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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Frodo Baxter who wrote (6027)	8/30/1998 5:28:00 PM
From: Fortinwit	Respond to of 9980

Not only can the Fed buy and sell bonds and currencies, there has been a persistent rumor that the Fed bought stock index futures in the wake of the 87 crash. Can anybody provide a definitive answer? Wish I could provide more than anecdotal evidence... the head trader of the firm I was working for in '87 was ready to call it quits on the morning of day #2 of the crash. It was headed down fast and furious until someone stepped in. F.

To: Frodo Baxter who wrote (6027)	8/30/1998 7:00:00 PM
From: Tommaso	Respond to of 9980

The idea that the Fed can intervene in the stock market directly is pretty far-fetched. I have never seen it discussed in the Wall Street Journal, even as a form of paranoid suspicion, or in any other publication, and it has never been mentioned in any hearing or investigation of Congress or any other part of the government. Indeed, the only place I have seen references to rumors of such a thing is here on SI, and the rumors seem to be passed around from one person to another on SI until they finally get back to where they were at one point before. There may be other places on the Internet such as the Goldbug sites, where the idea of the Fed manipulating the stock market comes up. The realities of finance are hard enough to understand without adding in imaginary operations. I am afraid that the burden of proof in this matter must fall on those who wish to believe that the Fed can and does carry on enormous manipulative operations in the stock market without anyone being aware of it except a few people exchanging messages on the Internet. Given the jealous curiosity with which an army of financial reporters, as well as all others who continually examine the operations, motives, and policies of the Federal reserve, it hardly seems likely that this is anything more than a rumor. Not only that, it's a BORING and unimaginative rumor--maybe a little more interesting than, say, the theory that Jewish lawyers secretly control the judiciary and that the evidence for this is the origin of the word "jury" from "Jewry." The circuit breakers seem to be proposed by the New York Stock Exchange and approved by the SEC. With other dampers on computer-guided trading, they don't seem particularly necessary but might be useful if, say, a terrorist group from Pakistan exploded a nuclear bomb in Baltimore harbor.

To: Frodo Baxter who wrote (6027)	8/31/1998 11:19:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

L.K. & thread: Regarding the Fed buying S&P futures in 1987..... On the day after the crash of 1987, not only did the Fed buy futures but they were so horrified that a few executives took their own lives that they actually pledged to provide liquidity. This was unprecedented - in other words, they put themselves in the position to promise a fair bid on all stocks. Another 700 - 1000 points down from here (the Dow's at about 7970 as a write) would probably yield another such pledge. As for the Feds everyday market participation: Just a few months back there were some maverick Republicans whom publicly complained that Clinton, Rubin, Greenspan, et. al had facilitated the elimination of the deficit by taking Govt. funds and buying blue blue chips, though the Republican whistleblowers were quickly hushed by other senior officials, and the event was swept under the rug. Does anyone remember reading this? I see no reason not to believe it. Maybe the Fed is holding a large amount of blue chips right know with unrealized gains (or losses!). I also wouldn't recommend buying any of theses dips until we're all positives Yeltsin won't resign and the communists won't attempt a coup. Because if either of those thing happen, it'll surely be another 10% of the market. Finally, as for Taiwan's , HK's and others' govt. initiated restrictions on various forms of trading: It has yet to work and I doubt any of them will have a lasting effect. Every such measure has resulted in a darker picture in the following months.