News & Analysis
How the Elites Manipulate Big Stocks – and Why They're Failing
Where Has All the Trading Gone? ... It's one of the biggest mysteries on Wall Street. How can stocks be in their fourth year of a bull market and trading activity be so low? During March, average daily volume in equity shares was at their lowest level since December 2007, according to new data from Credit Suisse. This is the same month that marked the three-year anniversary of the bull market that caused the Standard & Poor's 500 to double from its March 2009 credit-crisis low. – CNBC
Dominant Social Theme: What's wrong with the stock market? It's just in the doldrums and will recover shortly. In fact, it already did ...
Free-Market Analysis: This kind of question is a kind of elite dominant social theme, no doubt about it. It frames the conversation and presupposes that the market itself is a greater good and that its growing failure is bound to be mitigated by additional success.
The elites are wedded to the stock market, which allows them to monetize various financial promotions. The bigger companies (stocks) receive the most attention. Facebook is a prime example of this. The company is likely in some sense an Intel operation, but it is being rolled out as investment opportunity of tremendous consequence. For our take, just Google "Facebook" and "Daily Bell."
Smaller equity opportunities and private equity opportunities are, ironically, perhaps more sincere ones, in that they are less subject to elite manipulation. For the most part, the powers-that-be don't bother so much with the small fry, but there's no doubt the elites value the stock market for their larger efforts.
This can be seen with the nascent "green" economy. Without a stock market, the "new" economy that the elites are trying to put into place cannot be properly positioned. Stock markets are supposed to provide a public buy in, to essentially validate these vast, industrial promotions.
Middle classes are actually entangled in them as part of their "portfolios" and this provides further support for even the most dubious corporate efforts. Now howver, as the Internet creates further skepticism about the Way the World Works, it would seem this strategy generally is attracting increased scrutiny.
Of course, every time the market goes down these days it seems it is soon going back up. On Tuesday, stocks were up in many major capitals around the world. But this does not mean that the troubles of public equity generally are over. Far from it.
Looked at from the standpoint of directed history, the evolution of the stock market cannot now be said to be entirely natural. As with most mainstream monetary facilities, it was cultivated and raised in the United States.
The evolution of the stock market – and securities markets generally – into what it is today began after the Civil War in the US when the New York Stock Exchange went on a buying binge, acquiring up to a dozen or more New York area exchanges.
This seems to have been a trigger for a massive rise in equity trading that turned railroads into the first big equity bubble. JP Morgan was one of the catalysts for this evolution, and the advent of the Federal Reserve in 1913 provided the fiat money fuel that rocketed the market into the Roaring 20s.
After the Great Crash, subsequent Depression and World War II, the mavens running the NYSE went on a countrywide tour, reselling equity as a logical investment methodology. The American public eventually bought it and for the rest of the century the stock market prospered. But no more. Here's some additional text from the article:
"There's no way to sugar-coat it: Volumes are down and trending lower," wrote Ana Avramovic of Credit Suisse, in a note to clients. "A growing preference for other asset classes may be drawing money away from equities." Daily equity volume in March was 6.59 billion shares a day, the lowest since a sub-6 billion volume month in December 2007, according to Credit Suisse. (The firm adjusted December 2011's low figures to account for the holiday-skewed week.) ...
The Credit Suisse analyst also notes that high-frequency trading, which accounts for half of all market activity, has been on the decline since last summer ... After two vicious bear markets in a decade, the average investor simply doesn't trust this market anymore. "There is no fresh money going into the markets," said Doug Kass of Seabreeze Partners. "Why should we be surprised the retail investor is not there? We've had two huge drawdowns in stocks since 2000, a flash crash two years ago and real incomes are stagnating."
Stock mutual fund flows are negative on the year despite a double-digit percentage gain for the S&P 500 in 2012. Meanwhile, bond funds of all kinds keep garnering more assets, even with interest rates in the basement ... "The financial industry has placed itself above the investing public," said Alan Newman, author of the Crosscurrents financial newsletter. "The public's confidence has been shattered, possibly beyond repair."
The power elite that apparently wants to run the world is intent on expanding the large public equity market and has been successful in doing so in the past half century. But this drive toward a seamless world marketplace would seem to be faltering of late. The elites have done what they can to reignited the meme, even putting in place - in the states - a "plunge protection team."
At this point, we'd speculate that the market for the elites biggest stocks is a fairly inflated oned, kept up by all sorts of inflated trading. But we wonder how long this can last in an era where commodities and precious metals investment is obviously ascendent. The markets went up and down in the 1970s, a decade analogous to the first decade of the 2000s in our view.
