Time: Thu Mar 27 03:56:28 1997 by primenet.com (8.8.5/8.8.5) with ESMTP id LAA21125; Thu, 27 Mar 1997 11:32:14 -0700 (MST) by usr08.primenet.com (8.8.5/8.8.5) with SMTP id LAA29753; Thu, 27 Mar 1997 11:32:06 -0700 (MST) Date: Thu, 27 Mar 1997 03:24:03 -0800 To: (Recipient list suppressed) From: Paul Andrew Mitchell [address in tool bar] Subject: SLS: Fedgov involved in Wall Street? Strategic Investment (Fwd) <snip> > >Strategic Investment / March 19, 1997 > >Plunge protection team takes a bow > >Strategic Investment has been warning you for years >that the federal government was secretly rigging the stock >market. Whenever the market drifted near to a technical >breakdown point, some big buyers would always >mysteriously turn up at the last moment to prop up the >market and crush the shorts. > >As I used to run a hedge fund that aimed to profit from >a market meltdown, I was particularly sensitive to the fact >that none of the meltdowns ever happened. I wondered >why. For a time, I entertained the notion that some of the >big brokerage and mutual fund firms might have clubbed >together to sponsor a secret intervention fund. But I could >find no evidence of it. Most brokerage and mutual fund >groups are public companies. Any intervention fund would >have had to be disclosed. None was. There was not even a >self-congratulatory rumor. But there were rumors among >traders that the U.S. government was stepping into the >market to purchase S&P contracts. > >The frequent, miraculous recoveries might have been >a coincidence had nothing else been known. But they were >the type of coincidence that aroused my suspicions. As >David Atlee Philips, a former CIA division chief once >noted: "The intelligence profession does not exactly >condition one to accept coincidence as an explanation for >a sequence of events." Given Strategic Investment's >orientation toward providing intelligence for investors, we >looked more closely. > >Our man on Wall Street, Michael Belkin, made >inquiries. He was soon convinced that the rumors of >clandestine government intervention in the S&P pits were >true. The question is why had not this meddling in the >market been reported in The Wall Street Journal and other >leading media outlets which have the resources to really dig >out a story? That remains a good question today. > >A concerted investigation by the Journal, New York >Times or Washington Post would surely have revealed this >clandestine tampering with the free market. But like the >murder of Vincent Foster, the rigging of Wall Street was a >dirty little secret the media establishment would rather not >reveal unbidden. Rumors at the time held that the >government was buying S&P futures contracts through the >good offices of Goldman Sachs, the firm once headed by >Treasury Secretary Robert Rubin... Many people must >have known about it. Everyone who did was placed in a >position to profit dramatically by purchasing the S&P >futures in the full knowledge that the federal government >was poised to intervene the market to guarantee the >profitability of their trades. Under those conditions, anyone >could trade futures as profitably as Hillary Clinton. > >I remember receiving intrigued telephone calls about >our reports in Strategic Investment from denizens of the >mainstream press. But without exception, they soon >contemptuously dismissed our contentions that rigging was >taking place These reports were based upon sound >intelligence sources, not daydreams, or mere inference from >coincidence. We had confirmation from people who were >in a position to know. Unfortunately, our sources could not >come public with their proof, because to do so would have >meant the loss of cushy jobs as well as the risk of severe >penalties for violating confidentiality requirements. > >"Direct intervention in market events" > >Because we could not produce photocopies of actual >confirmations or exchange position reports showing the >Federal Reserve or the Treasury buying 5,000 S&P >contracts with fills at or below major support levels, the >story went nowhere--although to his credit, John Crudele >at the New York Post doggedly tried to pursue it in the face >of indifference from the heavyweight media. I remain >convinced that an investigation backed by subpoena power, >even a civil suit with the power of discovery, could have >proven that the federal government was using resources >provided by all taxpayers, including short sellers, to >arbitrarily enrich investors on one side of a two-way >market. > >Now stretching for such proof is no longer necessary. >The government has admitted that we were right. First of >all, the newly loquacious Alan Greenspan gave a speech in >Lueven, Belgium on the 14th of January, this year, in >which he touted the Fed's obligation to bail out banks and >private financial institutions not just by printing unlimited >amounts of money but also through "direct intervention in >market events." (For more information, see Michael >Belkin's article, and get the whole text of Greenspan's talk >on the Internet at www.fame.org.) > >In case the representatives from Fidelity and Merrill >Lynch were not in Lueven, Belgium in mid-January, a full >account of the federal government's "Plunge Protection >Team" was leaked to the Washington Post and reported on >February 23. We now know beyond a doubt that the >Treasury and the Fed have formed an informal working >group for intervention in the financial markets which can >bring to bear massive resources of the United States >government to prop up stocks. A few years ago, we were >considered somewhat nutty for telling you that the feds >were rigging the stock market. Now the government itself >is dropping the veil. Why? > >"A sniper preaches gun control" > >For that matter, what weird game is Alan Greenspan >playing? On the one hand, he stirs up public concern about >a stock market decline. On the other, he force feeds >liquidity into the system, and even stands ready, with >backing from the Clinton Treasury Department, to >monetize S&P contracts, if necessary, to keep the market >from falling. Maureen Dowd's description of Clinton is >every bit as apt a statement about