Plunge Protection Team Is No Myth, But Now Is Not Its Time

Zillionaire Asher Edelman was quoted on ZeroHedge the other day saying he has ‘no doubt’ that the Plunge Protection Team is behind the stock market’s steep rally since the election. With all due respect for Mr. Edelman and others who believe this, it is conspiracist poppycock. Yes, the Plunge Protection Team, which is officially known as the Working Group on Financial Markets, does exist, having been created under President Reagan. And I have no doubt that it will be pressed into action some day when the inevitable avalanche hits Wall Street. But the source of the stock market’s ongoing buoyancy at present is not the PPT, which has no reason to act unless there’s a crisis, but rather the unlimited sums of credit available at zero or near-zero interest rates to institutional investors and to companies that continuously buy back their own stock to artificially inflate earnings per share.

This dynamic is quite sufficient to keep the markets buoyant as long as the easy-money spigot remains open. Moreover, the bullish effect is powerfully augmented by short-covering, the most urgent source of buying — indeed, the only source of buying sufficiently powerful to push the broad averages through heavy layers of supply to new record highs.  With that kind of boost the stock market hardly needs the Plunge Protection Team to keep the bull market going. Ultimately, however, and as any student of history could tell you, when the forces of nature usher in a bear market as is inevitable, the PPT will be powerless to affect it, let alone stop it.

  • Agree with John Jay May 25, 2017, 6:59 pm

    Rick – The implication I get from NY Post article is that Swiss Bank is doing part of the Fed’s work.

    Seems similar to what Bank of Japan has been doing with propping the Nikkei.
    One only has to look at asset purchases made by the BOJ of Nikeii issues in 2016.

    Seems like the Fed is though its own efforts and that of intermediaries following the same path.

    Wish such wasn’t the case.
    Where in history have we had a quasi governmental agency that actually prints our money supply become an active investor in stock market equities?

  • redwill May 25, 2017, 10:55 am

    Hi Rick, I have to chime in for a few reasons.

    1. Was shocked at Edelman was allowed on CNBC’s air given what he’s pushing.

    2. I look at it a little differently. I think human nature (greed/ego, and lots of it!) makes it easy for them to take the next step beyond support during a crisis. Listen to this “conversation”: Insider Thug A: Hey, I’ve an idea, how about INSTEAD of waiting for these selloffs to intensify, we simply step in earlier and prevent any real technical damage from happening, EVER? Cartel of Thugs: “AGREED”

    3. I agree that the complexion of the charts have been and remain bullish. I haven’t been fighting this at all BUT you and I both know as former floor traders that in eras gone by vol wouldn’t be this low and stocks wouldn’t be this high given the geopol, the DC bogdown and 2017 puttering with rates set to rise. There would have been some type of 7 – 10% selloff by now. I’m with JJ and Edelman to a certain extent…

  • none May 25, 2017, 6:03 am

    Correct Rick, markets are to be observe in a balance manner, and today’s (or this evening) stamp print needs or suggest little outside aid is needed in creating these prints.

    The FED is a very small part of the debt market and over see only what others believe they are seeing or suggesting. The more ones talks of the FED suggest only how weak they have always been.

    The DXY market has turn into a major bear market, equal to the turn in 1985 and 2001. The breaking of the 91.919 level in DXY will then only have a small group moving towards that slide. Once these levels are seen observe a 57.720 print.

    Take special note of the $Valug INDEX towards the major highs in the last 2 decades, as it is the true value of the over all stock market. Enjoy the email.

    Problems in the world ‘are a blessing’, solutions just another added curse. Problems create the ‘paths’, which so many at the most important time should be going the other way.

    INDU SPX are to sell with both hands, as all inverse markets are to buy with both hands.

    Have a great Memorial Day!

    Bless be those that have given…

  • Agree with John Jay May 24, 2017, 11:41 pm

    Rick, John Jay is correct. Central Banks are buying the paper. Timely comment – here’s something from today’s NY Post http://nypost.com/2017/05/23/what-we-know-about-swiss-national-banks-investment-in-us-stocks/

    • Rick Ackerman May 25, 2017, 1:25 am

      The Crudele story you’ve linked is so over-the-top idiotic I won’t even comment on it. I’ll stand by my thesis that U.S. stocks need no “outside” support at these levels — that they are getting plenty of it from the sources I named. Why on earth would the Swiss conspire with the Fed to “support” a stock market that is trading at record highs? As Crudele himself concedes, maybe they simply hold shares in U.S. companies as an investment. He makes this point in order to knock it down, but his alternative theory fails so miserably it is laughable. RA

  • John Jay May 24, 2017, 9:25 pm

    Rick,
    Google “central banks buying stocks and bonds like crazy”
    The PPT is soooooo 1990s!

    TARP made the PPT superfluous.
    PPT was a part time job.
    TARP is now full time, a 24/7 Intervention.
    Not to mention the toxic MBS paper the Fed still holds.

    Japan, Switzerland, Europe, China, always follow the USA lead.
    The Swiss CB tried honest money for a while, they’ll never do that again!
    We have reached TEF all over the globe.
    Total Economic Fascism.

    I will stand by my “Dirty Dozen Oligarchs” prediction.
    In a short while, 12 guys, at least on paper, will own the entire world.
    And then, the other 7.5 billion people on Earth will start to laugh out loud!
    And then???

    “Death solves all problems – no man, no problem.”
    Joseph Stalin