Are Markets Being Manipulated?
by ilene - August 24th, 2009 10:00 pm
Are Markets Being Manipulated?
Courtesy of Damien Hoffman at Wall St. Cheat Sheet
Federal Reserve
Conspiracy theories are nearly as old as the first human thought. However, there is a valid demarcation between presenting a collection of compicated facts as opposed to connecting stars from across the Universe.
Bob English and his team at Precision Capital Management recently distributed a buzz-worthy report entitled, “A Grand Unified Theory of Market Manipulation.” With a healthy dose of skepticism and understanding that the “Invisible Hand” is actually semi-transparent, I asked Bob to put his theory on the anvil so we could see which quality sword emerges …
Damien Hoffman: Bob, your team recently released an interesting report entitled, “A Grand Unified Theory of Market Manipulation.” Could you summarize this report for us?
Bob English: There’s an episode of an American sit-com I remember seeing years ago that featured a kid played by Ricky Schroeder and a grandfather played by the inestimable John Houseman — who, interestingly was a grain speculator until the 1929 crash wiped him out. They decided to corner the baseball card market for Tommy Lasorda cards by buying all they could, then planted rumors that he was a shoe-in for the Baseball Hall of Fame. The scheme worked at first as they were able to sell the cards for high prices that they could set. They owned the supply and created artificial demand. However, in the end, Tommy Lasorda dumped a carton of his own cards on the market, collapsing their prices. As a side point, there never was a good explanation given why Lasorda did this.
Anyway, in the current situation, instead of baseball cards we have US Dollars, and the US government controls the supply. If the government increases supply slowly and encourages demand, the Dollar’s price erodes over time but most people don’t notice. The real threat is a Tommy Lasorda in the form of China or Japan coming in and dumping the cards (i.e., Dollars) onto the market at once. Those Lasorda’s don’t want to do this, but there is a point that can be reached at which they would — for example, if they saw their investment in US Dollars about to become worthless and thus had little to lose.
At the same time, everyone has a vested interest in a rising stock market. It…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site