Plunge Protection Team

There is some growing debate about the PPT or the government's plunge protection team meant to manipulate, I mean calm down, the markets in a situation where the market is crashing. This group was supposedly created after the crash of 1987. This is a video where it is actually discussed on CNBC. Scott Nations, President of Fortress Trading, had the the audacity to suggest the government was buying futures on October 10th and 24th. CNBC about freaked when this was brought up.

My 2 cents. I think it is naive to automatically assume it does not exist. The market are inherently random but there are certain ways that a market trades. October 10th and 24th are good examples of where these normal relationships did not exist. I would add November 13th and 14th to the list (last Thursday and Friday). Last Thursday it looked like death to equities as the the S&P 500 broke new lows. The amazing thing is how fast it happened dropping 20 point in about ten minutes. The government wanted to hold the October lows and steps in (a little slow) and starts buying S&P futures when no one in there right mind would buy them. You have a billion dollars of cash flood the market every couple of minutes which then gets real money working and short covering and you are off to an 11% rally in two hours. So the theory goes. What really looked even more weird to me was Friday the next day. The market is once again moving down strong, down over 3% and all of a sudden the market reverses again. What was really amazing though is it was only the major indexes. The Dow was up almost 100 points while the Russell 2000 (small cap index) was down over 4%!! That doesn't happen. So there was buying interest only in the big names which seems very questionable considering the massive gap in performance. If your trying to manipulate the market it is the big names you mess with, not the Russell 2000 which has companies with market caps of say $50 million.

Anyway, I have definitely seen abnormal trading action that on the surface makes the most sense if big money is at work trying to stop the market from going down. I have considered the PPT the worst kept secret on Wall St that doesn't really exist except when things are bad and something the general public is not allowed to know about. Who knows what really goes on. I definitely am not anymore informed than the next guy and I hold the opinion that the government's manipulation, if it occurs, only buys time. It doesn't really change anything. To think we are this great capitalistic nation is being an idealistic. At best we are closet socialist with capitalism thrown around to make everyone smile.

Here is the actual video
http://www.cnbc.com/id/15840232?video=931599105

Below is more comments from Big Picture
http://www.ritholtz.com/blog/2008/11/debate-on-the-existence-of-plunge-protection-team/

Well, well, well … it’s early morning and a guest on CNBC’s Squawk Box blurted out in vociferous fashion about how The Working Group on Financial Markets, or the Plunge Protection Team, has been active in the S&P futures markets … most notably on October 10 and 24. He mentioned that late market action in which the S&P rose 100 points from low to high for no apparent reason, and that the US Government was in no mood to let the markets close for the weekend(s) in a near state of panic.

Well, you can imagine the horror on the faces of The Muppets, especially as this guest, Scott Nations, President of Fortress Trading, refused to back down and kept right on despite protests from the Planet Wall Street apologist hosts. Some reactions and observations…

*Economist Steve Leisman said he had heard from others about the PPT, but that this was the FIRST time it had been mentioned on the show, perhaps even on CNBC. Leisman wanted more specifics, proof. Scott Nations mentioned the George Stephanopoulos ABC public comment regarding the activities of the PPT during the Clinton Administration.

*Becky Bimbo, the one who goes around the world sucking up to Warren Buffet, almost went apoplectic, saying this PPT comment in no way represented the views of CNBC in any way. She was taken aback and acted like this guy had no right to an opinion such as that in America.

*Bank of America economist, Mickey Levy, was immediately praised, especially after he said the PPT notion was silly, while he frowned disdainfully.

*Scott Nations came back with the government is in the bond market, why not the stock market?

*To his credit host Joe Kernan mentioned that with all the money thrown around by Washington these days, that a billion here and a billion there could really move the S&P around in a short period of time.

For some reason Kernan would not let up, questioning floor trader Art Cashin next, who got his Irish dander up …. decrying it was Black Helicopter stuff and “conspiracy crap.”
Kernan pressed him further about others saying the same thing regarding a PP and Cashin began to stutter, becoming madder and madder. Cashin came across as an ole goat of a man, whose 40 year commentary from the floor and dealings in the market had been threatened.

*The net, net from The Muppets was the talk of a PPT was just internet conspiracy talk. Yet, Kernan and Leisman obviously have been bombarded with such talk, and NOT from the internet.

*Most of the Muppets/Planet Wall Street, like Becky the “B” and Cashin can’t handle the truth.

*And finally, and I can say this from personal experience, “Scott” has made his last appearance on CNBC.