THE DOT - if this turns orange or red be alert

Tuesday, June 30, 2009

Confidence Market Divergence accelerates

The last time we got a -2.42 standard deviation between confidence and the market, things got real ugly, real fast.

Monday, June 29, 2009

SPX tech andgeneral update

We are in a crucial window dressing week (end of quarter) and so far the monthly performance is neutral hence we can expect the manipulaters to push the market higher to increase the buying pressure. Second half of the week we can expect a pullback though. It should be a volatile week though as Uranus goes stationary on 1st July. We are still in the 830-1ß30 trading range I mentioned a few weeks ago and I rather had expected a pullback to 830 before the final thrust up but the sentiment indicators have come down quite a bit as Rydex and ISEE and the market is talking to much over a correction as it could happen right now. Mid July is a more likely point of time for a corrective move but weakness can be bought by traders as we will see the SPX above 1000 since its a psychological hurdle which will be taken out and trigger follow through to the 1030-50 level. I do not agree to the calls that we had the lows already which also Mr Doom and Gloom claims these days. We are clearly in wave 4 up and need wave 5 down which will happen in Q4 09 - Q1 10 to a drastic new low around 500 SPX if not even 400 before we might see a longer upside consolidation will kick in. No severe downturn ever ended with a 15 times PE ( and that's stilll the fake version) but more importantely the forces behind the scenes want a global crises to make a leap in their agenda. The Rothschild / Rockefeller gang needs people to be in panic to make the legal and administrative adjustments for their New World Order and as in 9/11 they need some dramatic events to steer people into their direction.

Thursday, June 25, 2009

BTK tech outlook - a sector with a little upside scope

BTK (biotech) Still needs to make a top above 700 as one can see clearly by the pattern. The target zone is around 720/5 within the next days.
The NDX has an 12 Seq count today and needs to make a little spike up as most indices might do the next days without making new highs for now. Thereafter we should see another wave down for 1-2 weeks before the final leg up starts.

Bernanke is toast - he was very likely framed

As I wrote in an earlier post that even Bernanke or Paulson were in trouble and I assumed it rather would be Bernanke today's hearing made it very clear that he was framed in the process of the Bank of America takeover of Merrill ( by Paulson I assume).
He made plenty of mistakes but he was a goat from the beginning as he never had what it takes to play with Wallstreet mobsters like Paulson - he was completely overwhelmed by the situation and followed the lead of Goldman ( Paulson ) rather than to make his own calls.
Mr summers is sitting in the background and might be cheered up as the position he aimed for is now ready for him to take over as the new power legislation bolstering the FED's authority is made for him right from the beginning. The defense of Obama for Bernanke was formally but not expressively supportive anyway.
I do not believe he will get another term and he was heavily discredited in today's hearing as it will help the current government to make him the goat who sinned and move on to clear the air for the future.

Excerpt

Bernanke Defends His Record on Bank of America Talks

By Craig Torres and Scott Lanman

June 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the central bank acted with the “highest integrity” in talks on Bank of America Corp.’s takeover of Merrill Lynch & Co., defending his record against some lawmakers who have alleged officials’ actions were inappropriate.

“The Federal Reserve acted with the highest integrity throughout its discussions,” Bernanke said today in testimony to the House Oversight Committee. He said that “in retrospect,” the Fed’s actions have strengthened Bank of America, Merrill and the financial system and protected taxpayer interests.

Legislators are trying to determine whether Bernanke overstepped his authority in pressuring Bank of America to complete the purchase of Merrill. Bernanke’s record on the issue and lawmakers’ reactions may also figure in whether he will be reappointed by President Barack Obama, and in debates on overhauling the Fed’s powers and responsibility.

“These are the kind of questions that need to be answered before the president makes his decision,” Elijah Cummings, a Maryland Democrat and member of the committee, said in a Bloomberg Television interview earlier today.

Bank of America Chief Executive Officer Kenneth Lewis told the committee earlier this month that he decided to proceed with the takeover of Merrill after regulators said they might remove management and because his company’s future was “intertwined” with Merrill’s fate.

Lewis Testimony

Completing the purchase of New York-based Merrill was in the best interests of the bank, Lewis also said June 11. He cited the potential benefits to the company, as well as consequences for the bank if the deal was scuttled and the financial system was disrupted.

Republican lawmakers who have consistently opposed government rescues of financial companies have accused the central bank of overstepping its authority in pressuring Bank of America to absorb Merrill Lynch.

Republican congressional staff wrote in a memo on documents received by the House panel from the Fed through a subpoena that a “gun placed to the head of Bank of America” forced the Charlotte, North Carolina-based bank to go through with the merger, which was announced in mid-September.

Issa’s Charges

Representative Darrell Issa, the ranking Republican on the panel who voted against the $700 billion financial-rescue program last year, also said the Fed withheld concerns about the deal from other agencies.

Bernanke today said he didn’t threaten that Lewis would be fired if the bank didn’t go through with the Merrill deal. He said the takeover came at a time of “extreme stress in financial markets,” and noted the government had taken extraordinary steps to prevent the collapse of systemically important firms, including Citigroup Inc., Fannie Mae, Freddie Mac and American International Group Inc.

Bernanke said in the testimony that the Fed didn’t try to limit public disclosures or force the merger. He said in answering questions that he also “personally” informed Federal Deposit Insurance Corp. Chairman Sheila Bair and Comptroller of the Currency John Dugan about the Bank of America situation.

“I did not play a role in arranging this transaction and no Federal Reserve assistance was promised or provided” when the acquisition was announced on Sept. 15, Bernanke said.

Merrill Losses

Bank of America in December considered retreating from the Merrill deal because of large losses at the brokerage firm. Merrill reported a $15.8 billion loss during the fourth quarter.

The Fed chairman said if the deal fell through it “might have triggered a broader systemic crisis” that could have enveloped both Bank of America and Merrill. Also, if Bank of America cited adverse changes at Merrill as a reason for retreat after three months of preparation, it might raise questions about the bank’s own risk-management and due diligence, Bernanke said. Finally, use of the so-called MAC clause could provoke “extended and costly litigation,” he said.

“The decision to go forward with the merger rightly remained in the hands of Bank of America’s board and management, and they were obligated to make the choice they believed was in the best interest of their shareholders and company,” Bernanke said. The Fed’s actions “have strengthened both companies while enhancing the stability of the financial markets and protecting the taxpayers,” he said.

Bernanke Defense

The Fed chairman said neither he nor any member of the Fed “instructed, or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch, including its losses, compensation packages or bonuses, or any other related matter.”

He said the disclosures “belong squarely with the company, and the Federal Reserve did not interfere in the company’s disclosure decisions.”

