Define manipulation. It can't be done.
It was a word you used. I used it in response to your post to raise the question. As an approximation let's say that it is engaging in buying and selling for the purpose of driving the price to a certain level as opposed to positioning to gain from a predicted future level based on fundamentals or technical analysis. Few of us have the resources to impose our will on the market. Those who do are free to make their gains happen through influence rather than prediction.
You try to manipulate the market every time you trade, or do you?
No, I do not. I do not have the resources to create momentum or influence the direction of the herd. The best I can hope to do is be properly positioned so that when the herd moves it is to my advantage, or at least not hurting me.
FED has never intervened in the stock market. If you think to the contrary, what's your evidence, because it is you who is making the assertion that they are
I made no such assertion, but how do you know they have not? I responded to your statement LTCM was a development where PPT-like action was taken, but it never involved the so-called PPT. FED called on the money center banks only to find out what they knew, but initiated action on its own, which suggests the possibility the FED would intervene in some situations. I cannot prove that the FED has intervened in the stock market and I have no intention of trying. I've not seen anything that proves they have not, or would not if they believed the situation warranted their doing so
Otherwise, one need Occam's Razor
That gets right to the point. You choose to believe that an event like the October reversal resulted from a coincidental change of sentiment by a majority of market participants who suddenly decided that the market was going to go higher so it was time to start buying, and keep buying while the average stock price ran up in a few weeks in excess of the average market % gain of a few years. I find it more plausible (not provable because even if true I have no access to the supporting data) that there is an entity or group with sufficient power to initiate such a change and then simply do the minimum necessary to keep the herd doing what herds do. I don't claim to know whether the FED is involved, or if it is just collective action on the part of big money, or the identity of the big players involved, but it is, IMHO more probable that the market turns at their direction than it is that random acts of small players suddenly fall into some extended and powerful alignment.
Random action doesn't preclude the existence of theory of runs. When the shorts run the shorts, the resulting action runs. Why didn't you take advantage of such an obvious development if you thought the action was causal as would be the case when a causal agent like the alleged PPT was involved?
Random action is observable and subject to statistical modeling. Runs do occur in purely random systems, but given sufficient data to analyze or a known probability of some single event you can assess the probability of encountering a run of any size. If you want to take the trouble of calculating it, you can find the probability of flipping a coin and having a string of 10 heads in a row. You can never predict the outcome of the next flip because each new toss is independent. There is no reason to believe that market movement is independent of historical price action, and an abundance of evidence that it is constantly affected by external stimuli of one sort or another. In introductory statistics many concepts can be illustrated with a fair coin or a fair die, the "fair" qualification being introduced in recognition that it is possible to "load" the die in such a way that the statistics will be altered without creating a deterministic system that assures the outcome of any single roll. If you roll the die enough times and you see a nonuniform distribution of faces up, the most plausible explanation is that the die was loaded, even though there is some statistical probability that it was a fair die that just happened to run. Without additional evidence such as measuring the mass distribution of the die you could never prove that was loaded.
You are the source of the herd
Actually, I find myself being run over by them more often than going along with them.
Have you considered that a lack of selling accomplishes the same outcome?
Certainly, and I'm getting better at recognizing the difference between a lack of selling interest and massive buying when the market seems to be probing through certain levels. But as you say, both can accomplish the same outcome. Either way if the herd changes direction you can still get run over.
If you can see such a series, you should put it to your advantage. The trouble is, you can't. You can't because it isn't possible to see such a series while it is forming. and that is due to the fact that it isn't causal.
You are quite right that it is impossible (or at least difficult) to see a series while it is forming. Everyone can look back and see what has happened. Nobody can say with any certainty that an obvious series seen with perfect hindsight will continue, or end. That in no way proves that the series was not caused by something that affected the probability of certain outcomes. If I am playing a game with a loaded die and see a statistically unlikely repetition of the same face coming up it does me no good to bet on that occurrence if at anytime without my knowledge, that die could be replaced by a fair die, or worse one loaded some other way.
Isn't financial leadership a reasonable quantity? If trouble is developing, isn't it the responsibility of some to assert that? Sure are a lot letter writers who believe so.
It's quite a different thing to argue the merits of intervention than to argue the existence of such intervention. Are you saying it's OK for the FED to intervene in the market if needed, regardless of whether or not they have done so?. As for financial leadership, we supposedly had some in the private sector guiding the masses toward a secure future. You can make your own judgement about the quality and integrity demonstrated by that segment of our society.
The cost is zero. What was gained was all paper or do you believe in bubbles?
The cost is far from zero. Not everyone participated in the whole ride to the top and simply gave away paper gains on the way back down. There is a large segment of the population who worked hard for their wages and were led by the financial industry into defined contribution retirement plans absolving companied from their traditional role of guaranteeing benefits. Many of them were at their peak earnings during the "bubble" and contributed heavily to a market that was being hyped as going up forever. Those contributions lined the pockets of a lot of investment bankers, but to the people who made them these are not paper losses. Many people who had made out on paper retired "early" knowing that if the market merely returned to the supposedly "normal" rate of advance of 10% or so they would be OK. With perfect hindsight we can see they were wrong, and we can blame them for being "greedy" and being duped by the charlatans who manipulated them into contributing, but these are the people who are returning to work taking jobs that might have been filled by people starting out and they are the people who instead of being self-sufficient are going to be relying on the state for health care and other elderly services for subsistence instead of pouring their retirement money back into the economy.
We have barely scratched the surface of the cost. There are many states already operating at huge deficits and talking of raising taxes because there are no longer any capital gains and fewer wages to be taxed and the expenses of providing services are escalating. Whatever your political view toward the obligation of government to provide services for these people, the fact remains that a large number of would-be contributors to the system have been turned into eventual recipients of those services, and the cost will be enormous. |