There will no doubt be further ups and downs of the stock market over the course of this year, without necessarily a resolute trading trend. This is because, as we've often pointed out, the business cycle has trended toward gold and silver and will like do so until either the elites interfere strongly, or until finally there is a paper blowoff of junior miners.
Smaller equity plays, private deals, bootstrap equity created locally among family and friends, all this has a place in the modern investment paradigm. But the large-deal market is surely not what it was. In fact, in our view, the elites themselves realize this and are getting ready to pound Wall Street with yet more regulations and purges as they did during the 1930's Great Depression.
Conclusion: People have certainly lost faith in stocks – but this must be seen within the context of the larger bull market in money metals. This is what the paper money crowd is fighting against and why stocks are resistant to re-stimulation.
Posted by 9helga on 04/12/12 11:06 AM
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i love it when the prez says if we started drilling today it would be ten years before we see any results, well that same attitude was in place ten years ago... this is something i strongly believe..the forces in this country against drilling for more oil because it will upset the power of balance in the middle east..i believe that a promise was made to the saudis that we would not excercise our god given right to drill for more oil and keep them proped up with our Click to view linkn anyone in there right mind provide a more cogent reason we not drilling... i love this site...
Posted by Bischoff on 04/12/12 03:43 PM
DB: "This seems to have been a trigger for a massive rise in equity trading that turned railroads into the first big equity bubble. JP Morgan was one of the catalysts for this evolution, and the advent of the Federal Reserve in 1913 provided the fiat money fuel that rocketed the market into the Roaring 20s."
B: It "seems"... .??? Let me clue you in on a secret, so you won't have to "surmise".
1. The bubble in railroad equities had to do with "land speculation". It had nothing to do with an equity bubble in ownership of capital. Bankers used "idle", redeemable RBD currency, which they were required to keep in bank vault, to "invest" in real estate needed to build railroad tracks. The inflation of the RBD currency thus created could not be detected for several decades.
2. To stop this sort of RBD currency inflation, the states insisted that the federal government supervise the creation of RBD currency. That was the reason for the passage of the Federal Reserve Act in 1913. Every other explanation is outright bovine excrement (BS). Were the rogue bankers happy about the states putting a leash om them with a national currency franchise... ??? Absolutely not. While the rogue bankers couldn't stop the Federal Reserve Act to come into existence, they had no trouble to soon find enough federal politicians ready to undermine "congressional oversight" of RBD currency creation. With help of those federal politicians by neglecting their oversight function, the rogue bankers soon felt no compunction to brazenly violate the FRA. None of the penalties provided in the FRA for violation of the act were ever applied against the rogue bankers.
3. As soon as federal politicians climbed into bed with rogue bankers, it was only a matter of time before the RBD redeemable currency system would be destroyed and exiled. The year in which it did happend was 1933. In 1935, federal politicians took over currency creation with the Banking Act by creating the "FED" as an "independent" agency of the federal government. With the National Banking Act of 1935, the federal politicians invited the banker to climb back into the bed with them again. That's where we are today. We have a monetary system with demonetized currency created against debt voted by federal politicians who through the FED use "prime dealers" in government bonds to sell this debt in secondary markets and use the big banks to distribute the proceeds according to "ear marks". The rest is just an attempt by the big banks to bamboozle the public in thinking that they are dealing with real banking. Real banking means "positive value" currency. What banks perpetrate is circulation of "negative value" currency.
As Lincold once said, "You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time." I hope federal politicians and big bankers keep this wisdom of Lincoln in mind as the embark on TARP, QE1, QE2, QE3... ..
4. There is a world of difference in investing RBD currency under the gold standard, and investing a de-monetized currency created against sovereign debt. You cannot properly show the financial condition of a corporation, unless the accounting unit you use has a standard. Using a de-monetized, debt based currency, which has no standard, to account for the assets on your balance sheet must sooner or later destort equity values. It is inevitable that equity markets will catch on. That's exactly what led to the 1987 stock market crash. Enter Sir Alan Greespan as newly appointed chairman of the Fed in 1987. Instead of letting the investors absorb the equity (currency value) losses, he monetized them. An executive order by Ronald Reagan ex-post-facto legalized the intervention. It made it legal to intervene in the future without being guilty of collusion by instituting the Working Group on Markets. The Plunge Protection Team (Working Group on Markets) has been at it ever since.