This is a must read about the manipulative involvement of the government in markets

Excerpt

http://www.marketskeptics.com/2009/06/still-researching-corruption-at.html

Monday, June 22, 2009

Still Researching Corruption At The Treasury

by Eric deCarbonnel

Need another day to put everything together. In the meantime, below is another interesting article on the The Visible Hand of Uncle Sam.

(emphasis mine) [my comment]

… in a 1992 article, John Crudele quoted someone who maintained strong connections in the Republican Party as stating that the government intervened to support the stock market in 1987, 1989 and 1992:

Norman Bailey, who was a top economist with the government's National Security Council during the first Reagan Administration, says he has confirmed that Washington has given the stock market a helping hand at least once this year.

"People who know about it think it is a very intelligent way to keep the market from a meltdown," Bailey says.

Bailey says he has not only confirmed that the government assisted the market earlier this year, but also in 1987 and 1989.

Now a Washington-based consultant, Bailey says the Wall Street firms may not even know for whom they are buying the futures contracts. He says the explanation given to the brokerage firms is that the buying is for foreign clients, perhaps the central banks of other countries.
[Emphasis added.]


It is unclear where the money for such futures purchases came from, although in a 1995 article, John Crudele advanced a plausible explanation. Referring to the U.S. Exchange Stabilization Fund, he wrote, "Sources have told me that in the early 1990s it was secretly used to bail the stock market out of occasional lapses." He further stated one source indicated "that the account used Wall Street firms as intermediaries and that Goldman [Sachs]… was used most often as a go-between." Crudele conceded that he could not confirm the allegations and, not surprisingly, that the Fed denied all of them.

They would issue a similar denial when queried by a U.S. congressman in the fall of 1998. According to an October 1999 report by Marshall Auerback of Veneroso Associates, Representative Ron Paul wrote both the Fed and Treasury, asking:

…has there ever been or does there currently exist a policy by the U.S. Treasury Department or Federal Reserve to intervene in the U.S. equity market through purchases of stocks or S&P futures, either directly for Treasury Department accounts such as the Exchange Stabilization Fund, for Federal Reserve accounts or by proxy - by having broker dealers purchase S&P500 futures when the stock market is threatening to crash on the understanding that they will be repaid for any subsequent losses through the Fed Open market operations or favored treatment at Treasury auctions? [Emphasis added.]

The report by Veneroso Associates stated that Fed Chairman Alan Greenspan responded:

The Federal Reserve has never intervened in the U.S. equity market in any form, either in the equity market itself or in the futures market, for its own account, for the ESF, or for any other Treasury account. The Federal Reserve has never encouraged broker/dealers to purchase any stocks or stock futures contracts. The Federal Reserve has never had any "understandings" with any firms about compensating them in any manner for possible losses on such purchases. [Emphasis added.]

Marshall Auerback then analyzed the response, suggesting that Greenspan may have dodged the issue:

Apparently, a very direct response to a very direct question, which would appear to settle the issue once and for all. We discussed this response with a former Fed counsel and asked his opinion. He immediately pointed out that the answers given by Chairman Greenspan only referred to actions undertaken by the Federal Reserve, and not by any which may or may not have been taken by the Treasury. This may be proper, given that the very same question was posed to Treasury Secretary Rubin. However, the former Fed counsel did point out that some members of the Fed, notably Mr. Peter Fisher, "wore" both Treasury and NY Federal Reserve hats. Not only is Peter Fisher the number 2 man at the New York Fed under [William McDonough], but he also has two vital roles which are carried out in his function as a member of the U.S. Treasury - namely, the management of the Exchange Stabilization Fund (ESF) and the manager of the foreign custody accounts held at the NY Fed. Chairman Greenspan's foregoing answer, according to the former Fed counsel, could be technically correct. But it does not elaborate on the ambiguous two-fold role played by Peter Fisher of the New York Federal Reserve, nor does it cover his Treasury related responsibilities as the manager of the ESF and custody accounts of foreign central banks held at the NY Fed. So the answer does not conclusively resolve the question of official intervention in the stock market.27 [Emphasis in original.]

A more definitive answer would not be forthcoming from the Treasury. In contrast to Greenspan's prompt response, they apparently took a full year to answer Ron Paul's letter. More importantly, the Treasury never directly addressed whether the department or the Exchange Stabilization Fund had intervened in the stock market. In fact, Veneroso Associates would observe:

A former Fed counsel described this response as "an elaborate non answer to the question," noting that the response speaks only to the role of the Federal Reserve, and not to the Treasury, nor the Exchange Stabilization Fund, nor the management of the foreign custody accounts in the NY Federal Reserve. This, despite the fact that the respondent here is the Treasury, not the Federal Reserve. It is a rambling philosophic response, which contrasts quite markedly with the more direct answer given by the Fed.

Thus, a question that could have been answered conclusively has instead raised even more doubts. [Emphasis in original.]

A statement cited previously may shed some light on the situation. When John Crudele quoted Norman Bailey as confirming government stock market activity in 1987, 1989 and 1992, he also wrote that according to the former National Security Council economist, "the explanation given to the brokerage firms is that the buying is for foreign clients, perhaps the central banks of other countries." Just who might have provided such an explanation? One person who could do it convincingly would be the New York Federal Reserve official in charge of the System Open Market Account. As Auerback notes, this official's responsibilities include "the management of the Exchange Stabilization Fund (ESF) and… the foreign custody accounts held at the NY Fed." Recall Crudele's information "that in the early 1990s [the ESF] was secretly used to bail the stock market out of occasional lapses." A reasonable scenario then unfolds: The person who placed the orders for futures contracts evidently told the firms that the buying was for foreign clients. This would have been believable, given one of the New York Fed official's responsibilities. But such an explanation would have conveniently masked the true buyer, which likely was the Exchange Stabilization Fund.

A Treasury-Fed Split?

The Fed's denial of stock market activity, combined with claims that the Treasury controlled ESF did intervene, is intriguing when considered in the context of two 1995 Federal Open Market Committee transcripts. At the January 31 meeting, St. Louis Federal Reserve President Tom Melzer expressed concern about the Fed's proposed participation with the Treasury in the bailout of Mexico then under discussion. The Clinton administration had decided to use the ESF to fund the rescue when Congress refused to grant an appropriation. Melzer worried:

In effect, one could argue that we would be participating in an effort to subvert that will of the public, if you will. I do not want to be too dramatic in stating that. This could cause a re-evaluation of the institutional structure of the Fed in a very fundamental and broad way.35

To which Greenspan cryptically, yet ominously, responded:

I seriously doubt that, Tom. I am really sensitive to the political system in this society.
The dangers politically at this stage and for the foreseeable future are not to the Federal Reserve but to the Treasury. The Treasury, for political reasons, is caught up in a lot of different things. [Emphasis added.]

