Today was what I think could be counted as a pretty good confirmation of the existence of PPT (plunge protection team) and they way it works.
I always suspected that PPT is not involved in direct market manipulation because the Uncle Sam is pretty short in cash in those troubled times. But it takes some art to move the markets in the most critical moment the most effective way without spending a dime on that.
Look at today chart:
Today afternoon the market clearly broke down the triangle formation which was pretty sufficient to trigger a quick ride back to January lows next week. Then, just half an hour before the market closed the rumor surfaced that Ambac will be rescued. They didn’t give any details before the marked closed, so the intriguing news sent the shorts to the run and the chart was saved.
Do you remember that every time the markets were about to plunge something always happened. Usually it was some kind of a plan (that later was proved to be ineffective) or some kind of rumor (that later was proved to be wrong or not important) or some familiar faces pop on TV saying that they have some magical solution to all problems. Whatever works, but you can’t undo the market – once shorts stampede to cover the plunge is over. This tactics must be familiar to those who follows the political roots of current elite. Remember, when Bush was campaigning against McCain back in 2000 the rumor surfaced that McCains is adopting a black bastard child. Of course that was wrong and the origins of the rumor were not proven, but it worked! And whatever works must be used.
How convenient is that Buffett has a policy to never comment on rumors that he’s buying something?