BUSH ARTIFICIALLY PROPS UP STOCKS, DEFLATES GAS PRICES FOR VOTES?

[redacted]

Think about it: WHAT ELSE does the GOP have to offer for the next week? That they'll stop the gays from marrying? They have nothing else to campaign on!

And doesn't it seem odd that with terrible 1.6% GDP growth announced yesterday that the stock market could be setting records? It turns out that the market's amazing performance now appears to be a fictional creation built on a house of cards, temporarily engineered by a shadowy collection of Administration honchos dubbed the "Plunge Protection Team."

Just what is this mysterious group doing? The three articles below--the best I could find quickly--provide an overview. And since apparently nobody in the U.S. media will report on the actual mechanism by which they're propping up the Dow Jones average, the third article, written in France, suggests what specifically the working group might actually be doing in secret.

I am not an expert, and I may be wrong. But my quick read of this third report is alarming: if this government working group were to stop enticing option traders in Chicago to keep buying gasoline options futures by keeping one of the main commodities indexes artificially low (traders have already bought $100 billion of these futures in just August & September), then there's nothing left to (a) keep gasoline prices artificially collapsed and (b) prop up stock prices. In fact, the authors conclude at the end of the article that this may also be why our Federal Reserve stopped reporting M3 separately, even though (as DU's own Professor GAC points out) that value can be calculated from other statistics that continue to be reported.

If you're a DUer already familiar with this situation, please chime in and help us understand what's going on.

And if you want to knock the GOP's only effective stump speech selling point out from under them, please RECOMMEND & forward to responsible press!

News report 1:
First we have this report from the Wall St. Journal, via the New York Post:

TREASURY'S PAULSON PLAYS WITH THE PLUNGE PROTECTORS
http://www.nypost.com/seven/10262006/business/treasurys_paulson_plays_with_the_plunge_protectors_business_john_crudele.htm

. . .Among other things, Paulson and the Plunge Protection gang discuss the problems that might occur with hedge funds and derivatives, plus the "government's ability to respond to a financial crisis," according to a source quoted by the paper.

Since the Federal Reserve is the group that would lower interest rates in an emergency, the Plunge Protectors would probably be the ones who'd fix the problem. In other words, they'd throw money at it.

Stocks have been moving steadily upward since July, when Paulson took over the Plunge Protection Team (and the Treasury). And one of the reasons could be that - as I mentioned back then - there is less risk in stocks if the government is providing a safety net.

Less risk, that is, until something bad happens.

News report 2:
Next, we have this unusual report posted yesterday from the conservative WorldNetDaily:

INVESTORS WARNED OF POST-ELECTION DISASTER
http://www.wnd.com/news/article.asp?ARTICLE_ID=52650

The founder of the Gold Anti-Trust Action Committee says the U.S. government's so-called "Plunge Protection Team" is helping prop up the U.S. economy, dollar and stock market – until Election Day.

Then, says Bill Murphy, "all hell could break loose" as the government's "strong-dollar policy" completely breaks down and is exposed as nothing more than a "keep-gold-weak policy."

News report 3:
This article suggests how the Plunge Protection Group may be working with Goldman Sachs to prop up stock prices by artificially deflating gasoline prices. These economists do not even question whether a post-election global economic crisis is going to take place--they assume it will happen. Instead, they are trying to predict how bad this crisis is going to be. They use the term "explosive."

BEGINNING OF THE PHASE OF IMPACT OF THE GLOBAL SYSTEMIC CRISIS
http://www.newropeans-magazine.org/index.php?option=com_content&task=view&id=4736&Itemid=87

(Translated from French)

According to our analyses, its impact will be much stronger in the financial sector than our forecasts of the first half of 2006 suggested, because the mobilization of this sector in the United States (together with its communication relays) in order to preserve the control of the Republican Party in the American Congress, led to “euphorise” the American public opinion and the immense majority of the players in this sector, enabling the leaders of this party to claim a good economic assessment (the only campaign topic at their disposal since summer 2006)<1>. The using of this side of the global system for electoral ends thus prevented the majority of the players from correctly anticipating the ruptures to come and as such will considerably increase the explosive potential of the impact phase in this sector, since the operators will be caught “on the wrong foot”. . .