At the March 28 meeting, FOMC members again expressed hesitation about the Fed's planned participation with the Treasury in the Mexican package. Once more, Greenspan attempted to alleviate any fears, but also noted:

We have to be careful as to precisely how we get ourselves intertwined with the Treasury; that is a very crucial issue. In recent years I think we have widened the gap or increased the wedge between us and the Treasury…. In other words, we have gone to a market relationship and basically to an arms-length approach where feasible in an effort to make certain that we don't inadvertently get caught up in some of the Treasury initiatives that they want us to get involved in. Most of the time we say "no." [Emphasis added.]

These passages obviously suggest that by 1995 the Treasury was engaging in activities that Greenspan deemed politically dangerous and, accordingly, with which he was very reluctant to be associated. It is only logical that these actions had not been disclosed publicly by the time he made these two statements. Had they been public, the Treasury would have already suffered the consequences of the political dangers of which Greenspan spoke.

Greenspan revealed what looks to have been a major split between the central bank and the executive branch of government. He spoke of having "widened the gap" between the Fed and Treasury, taking their relationship to a market-based one. This "arm's-length approach" was likely the Fed's attempt to preserve its credibility if the Treasury's initiatives resulted in a political storm. Whatever Treasury was up to sounds rather questionable, judging by Greenspan's explicit statements about political dangers and also his implied worry that the central bank could "inadvertently get caught up in some of the Treasury initiatives that they want us to get involved in." He seems to have fretted that even the appearance of the Fed's participation in these activities could be politically toxic for a central bank that prides itself on independence. Precaution thus appears to have been the Fed's approach when dealing with the Treasury. Of course, according to Greenspan, the Fed only said no to the Treasury most of the time, indirectly admitting that in at least some instances the central bank participated in the unspecified initiatives.

We do not know what these initiatives were and, indeed, Greenspan's frustrating ambiguity suggests he was cognizant of the fact that his words were being recorded. So we are left to speculate. It's a reasonable assumption that whatever the Treasury was doing was market-related. This likelihood is indicated by the Treasury's apparent attempts to include the Fed in the initiatives. The central bank is not responsible for fiscal policy, so logically its only use to the Treasury would be to execute or participate in some market-related transactions. This is further corroborated by Greenspan's comment that the Fed had moved to a "market relationship" where feasible with the Treasury. That statement suggests that the Fed had to conduct at least some of the initiatives on behalf of the Treasury.

At this point we return to the Exchange Stabilization Fund, which is controlled by the Treasury Secretary. According to the New York Fed's website, "ESF operations are conducted through the Federal Reserve Bank of New York in its capacity as fiscal agent for the Treasury." As a result, it is easy to see how the Fed could become entangled in questionable Treasury initiatives.

Speaking of such endeavours, at the January 31, 1995, meeting the Federal Reserve's general counsel revealed that the ESF conducted previously undisclosed gold swaps, and, while not spelling out the crucial details, a close reading of the transcript suggests they were recent transactions. Six years later, in an apparent cover-up, that same lawyer would claim not to know of any such dealings. But gold was probably not the only area in which the ESF dealt covertly. According to Greenspan, as of 1995 the Treasury was caught up in not one or a few, but "a lot of different things." While only speculation, it is certainly possible that the Treasury used the ESF for stock market interventions that the central bank deemed unnecessary. If so, the Fed would logically have been concerned that its participation could draw criticism if such a scheme were revealed. Whatever the case, the 1995 FOMC transcripts suggest that the Clinton administration left office having managed to keep politically dangerous revelations from leaking into the public domain.


The Plunge Protection Team article was not the last to hint at the government's resolve to protect the market. In 1998, Crudele described another apparently well-orchestrated leak, this time revolving around the activities of the aforementioned Peter Fisher:

The Federal Reserve [or treasury] is just dying to admit that it has been doing brilliant - but alas, questionable - things to keep the stock market bubble inflated. A Wall Street Journal article on Monday is the closest the Fed has ever come to making this admission, although the newspaper apparently didn't know what it was on to.

The Journal story was about the bailout of the hedge fund, Long-Term Capital Management, and how the Fed stepped in to save the day.60

The story gets interesting in the seventh paragraph, when it starts talking about
Peter Fisher, the 42-year-old No. 2 man at the New York Fed, whose "official" job is running the Fed's trading operation. [Remember, Fisher also manages of the Exchange Stabilization Fund (ESF) and foreign custody accounts held at the NY Fed as a member of the US Treasury]

"In that capacity, Mr. Fisher is the Fed's
[and treasury’s] eyes and ears on the inner workings of stock, bond and currency markets and is given a wide degree of latitude about deciding when certain events pose broader risks," the article says.

"He begins most workdays at 5 a.m. by checking the status of overseas markets… and ends them 11 p.m. the same way. In between,
Mr. Fisher SWAPS [Crudele's emphasis] intelligence and rumors with traders and dealers from his office in the Fed's 10th-floor executive suite that overlooks the trading floor he runs," the piece continues.

As I pointed out in a previous column,
the market has done some strange things in the wee hours of the morning, especially between 5 a.m. and 7 a.m., which ultimately affect how equities do in the New York market.

Crudele then asked of Fisher:

What exactly does he give to these traders and dealers he talks to at 5 a.m. in the morning? "Swaps," which is the word the Journal reporter came away with, implies a give-and-take. What is Fisher, the second highest person in the New York Fed's hierarchy giving to traders?

Just gossip?
Or is Fisher giving away what Wall Street calls inside information.



Whether any actual intervention occurred is not clear. However, the Observer noted weeks later:

Analysts say the Working Group on Financial Markets, nicknamed the "Plunge Protection Team," was extremely successful in helping coordinate a response across the markets when they reopened last Monday.

The team was set up in the late eighties by Ronald Reagan and came into its own in 1998 when it drew up an emergency response in the wake of the collapse of the giant hedge fund, Long Term Capital Management. In the past it has comprised Fed Chairman Alan Greenspan, U.S. Treasury Secretary Paul O'Neill, the heads of the various U.S. stock exchanges and the bosses of a handful of leading investment banks.

However, this time around no fewer than 35 individuals - including representatives of other central banks - are thought to have been in the team.

The challenge was to agree on how to react to the events. Harmony was in danger of being jeopardized when the members representing investment banks clashed with those representing the stock exchanges, who wanted an early resumption to trading. The banks, for their parts, were concerned that staff and infrastructure were too battered to resume in the same week as the attacks.

