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Dennis Gartman goes for a black helicopter ride
Sprott's researchers connect the dots;
Report suggests U.S. market manipulation is for real
By Peter Brimelow
CBSMarketWatch.com
Friday, September 9, 2005
http://www.marketwatch.com/news/story.asp?guid=%7B4D6EA397%2D1A92%
2D4662%2DB157%2D13B33B17A4A7%7D&siteid=mktw&dist=
NEW YORK -- A legendary bear may have turned bullish, sort of. But he
and the authors of a remarkable new report still harbor suspicions
about market manipulation -- something that could end very badly for
investors.
Dow Theory Letters' Richard Russell was artfully qualifying his
sudden bullishness on Thursday night. He's just suggesting
that "those willing to speculate" should buy Spyders, the S&P 500
tracking stock And it may not work. (Russell played the 2003 bounce
this way too.)
Russell's also making bullish noises on gold. And his comment that
really got my attention late Thursday was this:
"You can be sure that the central banks don't want to see an upside
breakout in gold. ... The primary trend of gold is bullish, however,
and the primary trend is stronger than all the central banks in the
world taken together. When gold's time comes, gold will brush by the
manipulations of the central banks and their friends, the gold banks."
This suspicion of covert market manipulation by governments in
alliance with favored private-sector firms has been voiced with
increasing frequency by Russell and other letters.
Indeed, several letters muttered about suspicious late-day rallies as
detailed in our June 27, 2002, column. Of course, it's too wild an
idea for most of the mainstream media.
But now two respected figures in the Canadian investment industry,
John Embry and Andrew Hepburn of Toronto's Sprott Asset Management,
have published a report, "Move Over, Adam Smith: The Visible Hand of
Uncle Sam."
It pieces together from published sources evidence that points to the
existence of the long-rumored "Plunge Protection Team," an informal
group of U.S. government agencies, stock exchanges, and large Wall
Street firms. (The report's downloadable from the firm's Web site:
http://www.sprott.com/pdf/pressrelease/TheVisibleHand.pdf
For starters, the Sprott reports quotes former Clinton adviser George
Stephanopoulos apparently confirming the group's existence and
revealing that the Federal Reserve directed large banks to prop up
currency markets in the wake of the Long-Term Capital Management
crisis in 1998.
The last episode Sprott thinks it has definitely traced was before
the U.S. invasion of Iraq in March 2003. A U.S.-Japanese agreement to
intervene to prevent any financial crisis during the war was
announced by a Japanese official, perhaps because the government
intervention in markets is openly admitted in Japan. The U.S. never
acknowledged such an accord.
Sprott doesn't necessarily oppose government intervention in
principle -- the apparent interventions after 9/11 or the 1987 crash,
for instance -- but says such intervention requires "the most
stringent safeguards and transparency."
Instead, Sprott asserts that "what apparently started as a stopgap
measure may have morphed into a serious moral hazard situation, with
market manipulation an endemic feature of the U.S. stock market."
All this raises two problems. First, possible corruption. As Sprott
puts it:
"There can be no doubt that the firms responsible for implementing
government interventions enjoy an enviable position unavailable to
other investors. Whether they have been indemnified against potential
losses or simply made privy to government policy, the major Wall
Street firms evidently responsible for preventing plunges no longer
must compete on anywhere near a level playing field."
Second, there's the matter of ultimate breakdown. Says Sprott:
"Displaying markedly low volatility, the Dow hovers comfortably above
the 10,000 mark. Yet with severe trade and budget deficits, rising
interest rates, and stubbornly high oil prices, the reasons to be
bearish on U.S. equities are numerous.
"Strangely, the market has an uncanny ability to maintain its footing
when serious declines threaten. ... This curious trading activity is
suspicious to say the least."
If that's right, economic reality may eventually intrude and, as
Russell says, "brush by" the manipulators -- and the investors misled
by them.
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