5. The market goes down today, and tomorrow it is back up. Why... ??? PPT intervention. There is no trading, but the Dow stays up. How... ??? It's the PPT intervention in the equity markets through the options market to keep up equity prices. However, by monetizing the losses on the Dow, the PPT actually decreases the equity values. Thousands of pension funds, IRAs and 401Ks must invest de-monetized, debt based currency in equities to try an beat inflation. To let equity markets reveal the actual value of equities would cause a revolt among the savers. Therefore, all the equity losses are monetized by intervention of the PPT. The dirty little secret is that without a gold standard, "price" and "value" have no relationship to each other.
DB: "Conclusion: People have certainly lost faith in stocks - but this must be seen within the context of the larger bull market in money metals. This is what the paper money crowd is fighting against and why stocks are resistant to re-stimulation."
Your conclusion is somewhat contorted, but you have your finger on the problem.
Posted by nithsdale on 04/12/12 05:25 PM
Your exposition is right on but you have left out one important fact... .It is called ERISA, after the 1974 act of Congress to safeguard pension funds of any company going out of business in the USA. That legislation created a new regulatory group that monitors companies with employee pension plans, sets standards and minimum resources for the fund in each case. It has had an interesting effect on stock markets.
ERISA today is the beast in the investment room. Most American corporations started their pension funds as profit sharing plans, depositting the company stock each year as the reserve that would grow, and allow employees to share in the success of the company. It was a very good scheme as millions have proved since its inception. But companies do go out of business when eclipsed by many factors and so many good funds did go sour in bad times.
The 60's and 70's had a spate of failures which led to Congress action and ERISA.
In the last four decades, the company profit sharing plans were amended to require only 10% of an enterprise stock could be in its pension fund so pension management groups were set up to handle the new mix of many companies in each fund as a result of this safety implementation.
Recently, a new wrinkle has emerged in this ERISA affair. There have been some market "runs" on certain companies that can bring these private pension funds below their minimums, automatically triggering a default which would enable the US Government to take over the pension funds and the companies that sponsor them. This new problem was small, contained but just about two years ago, a strange thing happened in the stock market. Overnight there was a run on most major American corporations' equities, a "flash crash", which sent all their valuations into the cellar. Suddenly, American companies woke up and realised that this was a 'run' that placed them all in jeopardy... .they could all end up in Washington's hands like General Motors, facing the same dissolution. The stock markets ceased operations until the problem could be solved. It never was.
American business today keeps lots of cash on hand, not using it for improvements et al, just to safeguard their equities in the market. They may have to rush in and buy their stock just to preserve the company! Some are buying back their stock but only from owners who can proffer the certificates since so much of the stock trade is via paper in lieu of such certificates. This constant action is behind the seesaw trading now, and any sudden break outs signify a "war" and emergency inflows.
There are other ramifications re ERISA but this is enough for you to consider when talking about the market and the "elites".
My problem with your fixation is that your definition of those who try to control is far off the mark when it comes to the problems constantly arising. You must begin to attend to the facts of the dotrine of "unintended consequences" as a major factor in all that is happening in economics and politics, not just one group masterminding all. As governments centralize and collectivize, these anomolies just compound! Most of the organizations you cite as proof of conspiracy are like fire companies in NYC, they are racing to save what is left! Frankly, the old line bankers, accountants, economists are exhausted and you and Ron Paul can have it all!
Posted by taoofnothing on 04/12/12 05:39 PM
I've heard something on the same line as your issue on the foreign oil. Apparently, Canada is one of the most resource rich nations in the World. Also, there have been people (I'd have to go find it again) that have said there is all kinds of oil in North America, including Canada, US and Mexico. It could be they are depleting the oil resources in other areas before opening up more in N.America? Fomenting discord around the planet also seems to be a ploy to ensure empire building. They are still able to control these foreign resource centers through the puppets they prop up. Just a thought...
Posted by Bischoff on 04/12/12 09:41 PM
N: "My problem with your fixation is that your definition of those who try to control is far off the mark when it comes to the problems constantly arising. You must begin to attend to the facts of the dotrine of "unintended consequences" as a major factor in all that is happening in economics and politics, not just one group masterminding all. As governments centralize and collectivize, these anomolies just compound! Most of the organizations you cite as proof of conspiracy are like fire companies in NYC, they are racing to save what is left! Frankly, the old line bankers, accountants, economists are exhausted and you and Ron Paul can have it all!"
B: I agree with you entirely. BTW, I completely forgot about ERISA. There is another government concoction like the FDIC which lays it all on the tax payers in the end, except the taxpayers are busted.
