Today we don our reporter’s fedora, sit at our typewriter… and pursue a question truly scandalous.
We will be denounced for fanning “conspiracy theories.” Social media will excommunicate us for hawking “fake news.”
We expect fully to be tried for sedition… and packed off to the gallows for offending God and king.
But we will take the consequences as we must.
For we are hot to expose an illegal Federal Reserve manipulation of the stock market.
Today we haul forth forbidden evidence.
Doesn’t the Fed Already Manipulate the Market?
“But wait,” you say. “Isn’t it common knowledge that the Fed manipulates the stock market through interest rates and tricks like quantitative easing?”
Yes, it is. And it does.
Yet these are indirect influences, actions at distances, nudges at one remove.
We refer instead to a direct market intervention — and again, an illegal intervention.
It is as if the Federal Reserve has the stock market by the scruff of the neck.
And might it explain how the market came shooting from the depths late Friday… when all was in freefall?
The answer — the possible answer, in fairness — anon.
But first today’s urgent news…
Powell Rides to the Rescue
This morning we noted the Dow Jones was 250 points in red. Not 10 minutes later we glanced again — only to learn it was suddenly 300 points in green.
A 550-point sprint… in 10 minutes!
But why? Here is the answer:
Chairman Powell came charging over the hill this morning… and slashed interest rates 50-basis points.
It was the first 50-basis point cut since December 2008.
Declared Napoleon on his white horse, bloody sword in hand:
Alas, Mr. Powell’s gallantry offered only temporary inspiration…
Why the Market Retreated
Stocks were in swift retreat shortly thereafter, pulling all the way back to negative territory.
“Where are they going?” he must have shouted inwardly. “Didn’t I just give them what they wanted?
“I didn’t even wait for our FOMC meeting in two weeks. And I cut by a full 50 basis points, not a measly 25.”
But that is precisely why stocks likely fled the field of battle, Mr. Chairman. Your move suggests panic.
It tells them this coronavirus is a genuine menace, a true fee-fi-fo-fum, something really to watch.
The Dow Jones ended up retreating further still. It shed another 786 points on the day.
The S&P gave up another 87 points; the Nasdaq, 268.
An Historic Day
Meantime, the 10-year Treasury yield dropped beneath 1% today as the stampede to safety continued.
Not once in history has the 10-year slipped below 1% — not once.
And gold made a bid to reclaim safe haven status today, gaining a thumping $41.70.
But should the rout deepen…
Do not be surprised to see stocks rise unexpectedly under invisible influence — as if by conjury.
And so we return to our central questions:
Does the Federal Reserve directly intervene in the stock market?
That is, has it become its own Plunge Protection Team?
And does any evidence exist for it?
A Puzzling Market Anomaly
Graham Summers is senior market strategist at Phoenix Capital Research. And his researches have shoveled up some odd and exotic findings:
It is true, some central banks such as the Swiss National Bank and the Bank of Japan are legally authorized to purchase stocks. Both take advantage in full.
But the Federal Reserve Act — Section 14 — grants our own central bank no similar authority.
It may purchase Treasury debt and mortgage-backed securities, yes. But not stocks.
You are alleging, Mr. Summers, that the Federal Reserve is acting contrary to the laws of the United States.
What evidence have you?
Look to Jan. 7., he instructs us:
Your explanation, Mr. Summers?:
Interesting. But certainly you have more evidence than that?
The Market Mysteriously Rebounds
Yes, we are told. Mr. Summers next directs us to last Friday, when markets were plunging once again.
During the previous five sessions, Microsoft, Apple, Alphabet (Google) and Amazon were tumbling faster than the overall S&P.
But early afternoon Friday, Apple and Microsoft mysteriously pulled up… and halted the S&P’s sell-off.
Microsoft had warned on Wednesday that manufacturing kinks in China would kink its bottom line.
Apple was similarly upset by the coronavirus.
Yet by closing whistle Friday, Microsoft posted a 2.42% gain. Alphabet, a 1.61% gain.
Meantime, Apple and Amazon nearly clawed even:
Again we ask… what prompted the about-face?
Perhaps Mr. Summers is correct.
Both the Dow Jones and S&P closed the day in red. But given their outsized weighting, these particular stocks halted the rout.
And both indexes ended Friday far higher than they otherwise would have.
Summers believes the Federal Reserve purchases these specific wagon-pullers to haul the freight along.The Role of “Passive Investing”
The strategy relates directly to the “passive investing” we tackled yesterday.
Please, continue. Do you have additional evidence of this ongoing — and illegal — operation?
The Evidence Mounts
We have no answer. You present a compelling — dare we say, convincing — case.
We demand a Congressional investigation at once. The alleged conduct is again, illegal.
This is a nation of laws after all.
And who, besides the FBI, CIA, NSA, IRS — and Department of Justice — is above the law?
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