PPT Exposed

Tonight I am also pleased to announce the first ever telepathic thought line two way conversation (TTL2) with an inquiring reader. It was about the Plunge Protection Team (PPT). Here is the startling telepathic conversation in entirety with Bob.

Bob: Mish, did you see the PPT in action today?
Mish: You mean the late day bounce on 2007-08-01?

Bob: What else could I mean?
Mish: Was that the PPT?

Bob: Of course it was. Look at the chart.
Mish: A bounce on the 200 EMA was the PPT? Was this expected?

Bob: Heck yes it was expected. The PPT always shows up when expected.
Mish: Always? That's interesting. Did you play for it?

Bob: Are you kidding? Of course I did. Who wants to stand in front of the PPT?
Mish: So you bought right on the 200 MA?

Bob: Damn straight. I knew the PPT was waiting there.
Mish: What else has the PPT been buying?

Bob: Homebuilders. Isn't it obvious?
Mish: Homebuilders?

Bob: Yep. They have been buying homebuilders for months. And lenders like Countrywide Financial too.
Mish: Wow. That's stunning news. But it does not seem to be working very well does it? Look at BZH and AHM and CFC.

Bob: Don't get me started. Of course it's working. Share prices would be much lower if the PPT was not propping them up daily.
Mish: AHM would be lower than $1 if it was not propped up by the PPT? That's amazing. By the way, when was the last time the PPT was in serious action?

Bob: When the S&P hit 1520.
Mish: 1520? Wasn't that the 50 MA? And aren't we at 1460?

Bob: Don't get cute. They fail on purpose from time to time.
Mish: The PPT fails on purpose?

Bob: Of course they do. The PPT has to make it look like they don't exist. It's all part of the plan.
Mish: Wow. That's quite an elaborate plan. Did you buy at 1520?

Bob: Don't be silly Mish. Of course I did. You would have to be nuts not to buy where the PPT is buying?
Mish: What happened?

Bob: The PPT stepped aside so I had to bail. I figured the PPT would try again.
Mish: How unfortunate that the PPT would step aside right when everyone depended on them. Where did you figure the PPT would make another stand?

Bob: Mish you really don't get this PPT stuff at all do you? I bought right at the 200 MA where the PPT and 8,263 hedge funds were all waiting. Who wouldn't want to buy there?
Mish: Uh.. Thanks Bob for exposing the PPT.

I was hoping for additional proof about the PPT's actions. That proof was supposedly on its way but simply never made it through. I think sunspots must have been acting up because the telepathic connection quickly went into complete disarray. Nonetheless I am pleased to show the very last telepathic transmission that did make it through before the lines of communication were disrupted. The last message from Bob was this chart of the PPT in action.

Signature Actions of the PPT
(click on chart for a crisper image)



A tip of the hat goes to Bob for that stunning chart of the PPT in action, complete with planned failures.

Earlier this week I had been discussing the PPT with Caroline Baum. The discussion centered around her article Rubin Should Teach Paulson Secret PPT Handshake. She sent me a few priceless reader comments about that article. It seems Caroline and I are basically in violent agreement. I do not think the PPT intervenes on a day to day basis. In fact I think they only intervene under severe distress but I could only give one example.

That however was enough to be jokingly labeled a CT (conspiracy theorist) by Caroline Baum. She has a point, however, a very solid point. And if I had to choose between picking between an activist PPT and one that has never acted to date, I say this: Believe Baum.

I could only name a single instance in which I actually thought the PPT was involved (Spring 2000 on an enormous Nasdaq plunge that rectified itself). It was the nature of the rally (indiscriminate and massive buying of futures ridiculously above the market price of the underlying equities for a very considerable length of time). That is what I would expect from a PPT attempting to stabilize the market. I am open to being wrong about that instance.

Conspiracies Theories in General are Bunk

I think nearly all conspiracy theories are total bunk. I do not really want to drag politics into this debate but the Kennedy assassination CTs are absurd. Supposedly we are to believe there was someone firing from the grassy knoll, from an overpass, out of a manhole, and from a building to Kill Kennedy. In addition the plot was hatched by the CIA, the FBI, Russia, Cuba, and the US treasury. "Proof" was that Oswald could not have fired off all those shots in the timeframe allotted and could not have walked to the building in time in the first place.

