while it is still alive and knowing."

One man knows the tiger, the other man understands the tiger. One man will be eaten, the other man will be safe. Both experience reality.

The tiger takes advantage of the rabbit hole you didn't know you were in. The tiger understands the role of opposites in its world well and relies on it for is sustenance. The tiger creates an illusion of safety through stealth and silence. It skulks through the middle of the village unseen by its inhabitants. When you are in exactly the right spot the tiger might thump its tail on the ground to create panic, because it knew exactly which way you would run, and it knew it would be laying there waiting for you...

Awareness is only knowledge, which is often useless without the experience which brings understanding.

The tiger does what comes natural to fulfill its needs, it does it with joy, it uses its tools, and it slips like fog back into the night unseen and unheard...

Humans do what they will, to fulfill their needs and desires, and some will do "exactly" to you what the tiger will do, and do it with joy. It uses its tools, and then like fog it slips back into the night, unseen and unheard, as all black magicians will do.....

One man "knows" the markets and sees a market place for an exchange of goods. One man "understands" the markets and sees an instrument of death, horror, and terror. He understands that it creates shrieks of agony and despair in the middle of the night in households the world over, and he is sad...

Some predators "understand" the market, and they use it to fullfill their needs and desires, as they use money and levers to create terror and despair, and the shrieks of agony in the night, that occur in households the world over. They knew it would cause the prey to flee in a known direction, and beside the route of escape they will be waiting. They do it with joy, and they slip back into the night unseen and unheard, as all black magicians will do....

George Soros said: "I made my money from the difference between what reality is, and what the common man perceives reality to be."

J.P. Morgan said: "Any man can become a millionaire, but to become a billionaire a man needs a damn good astrologer."

Wise words for wise ears.....

[MinM]

click the pics

[isachar]

Thanks, Jeff.

What I'm scratching my head about is what the final cost to taxpayers is going to be when this is over:

-Banks(how many at this point?);

-AIG;

-Plunge Protection Team.


How many other hidden costs are there, and will we keep taking over failing banks, etc., even after the bailout goes into effect? Did I leave anything out?

You left a little out...


chiggerbit wrote:
I've been wondering lately if this program has been involved in any way with the financial crisis, whether is was used so much that it got used up, or what.

It can't be used up because it is a strategy and not tangible resources such as money that create "opposite" moves in the market. Capitalizing on shifts in direction is the method of extracting objects of desire from the market. The plunge protection team isn't a group of people using shovels to throw money into the furnace hoping it helps until the money is gone. Running out of money is something that would be incredibly difficult for them to do since they create the shifts in direction. Money is only a substance, applied with levers, that creates pain and agony in its victims when the market shifts, until they seek relief in the future in some already known way. And beside the trail they use as an escape route waits the tiger, for he knew, all along, that they would come... he always knows...


Buried and hidden in this next sentence, and yet also blatantly obvious, are the answers to many financial conondrums, shrieks of agony in the middle of the night in households the world over, and various painful scenarios...


It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils.

The market is a rabbit hole and a world of opposites. For those people that have not yet fallen into the rabbit hole of existence, found themselves sitting with Alice staring through the two way looking glass, and had to traverse the world of opposite meanings in an effort to find their way back to solid ground, the sentence above will hold absolutely no "true" meaning. Those who have never fallen into the rabbit hole won't even understand this paragraph i'm typing. We have "many" rabbit hole travelers in this forum though and they know exactly what I mean.

For those that do not understand what indexs, shorts, credit levers, and most importantly "futures" are, the above sentence will hold absolutely no "true" meaning. Fundamental definitions of these terms do not qualify as "understanding". Why do you think they are called "futures"? Levers do specific things. Levers apply pressure where needed. Pressure is painful and it creates a known and desired outcome in the future.

Knowledge jumps to conclusions, understanding finds the answers, and realizes at the same time that much of it might not be real anyway, and that living in a constant state of paradox creates flexibility and is the rule of the day.

Often heard:...."Don't tell me what a "short" and a "futures contract" is because I "know" what it is and people don't use and manipulate the market to the degree you believe possible because if they did we would all know it !"

Me: "Oh really, what is a market, a short and a futures contract?"

Heard: "A short allows you to make money when things go down, and a futures contract is a way to participate in commodoties and things like that."

Me: "Thats a dangerous bit of "knowledge" you have. You told me what it is, but what does it "do"?

Heard: "I told you what it did, I told you exactly."

Me: "You told me what it is, not what it does."


Two men are asked their opinion of tigers. One lives in New York City and says, "A tiger is a large powerful furry animal with teeth and claws that eats meat."

A man in India says: "A tiger is a dispossessed soul and a demon that drags our children into the night, while we listen to its shrieks of agony and horror, as the tiger rips its legs and face from its body and eats the child before its very own eyes while it is still alive and knowing."

One man knows the tiger, the other man understands the tiger. One man will be eaten, the other man will be safe. Both experience reality.

The tiger takes advantage of the rabbit hole you didn't know you were in. The tiger understands the role of opposites in its world well and relies on it for is sustenance. The tiger creates an illusion of safety through stealth and silence. It skulks through the middle of the village unseen by its inhabitants. When you are in exactly the right spot the tiger might thump its tail on the ground to create panic, because it knew exactly which way you would run, and it knew it would be laying there waiting for you...

Awareness is only knowledge, which is often useless without the experience which brings understanding.

The tiger does what comes natural to fulfill its needs, it does it with joy, it uses its tools, and it slips like fog back into the night unseen and unheard...

Humans do what they will, to fulfill their needs and desires, and some will do "exactly" to you what the tiger will do, and do it with joy. It uses its tools, and then like fog it slips back into the night, unseen and unheard, as all black magicians will do.....

One man "knows" the markets and sees a market place for an exchange of goods. One man "understands" the markets and sees an instrument of death, horror, and terror. He understands that it creates shrieks of agony and despair in the middle of the night in households the world over, and he is sad...

Some predators "understand" the market, and they use it to fullfill their needs and desires, as they use money and levers to create terror and despair, and the shrieks of agony in the night, that occur in households the world over. They knew it would cause the prey to flee in a known direction, and beside the route of escape they will be waiting. They do it with joy, and they slip back into the night unseen and unheard, as all black magicians will do....

George Soros said: "I made my money from the difference between what reality is, and what the common man perceives reality to be."

J.P. Morgan said: "Any man can become a millionaire, but to become a billionaire a man needs a damn good astrologer."

Wise words for wise ears.....

Vig, what a brilliant post. Many lessons and insights there, thanks.

Question: What's a central bank?

Answer: A federally-chartered bank consisting of member banks that manages the money supply and cost of credit.

Real Answer: A federally-chartered criminal enterprise masking as a benevolent, though sometimes strict social enforcement organization under the imprimatur of a credulous central government that enables favored individuals and groups to extract rents from society as a whole.

Beware the tiger when it is on the prowl.