Eventually the investment banking lobby won the day and when the markets did open on Monday there was an
unprecedented level of cooperation between the financial institutions. Short selling seems to have been kept to a minimum as the banks resisted the temptation to bet on the markets plunging. [Emphasis added.]

The significance of all this is difficult to overstate. Nowhere in government statements about the Working Group on Financial Markets or the Washington Post article detailing its activities is mention made of private-sector membership. Although the Working Group is supposed to consult with, among others, "major market participants to determine private sector solutions wherever possible," this is a far cry from the role described by the media reports cited above. They indicate that the banks were not simply consulted about issues, but instead played an integral role in implementing the agenda of the Plunge Protection Team. Along these lines, George Stephanopoulos claimed that the PPT had "kind of an informal agreement among major banks to come in and start to buy stock if there [appeared] to be a problem." So while many people exaggerated the revelations explicitly made in the 1997 Washington Post article, their suspicions were apparently correct after all.



"But Heller's idea was different. He wanted a more direct approach, especially when the bond and currency markets were becoming uncontrollable…. Heller believed that in an emergency, the Fed should start buying stock index futures contracts until it managed to pull stocks out of their nosedive.
Essentially, whenever there is heavy buying of these futures contracts it causes the underlying stock market to rise. The futures contracts can be bought cheaply; they are highly leveraged so you can get more bang for your buck, and they eliminate the need for a rigger to purchase, say, all 30 stocks that make up the Dow. Heller explained that the process was simple. And it is. The trouble is, the government never has had authority to rig the stock market." [email from Bill King, March 11, 2003 - kingreport@ramkingsec.com]

King, who at the time was running several equity trading desks in New York, goes on to say that
it was during Q1 of 1990, as the Japan bubble was bursting, that massive S&P futures buying began to be used extensively by the trusted agents of the PPT, big "name" brokers in New York. During the crises of the late 90's, this massive buying increased even more. By this time, many skeptics of such manipulation in the investment advisory business began to realize it was definitely taking place. [Emphasis added.]

According to Hultberg, King says it was during the first quarter of 1990 "that massive S&P futures buying began to be used extensively by the trusted agents of the PPT." Along these lines, after September 11, the Observer stated that the PPT had previously acted in the early 1990s. Furthermore, John Crudele wrote in a February 20, 1990, article that "the stock index futures markets were buzzing with rumors that Washington was putting pressure on big trading houses to give the market a lift." This was mere months after Heller's proposal and thus may represent the effective entrenchment of market intervention in U.S government policy. The 1987 and 1989 rescues confirmed by former National Security Council economist Norman Bailey, by contrast, would appear to have been ad hoc activities. These likely were implemented with official approval, but not yet firmly instituted as the government's typical response to a market plunge.



A close comparison between this statement and the remarks of George Stephanopoulos on ABC is revealing. Stephanopoulos said the PPT included the "Federal Reserve, big major banks, representatives of the New York Stock Exchange and the other exchanges." While not mentioning the PPT by name, John Mack reported that a meeting occurred after September 11 and apparently comprised "the firms… the New York Stock Exchange… the Federal Reserve, [and] the SEC." Other than the SEC, the two lists are the same, suggesting that accidental leaks by the former presidential adviser and the CSFB chief executive have essentially confirmed the existence of a PPT that includes the private sector. Furthermore, the list provided by John Mack is exactly identical to one detailed by the Scotsman newspaper, where they claimed that the PPT includes firms as well as "members of the Securities and Exchange Commission, Alan Greenspan's Federal Reserve Bank and NYSE chairman Richard Grasso."


The fact that the publicly acknowledged Working Group and the unspoken PPT differ in their constitutions might explain a report from the U.S. General Accounting Office in 2000. It stated: "Agency officials involved with the Working Group were generally averse to any formalization of the group and said that it functions well as an informal coordinating body." As formalization would no doubt restrict the ability of the Working Group to grant status to the private sector, the reluctance of government officials to do so is not surprising. Instead, the government has apparently used the publicized Working Group as clever cover for the activities of the Plunge Protection Team. This possibility is supported by press reports cited previously in which the Working Group and the PPT are referred to interchangeably.



The dollar's miraculous recovery, apparently thanks to large Wall Street firms, provides a rare glimpse into recent market interventions by the U.S. government. Rather than intervene directly in the markets themselves, the U.S. central bank [acting on treasury’s behalf] evidently gave instructions to trusted surrogates who did the Fed's bidding. Importantly, the Fed apparently did not merely provide instructions to each bank separately. Stephanopoulos stated that at the time of LTCM's collapse, "all of the banks got together" to prop up the currency markets." This was clearly a collaborative effort.

The LTCM revelation is also significant because it indicates that the Plunge Protection Team isn't merely concerned with the stability of the stock market. Supporting this, a report cited earlier from the Scotsman newspaper stated that in the aftermath of September 11, the PPT would "also attempt to deflect any pressure on commodity markets."

Taken together,
these revelations demand a radical revision of prevailing beliefs about the current state of markets, not to mention the relationship between the private sector and the U.S. government. If major financial institutions are knowingly implementing government policy with regards to important markets, they have essentially become de facto agencies of the state. Just as importantly, the government's role has also changed markedly. Previously content not to intervene in certain spheres, now the Fed and Treasury apparently regard the stabilization of markets to be within their responsibilities.

The continuing silence of government officials about this expanded reach is easily explained. First, they no doubt recognize that an electorate supportive of free markets would frown upon market interventions. More pragmatically though, the government must also realize that to publicly acknowledge such activities would be to invite the greatest of moral hazard situations. To use a famous quote, the risks would be socialized while the rewards would remain privatized. Such a disconnect invites increasingly reckless speculation by investors who believe that the government stands ready to rescue them should crises arise.



Conclusion

Given the available information, we do not believe there can be any doubt that the U.S. government has intervened to support the stock market. Too much credible information exists to deny this. Yet virtually no one ever mentions government intervention publicly, preferring instead to pretend as if such activities have never taken place and never would. It is time that market participants, the media and, most of all, the government, acknowledge what should be blatantly obvious to anyone who reviews the public record on the matter: These markets have been interfered with on numerous occasions. Our primary concern is 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.

We have not taken a position on the wisdom of intervention in this paper, largely because exceptional circumstances could argue for it. In many respects, for instance, the apparent rescue after the 1987 crash and the planned intervention in the wake of September 11 were very defensible. Administered in extremely small doses and with the most stringent safeguards and transparency, market stabilization could be justified.

But a policy enacted in secret and knowingly withheld from the body politic has created a huge disconnect between those knowledgeable about such activities and the majority of the public who have no clue whatsoever. 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 non-public government policy, the major Wall Street firms evidently responsible for preventing plunges no longer must compete on anywhere near a level playing field. It is most unfair that the immensely powerful have been further ensconced in their perched positions and thus effectively insulated from the competitive market forces ostensibly present in our society.