When is nobody listening... ??? I say get the heck out of this situation by saving what can be saved. Strip the FRN of "legal tender" protection to allow banks to create redeemable currency under the Real Bills Doctrine.
However, it has to be done NOW while the FRN still has value. People need to cut their losses by selling irredeemable currency for redeemable currency. Once the FRN is worthless, its too late.
The old line bankers, accountants, and economists would understand what I am talking about. Sadly, there are too few left to make a difference.
Posted by Bischoff on 04/12/12 10:03 PM
Crude oil is a world market item. Every country needs oil. The price of crude oil is not a free market price. That fight about a "free market" price for oil was lost when Lyndon Johnson bailed out of Vietnam. Since then, the world crude market has been a managed market.
The price of world crude is set by the Saudis. They are the lowest cost producer, and thereby are in the position to enforce the price. They however use OPEC as the organization to help them do it.
The bone they threw the U.S. is to quote crude oil strictly in USD. In turn we guarantee the free flow of oil out of the Persian Gulf. Since every country has to pay their oil bill in USD, every country has to have USD reserve holdings. Being the world's reserve currency is like writing checks that are never cashed.
However, what happens when the Saudis stop quoting oil in USD. I think it is unlikely, because we protect their oil flow with our military. As long as the world oil price is quoted in USD, it really doesn't matter where we get the oil, it is always geared to the world market price.
Where there is an advantages, it is in transportation cost. Sarah Palin sold oil to Illinois by building an efficient pipeline from Alaska to the Mid-Western states. She beat everybody on the price of transportation, even so she had to deal with the world price for oil. There is plenty of domestic crude available that could be transported cost efficiently and could compete with middle Eastern, Venezualian, Brazilian and Mexican oil. It is the present administration which seems to do everything to hold down domestic production. Why... ???
Reply from The Daily Bell
It is the present administration which seems to do everything to hold down domestic production. Why... ???
This has been going on for 100 years, Ingo. Not just four ...
Posted by Bischoff on 04/12/12 11:03 PM
DB: "This has been going on for 100 years, Ingo. Not just four ... "
B: I agree with you that it has gone on longer than four years. However, it has only been a managed crude oil market since 1973.
The Vietnam War was fought over oil. That is not common knowledge. When Lyndon Johnson bailed out of that war, and Nixon wound it down, the Shah of Iran saw the chance to raise the price of Iranian crude. The Saudis promptly beat the Shah's attempt to control the world price. They succeeded by virtue of being the lowest cost producer. They set up OPEC to make it all work.
However, ever since WW I, the U.S. has sought to be the producer of oil anywhere in the world, and to sell at in an "open market". Of course, when we found our Waterloo in Vietnam, the game was over.
That is the history of managed oil markets. Not a hundred years, but forty years. However, this administration has gone beyond managing the oil market for the benefit of the U.S. Who benefits from prohibiting domestic drilling and prohibiting domestic oil transportation? Not the U.S. population, surely... .
There is a oil glut in the world. I hope you know that.
Posted by Danny B on 04/13/12 01:00 AM
I had a link from a very reputable investor showing that the PPT or somebody had pumped in just over $ 6 trillion into the stock market,,,, about a year ago. Schilling doesn't think that the stock market is a good bet.
Click to view link
ALL of this BS is done to keep investors from deserting U.S. instruments. The stock market is the most visible. The bond market is the most important. All the vital statistics are heavily massaged to retain investor confidence. How can a country with 23 % unemployment and $ 200 trillion actual debt ever repay?
It's all smoke and mirrors but, so far,,,, effective smoke and mirrors.
Posted by Bischoff on 04/13/12 03:46 AM
D: "The bond market is the most important."
B: The bond market is ten times the size of the equity market.
But, the bond traders have the Fed by the short hairs. They are front running the Fed. That's why prices in the commodity markets aren't rising.
If, and when they do, the end is near.
Posted by mantis on 04/13/12 05:50 AM
The MFGlobal saga hasn't helped anyones confidence in investing. Fiat money is practically useless as a store of value. The future is golden
Posted by Abu Aardvark on 04/13/12 06:08 AM
Hey, here's a question: What do Paul Krugman, Matt Taibbi, David Graeber, Barbara Ehrenreich, Nouriel Roubini, Robert Shiller, and a couple of dozen other luminaries have in common?
