Fed Governor’s Speech Perfectly Time To Stop Market Plunge Monday

Bill, these markets are frighteningly artificial.  Even though we know they are manipulated on a daily basis, I would bet good money that the effort going on behind the scenes to prop up stock and bond prices and hammer the precious metals sector would shock everyone in the GATA community.  – my comment to Bill Murphy today (His latest podcast LINK)

Although the stock market was closed last Friday, the stock market futures were still trading globally.   When the U.S. Government’s highly questionable employment report hit the tape showing a 50% miss in jobs added in March vs. Wall St. forecasts, the S&P 500 futures plunged 20 points.   It looked like a huge stock market dump was in store for Monday.

But a funny thing “happened on the way to the opera” and the stock market took off like scalded greyhound on amphetamines.  Why?  As it just so “coincidentally” happened, right before the stock market opened on Monday, NY Fed’s Bill Dudley “serendipitously” released the text of his speech he was delivering to some organization of business stooges in New Jersey.

Anytime a President of a regional Fed Bank makes a public statement on the timing of interest rate hikes or the pace of economic activity that influences that timing, it is well established that it moves stock, bond and currency markets.  – Wall Street On Parade  (I highly recommend reading that link)

Several remarks in Dudley’s speech would lead one to conclude that the Fed would not be raising interest rates any time soon and that the pace of rate increases would be “shallow” when they begin.   Let me translate this for you in a way the hedge fund HFT algos would have interpreted the remarks:   “The Fed is not raising interest rates this year so party on by dumping even more pension and institutional money in to the stock market – in fact, borrow as much as you can and throw that at stocks too.”

The Fed knows that it can manipulate the direction of the stock market by issuing remarks designed to imply monetary policy direction.  That was Alan Greenspan’s primary genius – he was the first Fed head to understand the power of the word as a tool to trigger the directional flow of hedge fund money.   The Fed has been methodically and strategically releasing implied policy statements since at least the early 1990’s when hedge fund capital began to explode.

As it so happens, Bill Dudley is the head of the NY Fed, which offices in the same building as the Treasury’s Working Group on Financial Markets.   The NY Fed has one of the most sophisticated trading floors in the world.  I would bet both of my manhood jewels AND my dog’s life that Dudley made sure that the release of his speech was well orchestrated with the Plunge Protection Team’s effort to keep the stock market from plunging and then light a fire which ignited the S&P 500 to soar over 40 points, or 2%, from the Friday’s futures’ low (2,046 to high yesterday of 2,086 on the cash index).

The more blatant the Fed becomes with its market interventions, the stronger the stench of desperation becomes.  No one can say with even a modicum of certainty when the bottom will fall out of this Orwellian Ponzi Joke, but it is going to extract a horrifying enormous amount of wealth from the public when it does.

 

 

7 thoughts on “Fed Governor’s Speech Perfectly Time To Stop Market Plunge Monday

  1. My guess is that when they have to release a speech twice a day we will see pure panic in the stock market. 🙂

  2. Re: “The more blatant the Fed becomes with its market interventions, the stronger the stench of desperation becomes. No one can say with even a modicum of certainty when the bottom will fall out of this Orwellian Ponzi Joke, but it is going to extract a horrifying enormous amount of wealth from the public when it does.”

    As hard as I try, I’m unable to think of any exact ancient Roman equivalent for the madness of today’s Fed, but here’s the closest one I can think of:

  3. Market cycles – now hugely distorted by mis-allocation of capital, mal-investment, ZIRP, financial repression, interventions, Fed jawboning, etc., etc. – must be respected. The markets are bigger than the Fed, although they can be moved a few % on light volume. At some point (again and soon), there will be a “rush for the exits” and the selling will completely swamp the interventions. The Fed, as seen from previous cycles as well as current policy, is a one trick pony. Forewarned is forearmed.

    “It’s deja vu all over again.” – Yogi Berra

    “At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” – Fed chairman, Ben Bernanke, Congressional testimony, March, 2007

    “When the music stops in terms of liquidity, things will get complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” – Chuck Prince, Citigroup

    Humpty Dumpty sat on a wall,
    Humpty Dumpty had a great fall.
    All the King’s horses, And all the King’s men
    Couldn’t put Humpty together again!

  4. Dave!!!! What’s up with the homebuilder stocks??? When are they going to plunge?? I can’t believe how much they’ve gone up in value its completely insane!!! Some of them have gone up 30 to 40% in the last few months. I’m waiting for the next earnings release on a few of them hoping that will get the ball rolling. It’s really getting discouraging. Also I have been thinking about these low metals prices and I keep thinking about how every ounce sold at these levels is a direct transfer of wealth from the mining shareholders to the purchaser of said ounce. And I’m getting raped repetitively on this. We are all bending over holding our ankles letting the bankers steal from us via price suppression!

    1. Housing stocks: combination of an incredible short squeeze – many of these homebuilders have 20%+ short-interest – and a high-beta sector moving higher with the stock market in general. Right now the entire stock market is the most dislocated from underlying fundamentals and reality that it’s ever been in history. The homebuilders, because they have roughly an SPX beta of 2 are 2x more dislocated from fundamentals than ever before.

      You saw yesterday what can happen when the SPX is weak: the homebuilders were down over 2%.

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