Sunday, February 26, 2017

Dow At Record Highs 11 Staight Sessions; Eye On PPT, Central Bank Intervention

As has been the case for multiple sessions over many years, a rally in the final hour of trading pushed the Dow Jones Industrial Average to a new all-time high, with the NASDAQ and S&P averages also closing up, but short of record highs. They NYSE Composite was fractionally lower.

In the red the entire session, the Dow gained 70 points from 3:00 to 4:00 pm ET, with other major averages also gaining. This kind of activity has been a market feature since at least 2001, when the existence of the Plunge Protection Team (PPT) turned from urban myth to global reality. The PPT, created by Presidential Order #12631, signed on March 18, 1988 by President Ronald Reagan is also known as The Working Group on Financial Markets, is, in reality, a body of financial authorities consisting of:
  • The Secretary of the Treasury, or his or her designee (as Chairperson of the Working Group);
  • The Chairperson of the Board of Governors of the Federal Reserve System, or his or her designee;
  • The Chairperson of the Securities and Exchange Commission, or his or her designee; and
  • The Chairperson of the Commodity Futures Trading Commission
Writers such as John Crudele of the New York Post have been critical of the Working Group's market-bending actions and foreign journalists from the Daily Telegraph and The Observer have suggested that the group has often exceeded its mandate.

Thus, tin-foil-hat type conspiracies have continued to suggest that the Federal Reserve and other central banks have been manipulating markets higher for years, and, while such coordinated action has yet to be unearthed by the mainstream media, sites such as and other fringe outlets report that while the PPT may or may not be always active in markets, there's no doubt that central banks, notable, the European Central Bank (ECB), Swiss National Bank (SNB) and Bank of Japan (BOJ) are heavily invested in US and other global equities, making a mockery of the global regime of fiat money.

There are those who say intervention by government-sponsored agencies is not altogether nefarious, and some who believe such market-rigging is a good and reliable replacement for Adam Smith's "invisible hand" of the markets, it cannot be understated adequately that such activity will eventually undermine the integrity of financial markets and instruments.

Being based almost entirely upon faith and trust, financial markets have become the backbone of the global economy. If that faith and trust is broken - an unlikely occurrence, as the central banks, governments, and major brokerages work hand-in-hand largely toward the same end (higher stock prices) - the fragile system would crumble. An antecedent (and, much larger market) to the inner workings of financial markets is the bond market, which has also been pistol-whipped regularly by central bank policy and directive. On Friday, the US Treasury 10-Year Note fell to its lowest level in nearly three months, closing out the week at 2.3170, a direct result of higher stock prices, also known in the investing world as TINA (There Is No Alternative... to stocks).

With central banks and government agencies regularly interjecting themselves and their policies into financial markets, the natural question becomes: how stable and trustworthy are these markets and who gains from such manipulation?

Answering the question bluntly, the markets are only as stable as the institutions behind them, which is today a matter of considerable conjecture and discordant viewpoints. Purists posit that the mountains of debt produced by individuals, businesses, and governments is simply unsustainable and that a rout and crash, while unpredictable, is inevitable. The obvious conclusion to the other half of the question "qui bono" (who gains) is those in power and in control of such vast swaths of money, the governments, oligarchs, commercial and central banks. Beyond that, those in power consider themselves to be benefactors of the millions who gain from higher stock prices, inflation and boosts to massively underfunded pension funds.

With this degree of chutzpah in and on the minds of the central bankers and government leaders of the world, there is little doubt that they believe their actions to be highly beneficial to the orderly running of global finances while also not taking into account the falsity and pervasive inequities that are given rise by those same actions. Those with power over financial markets hold an incredible degree of responsibility, a responsibility that seemingly has gone beyond the pale, over the moon and into its own orbit.

Essentially, those who have questioned or taken positions contrary to the policies of the Fed and their brethren central banks, especially since the GFC of 2008, have been serially decimated in the markets. With stock indices raging without underlying fundamental bases, the planet may have reached a point of no return, wherein all matters financial are no longer in the control of individuals, but, rather, controlled by an opaque group of self-appointed masters.

One can only hope that they are well-grounded and essentially good-natured, because the alternatives would be brazen in concept and bizarre in execution.

At The Close, 2.24.17:
Dow: 20,821.76, +11.44 (0.05%)
NASDAQ: 5,845.31, +9.80 (0.17%)
S&P 500: 2,367.34, +3.53 (0.15%)
NYSE Composite: 11,541.29, -14.87 (-0.02%)

For the Week:
Dow: +197.71 (0.96%)
NASDAQ: +6.73 (0.12%)
S&P 500: +16.18 (0.69%)
NYSE Composite: +30.38 (0.26)

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