Mish, PPT also used to be called Greenspan put.
The action of the Fed amounts to
1) Injections of liquidity when needed
In derivative markets the direct (automatic!) consequence
is reduction of volativity and rising markets
Thus, potential severe declines in free
markets are averted at every "bottom", resulting in bubbles
2) Surprise rate cuts
One example, remember the LTCM BK in 1998 due to
Russian crisis, and how the Fed announced 0.5 surprise cut,
then the DOW rallied 600 points in 1 hr.? I know a person
who went down $1M after the announcement, since due to all the
chaos it caused one of his orders did not get executed. He got
broke due to it. Fair? Hardly
Now, let me make the following prediction: Watch Fed's
coupon passes. Once another series materializes, this
correction is likely over. In fact, the start of every
correction this year could be perfectly predicted by
a manipulation model, which just takes into account the start
date for a series of coupon passes -g- How's that for no PPT?
Made some buck recently based on that. -g-
Now, I would argue the mad bull market mania of 2006-2007
is a direct result of the Fed throwing more liquidity at
rampant credit system. Yes, some day this will end badly
and blow up, but the Fed put IMHO is directly responsible for how
big all the bubbles have gotten. |