In addition to creating a privileged class, the manipulation also has little democratic legitimacy in the sense that the citizenry has not given its consent. This has tangible ramifications. By not informing the public, successive U.S. administrations have employed a dangerous policy response that is subject to the worst possible abuse. In this regard, the line between national necessity and political expediency has no doubt been perilously blurred.

We can only urge people to see what the evidence indicates and debate what is and ought to be a very contentious matter. The time for such a public discussion is long overdue.

Key points:

1) The New York Federal Reserve official in charge of the System Open Market Account has two vital roles which are carried out in his function as a member of the U.S. Treasury. He is responsible for managing the Exchange Stabilization Fund (ESF) and the foreign custody accounts held at the NY Fed.

2) The Fed is a proxy for the treasury. The treasury doesn't have the facilities to conduct open market operations (buying/selling securities) so it uses the Fed's System Open Market Account (SOMA). This misleads people into thinking the Fed is the one responsible for manipulating markets.

3) Wall Street firms may not even know for whom they are buying the futures contracts, as orders coming from the Fed's SOMA can be attributed to foreign custody accounts held at the NY Fed.

4) Interventions apparently started as a stopgap measure which morphed into a serious moral hazard situation, with market manipulation an endemic feature of the U.S. stock market.

5) The two Greenspan quotes which shows how the treasury lead the way towards more market manipulation:

I seriously doubt that, Tom. I am really sensitive to the political system in this society. The dangers politically at this stage and for the foreseeable future are not to the Federal Reserve but to the Treasury. The Treasury, for political reasons, is caught up in a lot of different things.

We have to be careful as to precisely how we get ourselves intertwined with the Treasury; that is a very crucial issue. In recent years I think we have widened the gap or increased the wedge between us and the Treasury…. In other words, we have gone to a market relationship and basically to an arms-length approach where feasible in an effort to make certain that we don't inadvertently get caught up in some of the Treasury initiatives that they want us to get involved in. Most of the time we say "no."

6) At the January 31, 1995, meeting the Federal Reserve's general counsel revealed that the ESF conducted previously undisclosed gold swaps

7) Mr. Fisher (who ran the Fed's SOMA) SWAPED intelligence and rumors with traders and dealers from his office in the Fed.

8) It was during Q1 of 1990, as the Japan bubble was bursting, that massive S&P futures buying began to be used extensively by the trusted agents of the PPT, big "name" brokers in New York. During the crises of the late 90's, this massive buying increased even more.

9) John Crudele wrote in a February 20, 1990, article that "the stock index futures markets were buzzing with rumors that Washington was putting pressure on big trading houses to give the market a lift." This shows that it is Washington/treasury which drove big trading houses to manipulate the market.

10) Goldman Sachs was used most often as a go-between the treasury and Wall Street.

11) Working Group and the unspoken PPT function as an informal coordinating body which includes the private sector and “manages” US markets.


I will go into everything in more detail tomorrow.

Market manipulation keeps marching as goal is triggered - retailers rush in at the highs

Here is a chart from Zerohedge who also follow the manipulation closely and have shown in many cases how Goldman and JP Morgan keep on doing so.
This is not new as I also saw the same pattern in the 2006/7 advance which was also manufactured pretty much in the same way.
The day before Bernanke made his surprise rate cut outside the regular FED schedule on a Friday - Goldman had bought tons of calls and made a killing on those in a few days.

Aim of the operation is to force in long only funds sitting on cash and the retail investor and they succeed as people are rushing in and more will rush in after the brief correction markets will make new highs later this summer with SPX going above 1000 briefly - I recommend to be a heavy seller above 1000 up to 1050.

That's a good one

enjoyed to read it - you may too

Excerpt
http://wallstcheatsheet.com/?p=574

Categorized | Satire

FOMC Statement

Written by Damien Hoffman

Press Release


PRheader

Release Date: June 24, 2009

For immediate release

Information received and manipulated since the Federal Open Market Committee met for lavish meals and chit-chat in April suggests that the pace of economic contraction is slowing when we tweak our models to add seasonal jobs that don’t truly exist. Conditions in financial markets have generally improved in recent months because the markets were oversold on a technical basis and needed to breathe before the next leg down. Household spending has shown further signs of stabilizing if you heavily weight consumption of goods at Family Dollar Store. However, spending on all other things remains constrained by ongoing job losses, lower housing wealth (don’t try to understand how this can happen simultaneously with stabilizing household spending), and tight-ass credit. Businesses are giving a boot camp haircut to fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with shitty sales. Although economic activity is likely to remain weak for a long, long, long, long time, the Committee continues to anticipate that policy actions to stabilize financial markets and otherwise incompetent institutions, artificial fiscal and monetary stimulus, and manipulated market forces will contribute to an almost imperceptible resumption of sustainable economic growth in a context of price stability ex-necessities such as food, gas, and everything reliant on gas to get to the retailer.

The prices of energy and other commodities have risen a shit-ton of late. However, we have a dream that our little children will one day live in a nation where substantial resource slack is likely to dampen cost pressures. Thus the Committee that caused this problem by pumping floods of cash into the economy under former Chairman Greenspan now expects that inflation (ex-necessities) will remain subdued for some time.

In these circumstances, the private for-profit entity called the Federal Reserve will employ all available tools (e.g., printing a tsunami of your currency) to promote a psychologically-driven, temporary, and artificial economic recovery and to preserve price stability at the Dollar Tree. The ignoramus Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent so bankers can have free money with which to charge you interest, and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period because there is no real economic activity to generate profits otherwise. As previously announced through perpetual propagandous press releases, Chairman Bernanke’s sweet 60 Minutes infotainment, and scripted Fed executive speeches, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets so we don’t have another Depression and civil unrest, the Federal Reserve will use your money to purchase a total of up to $1.25 trillion of near-worthless agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will use more of your hard-earned money to buy up to $300 billion of Treasury securities by autumn, or at least before you need to feel good when holiday shopping begins. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook that we are trying hard to manipulate with our fat-fingered visible hand, and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its, um, our (i.e., us and the public at large), I mean … its balance sheet and will make adjustments to its credit and liquidity programs as warranted to keep the Sheeple living in a consumption induced coma while the Chinese continue to become our largest lender and, ulitmately, our owners.

Voting for the FOMC monetary policy action were the incredibly incompetent private executives of the (not) Federal Reserve: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

In case you are brain-dead, this is a satirical reconstruction of a FOMC Statement. If you have more than one brain cell, put it to use and do not make investment decisions on this parody.

