Eddie, Bart13 has tons of data to show this. Here is a link
that shows treasury bonds are controlled by the banks
forbes.com
I don't think it's the Fed that manipulates the markets. Rather, it's the derivative markets, and there are only
a few players there that control them. The injections
of liquidity have lead to declining level of volativity
(risk) in the stock market, and spreads (risk) in the
bond market. I think risk in stocks and bonds is completely
out of touch with reality.
In stocks the mechanism is simple - options. Banks and
other Wall street firms are market makers in the options
market. They use computer models (Black-Scholes, etc.) to
manage risk. In normal times, these models simply produce
income - whenever you pay options premiums, you pay them.
However, there is risk involved, since FREE markets are
not normal - they can crash (tail events). The tail events
normally involve liquidity crunch, as we have seen, for
example, with LTCM. So, the tail events
have been eliminated by the Fed injecting liquidity whenever
it's needed, thus
giving banks and Wall street firms unfair advantage in
the marketplace.
The net result? The market statistics is completely out
of whack. We have not had a 2% down day for the SP
for 2.5 years, 6 standard deviations from the norm.
The probability of that happening by chance is 0. |