At the center of the "euphoria" process of US voters, one will find the business bank Goldman Sachs in particular. The latter, whose former president, Henry Paulson became the US Finance Minister a few months ago, is at the origin of a technical decision that led to an artificial collapse of oil rates in the past weeks. Indeed Goldman Sachs abruptly changed the composition of his GSCI indicator (Goldman Sachs Commodity Index), a reference on Chicago’s raw materials market, thus compelling traders to sell more than 100 billion US dollars of “future” oil contracts between August and September 2006. . .

According to the LEAP/E2020 team, the time has come when the motivations of the US Fed in stopping the M3 publication last March will be revealed; and the consequences of this strategy will "catch on the wrong foot" those who naively chose to share the general euphoria built up in the perspective of the US November election. From then on, as explained in GEAB N°8, a brand new story starts. That of the impact phase of the global systemic crisis.

-----------------------------------------------------------------

(Note to everybody from the GOP on the campaign trail: As long as there's Google, as long as there's the Internet, LYING about the state of the economy for political gain can no longer assure you of the results it once did.)

[elehhhhna]

1. The Iraq Reconstruction (Our tax $$$) has been placed in the markets.

Google around, it's out there.

[femrap]

14. Along with all that $ from the crops in

Afghanistan....

[elehhhhna]

23. That $'s in "Poppy's" offshore trusts.

[elehhhhna]

2. p.s., K&R

[redacted]

4. Thanks elehhhhna

[bonito]

3. Ding ding ding the winner n/t

[Hubert Flottz]

5. K&R

They'd love to get the SS money tied up in the market, before the big crash...

[elehhhhna]

7. It HAS to go in--who's going to buy the stocks that are sold for

profit-taking? WE ARE.

i think the anticipation of snagging that massive influx of SS $ into the market is what's been propping it up all along.

[DemonFighterLives]

6. I'm kickin for the truth on the phony markets

I've been waiting for years for the collapse and these clown may succeed in placing the last straw on the camel's back.
:dem:

[redacted]

9. Thanks. You mean phony, as in the sense of a suddenly rigged index?

[DemonFighterLives]

11. I just don't think the markets reflect what is really going on

and they are artificially high. In the real world of middle to lower classes, nothing has gotten that much better. I really don't know how it is all happening, I just don't trust it. Even during Clinton when it went from the 3,000's to 10,000+ the markets have scared the crap out of me.

[redacted]

12. Why attempt to rig an election when you can rig a commodities index,

in relative secrecy, upon which the price of gasoline is ultimately based? After all, the result is ultimately the same in terms of effect on votes.

Artificially deflating the gasoline price, if that's what the Plunge Protectors are doing, contributes to the stock market "euphoria" which the French article cites as a cynical attempt to prevent a depressed economy and a depressed stock market from depriving the GOP of votes.

(Of course, they'll certainly try to rig the election as well.)

[DemReadingDU]

8. shocked

:sarcasm:

[BattyDem]

10. You think? My local Exxon station was down to $1.99 today!

I can't wait to see what it is on November 8th. :eyes:

(NOTE: I don't get my gas there - I go to Citgo.)

[femrap]

15. I saw $1.98 a couple of weeks ago and it lasted maybe

one day. Now we are at $2.09. Next week it will be $2.49!!! Just watch.

[redacted]

17. I'll bet you'll see $4 to $5/gallon in a week

If the Plunge Protectors stop their efforts immediately after the election, these markets will adjust rapidly.

[happydreams]

13. What does this have to do with....

the bumper crop of opium in Afghanistan?


....The Pop

Corporations trading on Wall Street, including many implicated in money laundering schemes where products are sold with questionable bookkeeping throughout drug producing regions, all have stock values that are based upon annual net profits. Known as "price to earnings" or "The Pop" the multiplier effect in stock values is sometimes as much as a factor of thirty. Thus, for a firm like GE or Piper Aircraft to have an additional $10 million in net profits based upon the drug trade, the net increase in these companies' stock value could be as much as $300,000,000. Did GE make a $10 million net profit on consumer products in Latin America last year? Easily. And since GE owns NBC is there a chance that accurate reporting on the drug trade and CIA's involvement therein might hurt their stock?..............