Wednesday, June 24, 2009

The AIG bailout turns into an apparent Goldman scam

I think the evidence is very clear and brought before a jury Hank Paulson would be in deep trouble with an very obvious conflict of interest to say the least.
The troubling part is for me rather that the whole down move was triggered by two firms who work together on many area's these days. I am talking of JP Morgan and Goldman as JP Morgan collateral call against Bear Stearns brought them down and Goldman triggered not only AIG's collapse but also profited from it in any way. That they were allowed to collect 100 % sponsored by taxpayers money after they brought it on the taxpayer is cynical since counterpart risk is not something they are responsible for. In the light that Goldman is preparing for a record bonus payout completely sponsored by taxpayers is a punch into the mainstream face. It is not clear at all why there is no full fledged investigation into the more than suspect undertakings of Paulson and Goldman and a shame on the Obama administration.
Goldman and JPM are the drivers by this manipulated rally and a very good article of Market skeptics (see link below its a must read) brought up some clear evidence that Goldman and the government were involved in market manipulations all together as they seem to be what I suspected for a long time the broker for the PPT team but they also trade on their own book on behalf of this in formations which would be against any legal rules since sponsored by the government might never be investigated. The Treasury secretary is in charge off the PPT ( Plunge Protection Team) which was Paulson at the operation sits at the trading floor of the FED which was run by an ex Goldman as well.

http://www.marketskeptics.com/2009/06/still-researching-corruption-at.html

Excerpt from Bloomberg

AIG Trading Partners Squeeze Insurer Before Bailout (Update2)


By Hugh Son and Richard Teitelbaum

June 22 (Bloomberg) -- Goldman Sachs Group Inc. and Societe Generale SA extracted about $11.4 billion from American International Group Inc. before the insurer’s collapse as the firms demanded to hold cash against losses on mortgage-linked securities, according to regulatory filings.

Goldman Sachs got $5.9 billion and Societe Generale received $5.5 billion of about $18.5 billion in collateral paid by AIG in the 15 months before the September bailout. The payments helped settle AIG’s obligations on $62.1 billion of credit-default swaps that the Federal Reserve later removed from the New York-based insurer as part of the rescue. Officials at AIG, Goldman Sachs and Societe Generale declined to comment.

“When counterparties see trouble coming, they’ll do everything they can to get their money back, even if it means the death of the other firm,” said William Cohan, a former JPMorgan Chase & Co. investment banker and author of “House of Cards,” about the financial crisis.

President Barack Obama proposed an overhaul in regulations last week to prevent the failure of systemically important institutions such as AIG, which needed a $182.5 billion government rescue to stave off bankruptcy. Banks that bought swaps as protection against losses on mortgage-linked assets demanded cash collateral as the market value of the securities plunged last year, overwhelming AIG’s ability to pay.

“It was precisely that drain of liquidity to Goldman and SocGen that put AIG in a position of illiquidity and ultimately threw them into the government’s arms,” said Charles Calomiris, a finance professor at Columbia Business School in New York.

Collateral Damage

AIG disclosed a complete list last month of payments made to settle the $62.1 billion in derivatives. The figures for the period before the bailout were calculated by subtracting post- rescue payments disclosed in March from the sum of more than 150 transactions outlined in May.

Including collateral from before and after the rescue and payments made by Maiden Lane III, a vehicle created by the Fed to retire the swaps, Goldman Sachs received about $14 billion from AIG, Societe Generale got $16.5 billion, and Deutsche Bank AG received $8.5 billion. More than a dozen more banks got a total of about $23.1 billion.

Michael DuVally, a spokesman for New York-based Goldman Sachs, the most profitable securities firm before converting to a bank last year, declined to comment. Stephanie Carson-Parker of Societe Generale, France’s second-largest bank, also declined to comment, as did AIG’s Christina Pretto and Deutsche Bank’s Ted Meyer.

‘Protecting Itself’

Goldman Sachs was more aggressive than other firms in seeking collateral from AIG because the bank’s models showed a greater decline in the value of securities that had been insured, said two people with knowledge of the matter, who declined to be identified because the contracts were private.

“Goldman is to be congratulated for seeing the problem ahead of others and protecting itself from the impending failure of AIG,” said William Poole, former president of the St. Louis Fed, in an interview last week. “It’s not the responsibility of any private firm to determine what the public interest is -- that’s why we have a government.”

Goldman Sachs bought protection on about $20 billion in assets from AIG, meaning the company was counting on $10 billion from the insurer after the underlying holdings lost about half their value, Goldman Sachs Chief Financial Officer David Viniar said in a March conference call. The firm had “no direct exposure” to AIG because it held about $7.5 billion in collateral and hedged its remaining $2.5 billion risk to the firm’s potential failure, Viniar said. The $7.5 billion tally includes trades unrelated to Maiden Lane.

Seldom Traded

“All we did was call for the collateral that was due to us under the contracts,” Viniar said on March 20.

Arriving at a value for the swaps was “challenging” because of the dearth of pricing information for securities that seldom traded, increasing the possibility of disputes with counterparties about how much collateral was owed, AIG said in a November filing.

Joseph Cassano, who ran the AIG swaps unit until March 2008, told investors at a December 2007 conference that AIG rejected some banks’ demands for collateral. The Department of Justice is probing whether Cassano, 54, misled investors and auditors about the contracts, a person familiar with the inquiry said in April. Joseph Warin, a lawyer for Cassano, didn’t immediately return a call seeking comment.

‘They Go Away’

“We have, from time to time, gotten collateral calls from people,” Cassano said on Dec. 5, 2007. “Then we say to them, ‘Well, we don’t agree with your numbers.’ And they go, ‘Oh.’ And they go away.”

Credit-default swaps allow investors to buy protection against a possible default. The contracts pay the holder face value for the underlying securities or the cash equivalent should a borrower fail to repay debt.

Banks received the full face value to retire the Maiden Lane III holdings by being allowed to keep $35 billion in collateral and getting $27.1 billion in payments to retire the contracts.

“Our government effectively made a cash infusion through AIG and this Maiden Lane vehicle to Goldman and the other banks,” said Haag Sherman, who helps oversee $7.5 billion as chief investment officer of Houston-based Salient Partners.

Goldman Sachs and JPMorgan were involved in a failed effort on the morning of Sept. 15 last year to save AIG with a $75 billion private credit line, AIG said in the November filing. Later that day, the insurer’s credit rating was downgraded, triggering a fresh round of collateral calls and forcing the federal rescue.

Fed Contribution

After then-Treasury Secretary Henry Paulson, a former Goldman Sachs CEO, decided that the government would intervene to rescue AIG, he picked Edward Liddy, a former Allstate Corp. CEO who served on the board of Goldman Sachs for five years, to lead the insurer. Neil Barofsky, special inspector general for the Troubled Asset Relief Program, is probing whether AIG paid more than necessary to banks to settle the swaps.