I have met people that can fire those rounds in the allotted time, and it has been proven time and time again that Oswald could easily have walked the distance (in the allotted time) to the building where he fired shots. On the other hand, many of the suggested angles from the overpass, manhole, and even grassy knoll are virtually impossible.

The theories that the US government blew a hole in the Pentagon with a missile on 911 are so absurd that I refuse to even rebut them.

GATA Conspiracy Theories

But people believe what they want to believe. The fact remains that people like to believe conspiracy theories. This will not win kudos with much of the gold crowd but I feel the same way about GATA (Gold Anti Trust Action Committee) theories as well as various silver conspiracies I hear literally every week.

I have rebutted them in the past and so has "Trotsky". Speaking about GATA in Misconceptions about Gold Trotsky had this to say:

Many gold analysts, from the mainstream to fringe groups such as the Gold Anti-Trust Action Committee (GATA) claim that they can predict what the gold price will do by adding up annual fabrication and investment demand (as well as dehedging demand by miners) and contrasting the resulting total with annual supply (mine supply, central bank selling, disinvestment and scrap). In short, they analyze the gold market in the same manner as they would analyze the copper market.

It should be immediately obvious that this can't be correct. After all, nearly the entire gold ever mined (approximately 150,000-160,000 tons) is still here. In short, the total potential supply of gold is some 97-98% greater than the gold produced every year (approximately 2,600 tons).

On that basis it makes no sense to apply traditional commodity supply/demand analysis based on annualized trends in the gold market.

Simply put, there is a big difference between commodities that are effectively used up (aside from scrap residual returning to the market every year) and a commodity the indestructibility and durability of which inter alia made gold the 'money commodity' in the first place.

I would like to add that with futures there is a short for every long. It is impossible for there to be record long interest without there being record short interest. When prices are extended and delivery is not taken, corrections occur as part of normal market action during futures rollovers. But I think the best indicator of the conspiracy nonsense is the price of gold itself. Gold has little industrial demand yet its price has gone from $250 to over $650. If there was a conspiracy to hold down the price of gold, it sure as hell isn't working very well is it?

Occam's Razor

When confronted with issues like these I often turn to Occam's Razor which states that the explanation of any phenomenon should make as few assumptions as possible, eliminating, or "shaving off," those that make no difference in the observable predictions of the explanatory hypothesis or theory. In short, when given two equally valid explanations for a phenomenon, one should embrace the less complicated formulation.

I did not expect to be talking about conspiracy theories toady. Heck I never know what I am going to be talking about. But let's Compare Kennedy assassination theories.

Kennedy Conspiracy Theory

Kennedy was killed in a massive conspiracy by someone on the grassy knoll, someone from a manhole, someone on an overpass, and Oswald from a building window, all directed by orders from the CIA, FBI, Cuba, Russia, and the Treasury department, and perhaps even LBJ. Doctors that did the autopsy covered up the results as did the FBI and CIA with their bullet analysis. To dispose of Oswald before he talked, Jack Ruby was hired to kill Oswald by the same set of conspirators that hired Oswald to kill Kennedy. Everyone else involved in the conspiracy kept their mouths shut forever and ever.

Kennedy Nutcase Theory

Some nutcase (Oswald) with some unknown grudge killed Kennedy. Another nutcase (Ruby) seeking fame killed Oswald.

PPT Conspiracy Theory

• The government created a good working plan to frequently stabilize the markets.
  
• The government kept that plan quiet.
• The government implemented that plan with the help of others (market makers, order takers, etc).
• The participants in the plan all keep quiet about it.
• The government plan is carried out to perfection.
• The plan works so well that no one can even prove the existence of the plan.
• The results mysteriously happen right near moving averages.
  

Massive Sheep Herding Theory

• A 8,263+ hedge funds all have been trained over time to buy breakdowns especially at or near moving averages.
• Loose monetary policy by the Fed has been supportive of that action.

So which is it? To believe the former you have to believe that this administration and/or this Fed can routinely carry out such a plan to perfection for 6 years running with no one willing to expose it. Making the problem even more difficult is the fact that most CTs think this administration and this Fed are both completely incompetent. It's time to face the facts. The PPT is simply not operating on a day to day or even a routine basis. In fact it's entirely possible, perhaps even likely, that it has never acted ever.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/