Detoxing the Markets: Bears Still Look Hungry

Source: www.thestreet.com ^ | 07/16/2002 | By Peter Eavis

[SauronOfMordor]

Tues morn 9am, DJIA futures are at -133, looks like we'll have another wild ride today.

[dennisw]

I will disagree. The PPT has the ability to use small amounts of money used very strategically. Just at the right moment. So not too much money has to be created for them to use. Just my thoughts I have no proof.

These small sums when pumped into the NASDAQ and S&P futures can demolish the shorts. Plus I would speculate that the PPT has the best (fastest) excecution/filling of orders. Another advantage for the shadow team.....

[habs4ever]

Yes, call me Sherlock, but this is my business.I run a hedge fund, so have an interest in being right.I put my money where my mouth is, and pay lots of dough to learn about what works and what doesn't.Plus, then there's that old stanby that should never fail if you use it properly: experience.

[habs4ever]

Wrong.......the markets will swamp anything the Feds can do, if that is what they are going to do.Ever watched an intervention in the forex markets??

[Lazamataz]

While I take you at face value per your claim, I do wonder about a hedge fund manager who asserts that the money supply has not increased lately.

[Moonman62]

A 500% rise doesn't mean much when you're starting from ten bucks.

Actually, their performance is over 3000% from their currency crisis lows. Nevertheless, they have a better economic policy than we do. They learned from the person who defeated them, Reagan. OTOH, President Bush with his Myrmidons in lockstep behind him is undoing everything Reagan did for us economically.

[habs4ever]

A rolling top on the DJIA is indicative that the blue chips have not been sold off, while the OTC has taken a pasting since Sept2000.The DJIA and NYSE have outperformed the OTC, and now is is their turn to get distributed.The forces at work in a bear market eventually catch up to all areas, and the big guys have been the last ones to get knocked, so the longer is takes for them to go where they are going to go, the longer the bear will last.

A purge gets this bear market closer to a conclusion.

[Lazamataz]

I can agree with everything you wrote, one message directly above.

[habs4ever]

Money supply increasing is meaningless unless you examine its context.A surge doesn't mean a damn thing if its coming from a base that has been turning over less than the growth of GDP.

Context, Laz, is all.....the monetarists should have learned this back in 1982.

Ask yourself this: "In relation to what"?....

[steve50]

In a free market there should be no such thing as a PPT. Protecting certain positions in the market are not a proper use of taxpayers dollars IMO.

[Dog Gone]

This article sets out what I've been trying to convey here for several months, especially regarding the money supply and the weakening dollar.

It's a deliberate strategy by the Feds, and it's having the effect described here. The bozo analysts who claim that it's foreigners showing lack of confidence in the dollar are totally clueless.

It will cause inflation eventually. Commodities will notice the effect first, which is why gold is higher and why oil (another international commodity priced in dollars) remains relatively high in a period where there is an actual glut of oil on the market.

These are not conditions that are favorable to a healthy business expansion. It's a transition zone, where the Fed is trying to let the bubble out of the market without sending us screaming into a deep recession.

But make no mistake about it. The bubble is being popped, because it needs to be in order to set us up for another business expansion. People who think this is over, and yesterday's intraday low represent the bottom, simply don't understand the macroeconomics in play here.

[Lazamataz]

Money supply increasing is meaningless unless you examine its context.A surge doesn't mean a damn thing if its coming from a base that has been turning over less than the growth of GDP.

Well, this is progress. At least you are now admitting there has been an increase in the money supply, even if you are challenging its relevance.

Now, you tell me: Why do you not think this increase is relevant?

[Wyatt's Torch]

If you've noticed, the huge increase in the money supply (which then appears to be used to fund the Plunge Protection Team) seems to be causing a precipitious drop in the dollar.\

This is on purpose. They are trying to devalue the dollar and reflate the price level in order to offset the deflationary devestation they themselves created with the "strong-dollar"/tight money policy. We need inflation just to get prices back where they should be.

[habs4ever]

What is it that you think such an increase portends? YOU are the one that thinks it has great meaning, not I...so..out with it?

I look at the way the markets are acting and take it from there.Money supply has gone up and down in big ways, for 20+ yrs, and what has it meant? Diddly....

Japan has a monetary base that is about 15% of its GDP, yet where is their inflation?? what is the cost of capital there?Yet to a monetarist, this is heresy, it means the inflation express is coming down da track....no, it means the economy sucks and isn't growing enough to make bond yields rise.Money sits in cash accounts doing nothing.

[FITZ]

Buy-high-Sell-low bump.

Maybe what's happening has to do with the way people are playing the stock market---partly because they aren't sure where it's going and want to make as much as they can ---I almost wish I had the extra money and time to watch it dip, then buy, watch it rise, then sell. Just to see what I could get out of doing that.

[Lazamataz]

What is it that you think such an increase portends? YOU are the one that thinks it has great meaning, not I...so..out with it?

I defer to the hedge fund managers of the world.

From what I gather from your message, you are of the opinion that an increasing money supply is not relevant. Is that a correct statement of your premise?

[habs4ever]

Yes, in a nutshell....

"It all depends" is a good place to start when examining something like money supply.A growing economy needs money turnover and its liquidity demands satisfied by the Fed.The monetarists back in 1983 screamed about the turnover numbers, saying it meant inflation was still a concern.Friedman, maybe very glibly, thinks the supply should only increase by 4 % per annum.How does he know? The markets will decide.

[Lazamataz]

Yes, in a nutshell....

I will defer to your judgement but some hunch tells me you are erroneous. I'm sure people who are smarter than I will chime in to challenge your premise. I do not have the education or experience to meaningfully challenge it myself.

[dighton]

Damned-if-I-know bump.

[Lazamataz]

DJIA off 122 out of the starting gate.