The insurer said in November that Maiden Lane III would be funded by as much as $30 billion from the New York Fed, with AIG contributing up to $5 billion. A separate facility, with as much as $22.5 billion from the New York Fed, was established to wind down the insurer’s securities-lending program.

In addition to the $52.5 billion for the two vehicles, the government committed to invest as much as $70 billion in the company and provided a $60 billion credit line.

Tuesday, June 23, 2009

NDX tech update

The NDX has a razor sharp performance in wave terms as we ended as expected the bigger wave 3 in 5 waves and have now entered wave bigger 4 down. The very likely target is around 1340 which is a 38 % retracement and should not exceed 1280 less likely.
After listening to the disgraceful comments by the talking heads about the golden cross ( they have no clue what they are talking about) - I share a general observation with you with a very high probability in daily terms approx. 2 months after a golden cross ( 50 crossing 200) a sharp pullback occurs toward the cross level. Happens to be around 1340 matching the retrac. level. After this correction we will see wave 5 up for the final target of this years upside sucker rally which should be 1580 -1600. Should be reached by August and you need to exit all longs then except for special situations which should be no more than 10% of your overall stock exposure.

Monday, June 22, 2009

Oil tech update and general thoughts

Wave A up in Oil is in as it is for stock markets as they trade in sink with each other. We can expect now a retreat back to the 50/5 area before wave C up will complete the corrective upmove around 78/80.
Starting in Q4 we will see a severe downturn again in overall economic activity which will undermine the demand even more and we can expect the retest of the lows but at some point we will see a decoupling of Oil from the stockmarket and economic correlations as the supply situation might change with plenty geopolitical risks developing a rising momentum and we can even expect that some big oil exporters might have rather interest in heating up the tensions in order to keep prices up. Chavez already gave such hints but also Russia will have a severe interest in keeping oil above 50 rather closer to 100 in order to survive the global downturn. What I am trying to say that with another severe downturn in economic activities stocks will fall to new lows but commodities might take a different path after going both down initially but the central banks throwing money even faster this time also on the real economy will create inflationary pressure.

Trichet and the ECB -Its kind of funny that this morons act like Gurus

I can not recall that any of this new declared Gurus from the FED to the ECB ever mentioned that there would be a downturn but they seem to have specific skills calling the bottom? - give me a f... b.. - pack your stuff and have the decency to go. It is outrageous that this people still have their jobs although they are doing harm in the deepest sense and that the public tolerates it.
The depression or crisis was foreseeable as If I could see it without having the workforce and think tanks why did they fail to do so - or was that a deliberate undertaking misleading people as they do now again. The top positions in all this area's are recruited by the same breed of people all members of the CFR or Bilderberger as official outlets but you can bet anything you have that they also mingle in other clubs like Freemasonsit versions off different types in the highest ranks just see through the ranks of Skull and Bones which was founded by the biggest Opium smuggler of those times and also started the Republican Party. The Bush family are members for 4 generations now with 2 presidents. Trichet has made an unbelievable bad job as European banks might be overall in bigger trouble compared to American banks but nobody calls for him to resign. A regular person with 5% of Trichet's ( and stuff) performance would have been fired months ago. Why is it to much these days to expect that people are prudent and have integrity - it may be that Clinton started the global erosion with his public lies and since than nobody seems to care anymore. Denmark is so rotten it needs to die only from the ashes a new foundation might be possible it seems to me for the whole society - definitely not the New World Order as some laws in the Universe do work and a group of elitist morons is not meant to rule the world and put the regular guy into slavery- that is the idea they have since they did it for a few hundred years. After they eliminated all the kings which was done over centuries because democracies are easier to control for them as they can make anyone they like President of chancellor.

Worldbank and IMF give conflicting signals as the IMF has recently improved its outlook the Worldbank plays the bad Cop now.

Excerpt

WASHINGTON -- Developing countries' net private capital inflows fell 41% last year and will be cut nearly in half this year, the World Bank said in a report that offers little hope that the countries will provide the spark for the global economic engine.

Meanwhile, European Central Bank Gov. Jean-Claude Trichet said Sunday that the ECB expects the global economy to moderate its slide over the remainder of the year and resume climbing in 2010.

The World Bank estimated in its annual development-finance review that gross domestic product in developing countries will grow just 1.2% this year, well off the 8.1% pace in 2007 and the 5.9% gain in 2008.

The report, issued at a conference in Seoul, projects a 2.9% contraction in global GDP this year, as rich countries contract by 4.5%.

"The crisis of the past two years is having dramatic effects on capital flows to developing countries, and the world appears to be entering an era of lower growth," World Bank Chief Economist Justin Lin said.

The report said net flows of private capital to developing countries fell to $707 billion in 2008 from $1.2 trillion in 2007, and it projects they will fall an additional 48% this year to $363 billion.

"Net private capital flows will be insufficient to meet the external financing needs of many of these [developing] countries, and in view of the intense fiscal pressures triggered by the crisis, the prospects for large increases in aid flows are dim," the report said.

"The bulk of new commitments by international financial institutions will go to middle-income countries in 2009, and workers' remittances to low-income countries are projected to decline by 5%. Such sobering facts reinforce the importance of broad international agreement to mobilize the necessary resources to achieve" United Nations' goals for alleviating world poverty.

On a regional basis, the report offered the following outlook for developing countries:

East Asia and the Pacific: China's fiscal-stimulus efforts should spur a recovery in the region, starting later this year, with regional GDP rising 6.6% in 2010 and 7.8% in 2011.

Europe and Central Asia: GDP is projected to fall 4.7% in 2009, and grow by just 1.6% in 2010.

Latin America and the Caribbean: Regional GDP is seen falling by 2.3% this year, then growing about 2% in 2010.

Middle East and North Africa: While less directly affected by the global credit crunch, growth in the region is expected to be cut roughly in half this year, to 2.1%, before accelerating to 3.8% in 2010 and 4.6% in 2011.

South Asia: GDP is expected to grow by 4.6% this year, followed by 7% next year and 7.8% in 2011.

Sub-Saharan Africa: Sharp declines in remittances and export prices will take a heavy toll on a region that was growing at a 5.7% annual rate in the past three years, with growth slowing to 1% in 2009 and 3.7% in 2010.

In Paris, Mr. Trichet said in an interview with French radio station Europe 1 that the Iran conflict means "there is clearly an additional risk for the international economy," but that Iran isn't the only area of instability in the world. That is all the more reason to proceed quickly with the program put together by the Group of 20 countries in April to deal with the global economic crisis and regulatory reform, he said.