Greenspan: "He is like >a sniper who preaches gun control." Greenspan has known >all about the Plunge Protection Team. By heightening >public concern about a plunge, was he more or less inviting >the Plunge Protection Team to step out of the shadows to >take a bow? And if so, why? > >I believe that the answer may lie with the growing >concern of the Clinton Administration about continued >mainstream media focus on the Asian fund raising scandals >in the White House. This is the first of the innumerable >scandals involving the Clintons that the mainstream media >have taken up energetically. The White House is worried >that it has been unable to deflect attention to other themes >as it did so deftly in previous scandals. So, in effect, the >Clintons have elected to send a message to brokers, mutual >fund companies, and shareholders reminding them of their >stake in keeping the Great Manipulator in power. > >I believe that a subtle version of this message >accounted for much of the support Clinton received in >1996 from people who voted the conscience of their >portfolios. They understood that if they want to keep a >floor under stock prices, that they should rally around the >one man who has proven beyond a doubt that he has a >genius for financial manipulation and bending rules. >Consider the conversation that Jack Wheeler refers to in his >column. The man who rates Clinton as "the greatest >president in history" because his net worth has soared >under Clinton is presumably well conditioned to respond >favorably to hints about keeping the Plunge Protection >Team on the job. > >The political wealth effect > >To extend the same reasoning a little further, perhaps >part of the explanation for the fact that the Republicans >who control Congress have seemed so feckless and half- >hearted about digging into the fundraising story, not to >mention the long train of proceeding Clinton scandals, is >concern about the consequent impact on markets where >some of their own wealth and that of their contributors is >at risk. > >In any event, I suspect Jack Wheeler's insight is >correct. High stock prices have helped insulate the Clinton >White House from scandal. The moment serious charges >are made that seem likely to stick against Clinton, stocks >will begin to suffer, especially stocks that are not contained >within the S&P Index. > >Equally, should the stock market sell off, while the >Plunge Protection Team is on vacation, perhaps because of >widespread repatriation of foreign money invested in U.S. >Treasury securities, or a serious disruption in oil supplies >in the Middle East, or some other macro event too large to >be easily papered over by the usual tricks, then you should >expect to see a rapid decline in Clinton's approval rating, >followed by a surge of media revelations of wrong-doing. > >What are the implications for the investor at this time? >Point number one is that the immediate risk of a market >meltdown may be somewhat lower than it would appear on >the basis of fundamental analysis, such as price/earnings, >price/ cash flow, and price/dividend ratios. Point number >two is that the rigging of the market is likely in the long run >to create a more devastating meltdown. Once it comes out >of the shadows, the government's program to prop up the >stock market is in danger of becoming as ineffective as any >other government program. > >Lord Rees-Mogg and I argue in The Soveriegn >Individual, that changes in technology assure that markets >will eventually predominate over the will of politicians. >When politicians make a public point of underwriting a >risk, they usually amplify the countveiling forces that are >destined to defeat the very purpose to which they aim. In >due course, the Plunge Protection Team's efforts to protect >the incomes of brokers and mutual fund buyers will prove >to be as pathetically in competent and useless as the Ready >Reserve Mobilization Income Insurance Program >(RRMIIP). > >For those who don't know, the RRMIIP was approved >by Congress in the 1996 Fiscal Year budget to protect the >incomes of military reservists ordered to active duty for >more than 30 days. As the program was outlined, reservists >were offered up to $5,000 of monthly income protection for >a premium of $12.00 per $1,000 of coverage. The >overwhelming majority of reservists slated for mobilization >opted for the maximum coverage of $5,000 per month. > >Like a guarantee against losses in the stock market, it >sounded like a great deal. The trouble is the Department of >Defense has determined that enrollees who have been called >to active duty will receive only 4% of their "coverage >amounts." Those who thought they were to receive $5,000 >per month coverage will receive only $200. The >involuntary call-up of reserves to Bosnia bankrupted the >system. > >Investors who depend upon the Clinton White House >and Alan Greenspan for "Plunge Protection" insurance will >in due course be whipsawed like the reservists who were to >be "home for Christmas" with $5,000 in hand for each >month of service. Instead, they are still stepping lightly >over land mines in Bosnia, and the $5,000 turned out to be >just a Tokyo cab fare. There is a lesson there. > > > >-> Send "subscribe snetnews " to majordomo@world.std.com >-> Posted by: Brian Litzenberger <litz@midusa.net> > >=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= >Unsub info - send e-mail to majordomo@majordomo.pobox.com, with >"unsubscribe liberty-and-justice" in the body (not the subject) >Liberty-and-Justice list-owner is Mike Goldman <whig@pobox.com> > > ======================================================================== Paul Andrew, Mitchell, B.A., M.S. : Counselor at Law, federal witness email: [address in tool bar] : Eudora Pro 3.0.1 on Intel 586 CPU web site: http://www.supremelaw.com : library & law school registration ship to: c/o 2509 N. Campbell, #1776 : this is free speech, at its best Tucson, Arizona state : state zone, not the federal zone Postal Zone 85719/tdc : USPS delays first class w/o this ========================================================================
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