Was the Market Pushed?

The Wall Street Journal headline on
the day after we almost lost the U.S. stock market reported that the
wise men on the Street were "baffled" by the big drop Thursday. The
Financial Times called the event "Shambolic" as if only a shaman can
decode it.

A week after CNBC assured its high-net-worth viewers that Greece would
no longer be a problem, there was an uprising there followed by a
volcanic market cliff dive that the White House, NASDAQ and every
regulator is now investigating.

There
is still a lot of head-scratching, as if to say, how come our casino
went batty? It all happened in a couple of minutes, about the time it
took for that fail-safe, top-of-the-line, ultra-secure, and unsinkable
oil platform to sink.

The whole world of finance couldn't believe what was happening before its eyes and so quickly.

--2:38 PM: Dow down 360.
--2:48 PM: Dow down 600.
--2:51 PM: Dow down 900.

Help!
We still don't know how the plunge was arrested. I am sure the Treasury
Department's Plunge Protection Team and the Fed and every Central Bank
in the world hit their red buttons to pump more money in before the
balloon popped.

You are not
going to believe it but no one really knows what happened yet. Should
we blame a trader who made a typo or were there others playing a
shadier and covert game of market manipulation which may soon
officially be listed as a psychiatric condition?

Floyd Norris in the New York Times just about suggested the market was
an insane asylum. Just read his lead paragraph and realize we are being
dominated by financial maniacs with rationality is out the window.

"Combine:
One part nervous traders; one part Greek crisis; and one part trader
error. Stir in one part central bank complacency. Bring to boil. Panic."

"That combination," Norris "explained," "produced one of the wildest days ever in financial markets."

On display were the usual twin towers of market self-abuse: Greed and Fear.

Angela
Merkel, Germany's chancellor, likened the wider crisis to "a battle of
the politicians against the markets" and attacked the role played by
credit-rating agencies.

She
declared: "The speculators are our adversaries" suggesting there is a
financial war underway that no one in the media seemed to get.
Financial analyst Max Keyser sees an outbreak of "financial terrorism."

The Web site, Gaming the Market, all but argues that this market drop
was a calculated maneuver which may be why it's being investigated. I
am not financially savvy enough to understand all of the evidence but
for those of you are, here's part of what they say, including the idea
of a "holy crap" moment, writing:

"These
moves typically occur after 2:30pm Eastern while the market is near a
new low or breaking point, with a relatively high VIX [which gauges
"volatility"]. Another characteristic is a large NYSE Adv/Decl negative
ratio. One that is negative 10:1 going into lunchtime typically
assures a weak close. Ratios of 3:1 negative aren't what you want.
They are easier to manipulate by weak bulls.

"You want a big scary ratio. It is these negative internals that can clue you into the probability of a PPT push. A
big push on a bignegative internal is the tell. To instantaneously
swing the market around on these days takes a massive amount of
concerted capital.

"If
you watched the market every day last year you know what this looks
like. Using 5min candles on your favorite index you will see an
immediate and massive full body candle, sometimes eclipsing the entire
day's range in minutes. There is no mistaking this move. It's a
wide-eyed holy crap moment! After this massive push the market will
typically close near the high of the day."

Again, I am not sure how accurate this is, but I do know that the truth
in the world of finance is elusive, and, yes "baffling."

"In many ways, money making is more an art as a science," I wrote two years ago in my book, PLUNDER: Investigating Our Economic Calamity, reporting on the meltdown in 2007. It was published a week before Lehman collapsed.

Despite all the rules that govern the markets or regulations designed
to assure transparency and accountability, crooks, swindlers, and even
gangsters are commonplace.

Corrupt
practices are pervasive; regulation is behind the curve; lightening
fast computers now do the heavy lifting. When professionals in the
field were asked how they define criminal conduct, the majority
surveyed said crimes only occur when you are caught.

Clearly
some of our "market makers" know what they are doing. There is also
extensive posturing in the industry to mask the often-fuzzy line
between risk and uncertainty.

In
many instances, major decisions are made on the basis of fragmentary
knowledge, even ignorance, despite professions of careful reviews and
"due diligence." Even "sophisticated investors, can be bamboozled, as
we saw in the unmaking of Goldman Sachs and Bernie Madoff.

The
Financial Times cites a supposedly knowledgeable market economist at
Lehman who said: "We are in a minefield. No one knows where the mines
are planted and we are just trying to stumble through it."

Another
market participant put it this way: "It is not the corpses at the
surface that are scary, it is the unknown corpses below the surface
that may pop up unexpectedly."

This sounds like a horror movie.

I was talking about this after the last collapse:

"Many
of the 'experts' whom I read or see on TV seem clueless, full of hot
air. Many of their predictions turn out wrong even when they seem so
self-assured and well-informed in making them. Jim Hightower warns
against believing them, writing: 'Don't be deterred by the finance
industry's jargon (which is intended to numb your brain and keep
regular folks from even trying to figure out what's going on).'"

How does one make sense of what is
going on? You have to burrow in the business pages and read articles
from the bottom up because the most revealing facts are often buried.

You have to break dependence on mainstream media and check out specialized Web sites, blogs, and alternative sources.

After
the New York stock market took a 340-point drop in 2007, only to
quickly recover, I went to the business pages of the New York Times. I
figured that they would explain it.

But they didn't know the
reason for it either, reporting "emotion and psychology, not financial
fundamentals were mostly at work." They quoted the chief U.S. equity
strategist for Citibank: "I don't think anybody can make sense of it."

Part
of the problem here is that the traders and brokers have come up with
all sorts of highly esoteric and complex financial instruments - ways
of securitizing debt and raising capital - that outsiders, even
experienced financial journalists, have a hard time understanding, much
less explaining.

Ditto for
regulators (and the laws they theoretically enforce), who are hard
pressed to keep up with the pace of change. Market traditionalists are
also lost." It seems deliberate.

The scammers are winning.

Two
years later after we have read so much about what went wrong, after
months of wrangling over financial reforms that Wall Street is beating
back like the demand to audit the Fed or break up the big banks, we are
back in a big inexplicable mess with a swamp of contradictory
information.

Wall Street has
gone short on the American people. Their pump-and-dump games have to be
controlled or it's not just whether there will be a massive depression,
but when?