.......
It's Legal to be Bad

It is also perfectly legal for a Wall Street brokerage or investment bank to go "offshore" and borrow once laundered drug money to finance a corporate merger or leveraged buyout (LBO). Why do this? If you were a major multi-national corporation in a cutthroat competition to buy a company with a hundred million in sales (which might boost your stock value $3 billion) you would be willing to pay a seemingly outrageous price. . All an LBO is is an acquisition financed on borrowed money. If you are Goldman-Sachs, arranging the deal, and you can borrow laundered drug money at five per cent or a bank's money at ten per cent where are you going to go? Remember that since the cost of capital is lower using laundered drug money you are now able to outbid all the other competitors because your total payback stays the same. Does this actually happen? In 1998 the Russians asked for only $18 billion to save their entire economy. With $440 billion a year moving around how could it not happen?

And a major drug dealer, like a Carlos Lehder, a Pablo Escobar, an Amado Fuentes, a Matta Ballesteros or a Hank Rohn, sitting around with ten billion dollars of useless illegal money, is more than happy to loan it at five percent because his money is now legal and liquid. And, if one goes to prison or dies, there is always another dealer to fill the void so that the supply is not interrupted. The drug trade now has power because it is underwriting the investments of the largest corporations in the world. It underwrites politicians. It has hooked the gringos on Wall Street whose own children sometimes die from its drugs. Wall Street cannot afford to let the drug barons fall. Congress cannot afford to let the drug barons fall. Presidents and their campaign finances cannot afford to let the drug barons fall. Why? Because our top down economy, controlled by one per cent, cannot take the risk of letting competition (business or political) have the edge of using drug money. The third world has its revenge for European colonialism but Wall Street still calls the shots. And for every million dollars of increased sales or increased revenues from a buyout, the stock equity of the one per cent who control Wall Street, increases twenty to thirty times.





http://www.fromthewilderness.com/free/economy/dontblink.html

[femrap]

16. I've been reading

UrbanSurvival.com and the thesis over there is that underperforming mortgages are being bundled and sold....then the buyer uses them as collateral for margin...and then buys more stocks!! Get scam, huh?

[redacted]

18. ..

[hvn_nbr_2]

19. They get an extra bonus from this if we take Congress

Immediately after the election, they let the market crash and then say the markets are alarmed at Dem control of Congress. "Your 401k dropped? Blame the people who voted Dem."

[redacted]

20. Right. You know they'll do that!

[redacted]

21. ..

[redacted]

22. ..

[KoKo]

24. Excellent! Thanks for posting the links....

Those DU'ers who visit DU Stock Market Watch are aware of what's been going on...and it's good to see this posted out here.

Interesting how Gas and Oil were propped up to give enough profits so that they could ease off before the election and declare "all is good." The Bushies and Wall Streeters gave enough profits to allow for the fall. Figuring the game could still go on longer if the Repugs kept it ALL.

The "underpinnings" are precarious. There's gonna be some serious stuff flying in the coming months. :-(

[siligut]

27. Link to the DU Stock Market Watch, please? EOM

[Ghost Dog]

31. Stock Market Watch is here today (Wednesday):

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2589903#2590822

Look for it in Latest Breaking News every working morning. It usually gets into the Greatest page each day too.

[siligut]

39. Thank you!

The market may not be based on reality, but it is still a good idea to keep in touch with it (reality, that is).

[redacted]

28. Thanks KoKo01! Agree with you completely. But didn't know about the

Stock Market Watch here at DU and will go check it out.

[KoKo]

25. !

[funkzilla]

26. nothing surprises me about the Bush administration

What an unmitigated disaster the Bush administration has been not just for the US but for the world. History will judge this to have been one of the blackest periods in America's history.

[redacted]

29. That's exactly what I think at 3AM when I can't sleep

[redacted]

30. Explanation of an older version of this mechanism (pre-Clinton era)

"The real purpose of the Brady report was to create a series of drugged and manipulated markets using funds from the Federal Reserve and other sources. The Brady group realized that if the Chicago futures price of a stock or stock index could be artifically inflated, this would be of great assistance in propping up the value of the underlying stock in New York. The Brady group focussed on the Major Market Index of 20 stock futures traded on the Chicago Board of Trade, which roughly corresponded to the principal stocks of the Dow Jones Industrial Average. As long as the MMI was trading at a higher price than the DJIA, the program traders and index arbitrageurs would tend to sell the MMI and buy the underlying stock in New York in order to lock in their stockjobbing profits. The great advantage of this system was first of all that some tens of millions of dollars in Chicago could generate some hundreds of millions of dollars of demand in New York. In addition, the margin requirements for borrowing money for use to buy futures in Chicago were much less stringent than the requirements for margin buying of stocks in New York. Liquidity for this operation could be drawn from banks and other institutions loyal to the Bush-Baker-Brady power cartel, with full backup and assistance from the district banks of the Federal Reserve."