They contributed to 'The Occupy Handbook', coming out next week, in screaming red:
Click to view link
Posted by old jed on 04/13/12 08:52 AM
I think another problem is the rise of programmed High Frequency Trading
Click to view link
programs see volume upticks and jump in to trade a few million shares at a penny profit, a million pennies yielding $10,000
the programs are so quick that trading corporations literally try to get their servers close enough to the floor mainframe to "step in front" at the speed of light
the programs are at the pointwhere they're squaring off cicling each other like virtual cyberspace sumo wrestlers
occasional rapid takedown attempts can result in flash crashes of the whole system
if this keeps up, the whole market will flatline in a permanent staredown devoid of any profits
Posted by Agent Weebley on 04/13/12 10:14 AM
Hi Abu Aardvark,
Click to view link
Posted by Danny B on 04/13/12 11:18 AM
The whole economy is based on trust and confidence and a certain amount of regulation. When Corzine was a member of congress, he voted for the Sarbanes-Oxley act. This act makes it a personal felony for the CFO if he doesn't know where ALL the money in a company is. Corzine played dumb to interrogators.
Grant has some excellent ideas for bringing things under control.
Click to view link
It DOES require prosecution though.
You can't buy trust. While GOV may try to force a new currency, they will have a very hard time creating trust. The West will fall into the doldrums.
Click to view link
I see no viable method for the PTB to resurrect the economy if they can not somehow "produce" trust.
Posted by taxesbyanyothername on 04/15/12 06:55 AM
So Ingo, are you saying that the bankers illegally and secretly invested what they were supposed to keep as reserves? At least some of that would have come to light if Morgan had not bailed them out in '07, is that correct? If Morgan had illegally invested himself, then he shouldn't have had enough to bail out the rest.
Posted by Danny B on 04/15/12 11:45 AM
This article has excellent info. It shows great graphs on the effect of money printing.
The "Positive" effects of QE have diminished by exactly 11 % in each successive round.
The article also shows that the EU will be the first to go.
Martin Armstrong said it would all crash in September.
Davidson says July 1.
Click to view link
Summers says may-June.
Click to view link
They may all be right. Pastor Williams said that Europe would be first followed in a few weeks by America.
So, what is the proper attire to attend a worldwide economic collapse?
Posted by spekulatn on 04/15/12 03:57 PM
Thinking outside the box:
Click to view link
Destroy the beast.
Posted by taxesbyanyothername on 04/15/12 06:54 PM
If it really does get that bad, proper will be whatever you can scrounge up.
Posted by Bischoff on 04/17/12 04:50 AM
What banks were supposed to keep out of circulation was "idle" currency, which is currency over and above the value of Real Bills in their portfolio. Since Real Bills mature in 90 days, the currency created against them exspires in 90 days as well. Banks have to constantly discount Real Bills to keep currency in circulation. So, if there is currency, previously created when the volume of Real Bills was larger, the bankers were required to keep "excess" currency to the value of Real Bills out of circulation until value of Real Bills in their inventory again matched the overall amount of currency created.
Many banks violated their bank charters by using "idle" currency for real estate speculation. Real estate investments don't create inflation in the consumer products market. The influx of "idle" RBD currency into real estate amounted to "double drawing" Real Bills. It created a bubble in the real estate market over time.
These rogue acts by bankers were never really discovered until the real estate bubbles burst after a 18 to 20 year cycle. When that happend, people were anxious to exchange paper currency for gold. Bankers had to pay out their required gold reserves and had to rediscount their Real Bills for additional gold. However, they could not get enough gold because they actually had "double drawn" Real Bills when they put the RBD currency in real estate investments. Then the politics set when bankers were asked to explain why they didn't have enough gold after they rediscounted all their Real Bills.
J.P. Morgan was fully aware of what was going on with these banks using "idle" currency for real estate speculation. He tried to use his influence to curtail the worst excesses, but trying to reign in rogue bankers is like herding cats.
Unless there were manufactured bank runs to drive out competition, banks were never called upon to redeem large amount of paper currency. Only when the real estate speculation bubble burst did people become suspicious and demanded gold for their paper currency. It was then that bankers were exposed of having inflated the RBD currency, and they became liable to proscecution for fraud.
J.P. Morgan, more than any other American banker, understood the function of gold with regard to RBD currency creation. It was he who uttered, "Gold is money, and nothing else." By always keeping that in mind, Morgan was always situated in such a way as to wheather the real estate speculation cycles. He gained control and influence by bailing out bankers who got themselves into trouble with speculating in real estate or natural resources.
Posted by taxesbyanyothername on 04/17/12 07:01 AM
If the legal requirements on real bills didn't keep the bankers in check then, why would they now?