There is explicit government manipulation of the mortgage market
and there are 10-s of trillions of explicit government guarantees
in the derivative market. This drives bond risk spreads lower, and,
as a consequence, stocks higher. Thanks to machines that
explore everything under the sun, risk
has become one trade. What was not correlated is now correlated,
so all markets melt down together (and come out of meltdown
together). Actually, this is pretty bad. It means the derivative
bomb tried to detonate (a nuclear chain reaction, BTW, the
domino effect), but all they did was reset the countdown.
The set of dominos includes the government, a major losing
counterparty.
Folks who believe the "PPT" manipulates the indexes are mistaken.
The derivative situation is much, much worse. The bubble ties
together all markets, even many individual stocks have futures
(and options, of course). Robots scan the market for
trades, determine correlations, and trade in agreement
with variations of the same program. Scanning 5000 plus issues
is not that difficult for a robot. In other words, there
is no "PPT" per se, this is derivative bubble that has
grown to a really grand scale. The Fed was always enabling it!
They did it again in 2008! The only difference is
that an action on grand scale was required. |