[redacted]

32. ..

[ozymandius]

33. There's a great deal of substance to this.

This is not just hyperbole. Goldman-Sachs capitulation in suppressing the oil and refined products market can be traced quite easily. Oil (and by extension, natural gas) was a no-lose proposition for any investor until August. That's when Goldman-Sachs and Price Waterhouse Coopers, among others, overnight virtually ceased all futures trades in hydrocarbons.

August is, after all, the months when one introduces a new product - be it either widget or idea or sensibility (See: Iraq: WMD). All this shit rolls out in August.

The markets are not so vast that the massive investment banks, acting in concert, cannot manipulate public sentiment on our island called America. One might also take into consideration the last sentence of this post: As long as there's Google, as long as there's the Internet, LYING about the state of the economy for political gain can no longer assure you of the results it once did.

The GOP lives in the technological Dark Ages. Old dogs like Paulsen, Rumsfeld, Cheney and President Stupid do not grasp how efficiently information travels these days. They still live in 1973.

[redacted]

35. Good point. Thanks for your post! Now, let me get this straight;

I'm trying really hard to get my head around this. You're saying Goldman-Sachs and Price Waterhouse Coopers, among others, overnight virtually ceased all futures trades in hydrocarbons. You're saying GS stopped their own trades just after their own people rigged their index?

Assuming the French economists are correct when they point out the $100 billion of gasoline futures that changed hands in only two months in Chicago, who's doing all that trading if several big players got out of the game?

[ozymandius]

38. Trading would revert to those who have a direct interest in the product.

That is to say: trading in hydrocarbons, once the investment banks are removed from the equation, would involve refineries and nations like Britain, China, India and the U.S.

How the investment banks got involved was on the futures end of oil trading. Either they can purchase oil that is currently flowing or they can purchase futures in terms of oil that will be delivered to market on a certain date in the future. The big investment banks have been heavy-handed in their purchase of oil promised for future delivery. Literally, they have been sitting on millions of barrels of oil with only certificates to show for it. They never really touch the stuff. Then they re-sell the goods to refineries at a handsome profit.

This is how Goldman-Sachs, et al., have been able to realize such tremendous profits over the past year.

The big players are actually the refineries and strategic reserves of respective nations. Where the investment banks have such sway is in their massive capitalization that allows them to leverage hydrocarbon markets upward with a promise of a hefty return on their investment.

And yes, G-S rigged the trade. There is either a long-term or short-term, depending on the bank's internal position, incentive to maintain the status-quo: a Republican majority with little incentive either to exercise subpoena power or to place oil execs under oath about what is "really" driving up gasoline prices.

[Imagevision]

34. In Fla. yesterday it was announced the gas prices went up .02 cents on CNN radio station

haven't heard anything since though from any other media??

[redacted]

36. Today's update from Bob Chapman, The International Forecaster

With what is going on in the world right now, how can anyone buy the stock market at a P/E multiple of 29 times trailing earnings? For 76 years the average trailing P/E multiple has been 15.5 times earnings. We believe it is fair to say that a 50% correction would be normal. We can just hear the CNBC moderator saying, that’s a pretty scary thought. We say you bet it is and that is reality. Not only is real estate headed down, that correction will finally trigger a stock market correction, which will be equally as damaging and the PLUNGE PROTECTION TEAM will be powerless to stop it. Again. If interest rates are lowered to save the economy, the dollar will collapse. The Fed is in a box and cannot get out. The Fed is staring into an abyss.

http://news.goldseek.com/InternationalForecaster/1162403674.php

[redacted]

37. "Rigging the Market; the secret maneuverings of the Plunge Protection Team"

The country now faces the growing probability of an economic tsunami triggered by the rickety hedge funds, the falling dollar, and the rapidly deflating real estate bubble. The solid foundation of government oversight and regulation has been eroded by the persistent attacks of the corporatists and banking giants. The entire system is now on shaky ground. When the scaffolding starts to fall, the futile maneuverings of the Plunge Protection Team won’t make a bit of difference.

MORE
http://www.informationclearinghouse.info/article14979.htm

[Nabia2004]

40. kick

thank you, I've had the same questions for some time now.