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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (22878)	8/19/2002 9:23:17 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hi KastelCo, In actuality, not yet bought what I said I intended to in that post. I generally post my buy/sell almost real time. But will buy some now ... there, done ... ready to take on chin tomorrow :0) On a separate matter - a news clipping [EDIT: the truth does not matter, only perception of what may be true matters] markets.scmp.com QUOTE Tuesday, August 20, 2002 Stock resilience fuels intrigue JON OGDEN Are embattled global financial markets getting some help from an unseen hand? That is certainly the talk doing the rounds in investment newsletters in the United States which is washing up on our shores. Some market commentators with a bent for conspiracy theories believe either the US Federal Reserve or a bevy of big investment banks are pulling the strings through the futures market to support US stocks. With Wall Street ever the pace-setter for global stocks, that makes the story not only interesting but relevant to investors in Asia and the rest of the world. The conspiracy chatter really gained currency last month when Wall Street was in accounting-scandal free fall. Exhibit A for the prosecution was July 15 when the Dow Jones Industrial Average plunged 440 points only to miraculously rise in the final 90 minutes of the session to end 45 points down. In the broad market, however, losers beat gainers by three to one and trade volume at lower prices was double that of higher prices. For some, such as Kennedy Gammage, author of the Californian-based Richland Report, that day was an intervention smoking gun, indicating a "crisis control team" had swung into action. A financial columnist in the San Diego Union Tribune picked up this ball and ran with it. "Sceptics believe that when the market is sinking too fast, the Fed and/or Treasury call the big houses on Wall Street and tell them to buy index futures and options," a Tribune report said. "The short sellers - who bet the market will go down - immediately smell a manipulation, and hurriedly cover their shorts by buying stocks. Then buyers, believing there is a rally afoot, jump in." In response to some of the chatter, the Treasury Department denied that the President's Working Group on Financial Markets had met to discuss plunging markets. The group was formed after the 1987 crash to foster closer co-operation among government agencies. The intervention talk has resurfaced in recent days with stocks showing surprising resilience despite weak economic data. "People in the US are speculating that this team has been actually supporting the market since late July to bolster investor confidence," Phillip Securities research director Louis Wong Wai-kit said, citing the Dow Newsletter as a source. Of course, the authorities in Hong Kong, Japan, South Korea, Taiwan and Thailand have all at one point or another intervened when their stock markets were plunging. The finance ministry in Japan became notorious in the 1990s for having breakfasts with leading figures from the brokerage industry at which tactics would be hammered out for what became euphemistically known as "price-keeping operations". But with Wall Street taking the mantle of free market champion and arch-critic of intervention, the State-side story naturally takes some believing. However, there are plenty of precedents of Uncle Sam climbing down from his high moral horse. Famed US financier J. Pierpont Morgan intervened several times to save the US financial system from collapse, most notably in the 1907 banking crisis. There was no Fed then, leaving it to Mr Morgan to bash heads together when markets had broken down. Before and after the 1929 crash, small investors with brittle nerves were often reassured to learn that the market "was being taken in hand" by big players. The October 1987 crash was another case. After Black Monday's catastrophic plunge of 22.6 per cent on the Dow, the market was in free fall for a second day only to suddenly recover and close up 100 points. There was a widespread belief afterwards that the Fed had orchestrated the buying of index futures to save the market. And do not forget how top bankers were herded into a New York Fed office in 1998 to sort out the mess left by the collapse of the giant Long Term Capital Management hedge fund which threatened to destabilise financial markets. Some mainstream fund managers are keeping an open mind. "There has been some massive futures buying at strange times when there is low volume which has had an effect on the market. But it could be Wall Street trying to get out of a position," said David Atkinson of JP Morgan Fleming Asset Management. For every conspiracy theory there are plenty of critics who step forward as debunkers. Morgan Stanley economist Ted Wieseman attempted to dampen some of the speculation. He said the Fed was not empowered to buy equities or corporate bonds. "To put it bluntly, the Fed does not have the legal authority to intervene in the S&P futures market," Mr Wieseman said. His rebuttal, however, did not address claims that it was the investment banks which were doing the actual buying. Like all good conspiracy theories, US market intervention will be as difficult to disprove as it is to prove and it will be a long time, if ever, before there is a definitive answer to this question. UNQUOTE