He repeated that the ECB expects the global economy to recover next year. "We expect a slowing in the decline of activity," Mr. Trichet said. "The first quarter was very bad; the following quarters will be less bad, until the end of the year when one can expect pretty much stability in terms of activity," he added. "We should record a resumption of positive activity over the course of next year."

But Mr. Trichet cautioned that governments must gradually address their bloated budget deficits as the economic recovery gathers pace next year.

Insiders Exit Shares at the Fastest Pace in Two Years

Not that this guys are particularly smart but they know for real that this green shoot propaganda is nonsense. Just study the job losses in an composed picture and you see we have the steepest job losses in decades outpacing the so called recessions by 100% - this is not a recession we are in the early stages of a depression and the remedy measures are slowing it down for a while but can not turn the tides. How could they we are in the biggest debt trap ever although we had a good run for almost 20 or even 80 years counted from the last depression. Increasing debt as a standard equation works for nobody but in the tough times will be a guarantee for a steep consolidation phase which should last 10-20 years if the right things are done. Look into history books and you see who the big rulers of the world went bust and with them the empire. Printing a few trillions does not solve anything it rather makes things worse medium term. The so called deleveraging has not even started yet the consumer has to get to I spend what I have terms best case but rather turn long term into negative spending and positive saving. he needs to repay his debt since in the markets he can not earn those interests he has to pay. In a world of negative interest rates paying down debt is anyway the smartest thing to do. That is a long term undertaking over a decade or two so what can a stimulus package with borrowed money worth 3-4 % of GDP do nothing at all. The dangerous part is rather the trillions the government throws at the banks which will create huge losses go forward. This 70 bil returning TARP money are just a distraction from reality. Banks have cut back in lending and just try to use the steep curve to earn money for themselves. The Mainstreet gets higher interest and fees charged in the meantime. DC creates entities and wants to give the wrong people like the FED which is not a government institution more power while watching how the banks keep screwing taxpayers on all ends.

Excerpt

June 22 (Bloomberg) -- Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc. Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years.

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.

“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”

Banks Downgraded

The S&P 500 slid 2.6 percent to 921.23 last week, the first weekly decline since May 15, as investors speculated the three- month jump in share prices already reflected a recovery in the economy and profits. Stocks dropped as the Federal Reserve reported that industrial production fell in May and S&P cut credit ratings on 18 U.S. banks, saying lenders will face “less favorable” conditions.

Futures on the S&P 500 slid 0.5 percent at 8:53 a.m. in London after the Washington-based World Bank said the global recession this year will be deeper than it predicted in March.

Insiders increased their disposals as S&P 500 companies traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data show. Equities climbed as the U.S. government and the Fed pledged $12.8 trillion to rescue financial markets during the first global recession since World War II.

Executives at 252 companies in the S&P 500 unloaded shares since March 10, with total net sales reaching $1.2 billion, according to data compiled by Princeton, New Jersey-based InsiderScore, which tracks stocks. Companies with net sellers outnumbered those with buyers by almost 9-to-1 last week, versus a ratio of about 1-to-1 in the first week of the rally.

Bear Stearns

“They’re looking to take some money off the table because they think the rally will come to an end,” said Ben Silverman, the Seattle-based research director at InsiderScore. “It’s the most bearish we’ve seen insiders, on a whole, in two years.”

The last time there were more U.S. corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the data show. The next month, two Bear Stearns Cos. hedge funds filed for bankruptcy protection as securities linked to subprime mortgages fell apart, helping trigger almost $1.5 trillion in losses and writedowns at the world’s biggest financial companies and the 57 percent drop in the S&P 500 from Oct. 9, 2007, to March 9, 2009.

Insider selling during the height of the dotcom bubble in the first quarter of 2000 climbed to a record $41.7 billion on a net basis, according to data compiled by Bethesda, Maryland- based Washington Service. The sales coincided with the end of the S&P 500’s bull market and preceded a 2 1/2 year slump that erased half the value of U.S. equities.

‘Clouding the Picture’

Bill Latimer, the director of research at O’Shaughnessy Asset Management, says insider transactions aren’t an accurate barometer of stock performance because executives often reduce their stakes for reasons that have little to do with a company’s prospects.

“When you’re dealing with an individual’s buying or selling, you’re clouding the picture with what their specific financial situation may be,” said Latimer, whose Stamford, Connecticut-based firm oversees about $4.5 billion.

During January 2008, executives at New York Stock Exchange- listed companies bought more shares than they sold for the first time since 1995, Washington Service data show. The S&P 500 slumped 40 percent in the next 12 months.

Citigroup Inc. CEO Vikram Pandit purchased 750,000 on Nov. 13, paying an average of about $9.25 apiece, the New York-based bank said in a U.S. Securities and Exchange Commission filing. Citigroup closed last week at $3.17.

Unrestricted Stake

U.S. laws require executives and directors to disclose stock purchases or disposals within two business days to the SEC.

Sharer, the chairman at Thousand Oaks, California-based Amgen since January 2001, disposed of $1.76 million worth in the world’s largest biotechnology company on May 12, an SEC filing showed.

The sale of 36,411 shares trimmed his unrestricted stake by 13 percent and came three weeks after the company reported first-quarter earnings that trailed analysts’ estimates. Between May 22 and June 9, five Amgen officers, including George Morrow, the executive vice president for global commercial operations, and Roger Perlmutter, the executive vice president for research and development, sold a combined $6.4 million.

“From time to time, and within appropriate trading windows, Amgen executives exercise their right to sell shares for tax planning, to prevent stock option expiries and other purposes,” spokesman David Polk wrote in an e-mailed response to questions.

Eight-Month High

Federated’s Christopher and Thomas Donahue together sold about 65,000 for $1.68 million on June 4 and June 5 through a family trust, according to SEC filings. The transactions were the biggest outright sales for each since December 2005 and followed a 52 percent rally this year that recouped more than a third of 2008’s stock losses.

The executives began selling two days after the third- biggest U.S. manager of money-market funds, which was founded by their father, John Donahue, in 1955, reached an almost eight- month high compared with reported profits.

Federated said in a statement on June 8 that the officers sold as part of a “longer-term” diversification strategy. Ed Costello, a spokesman, said the Pittsburgh-based company had no comment beyond the news release.

“If these folks don’t have confidence in the company and don’t feel that it’s an attractive value, then why as a shareholder would I think it’s a good value?” said Jason Cooper, who helps manage $3 billion at 1st Source Investment Advisors in South Bend, Indiana.

Stock Options

Seven directors at CME Group Inc., the world’s largest futures exchange, disposed of almost $3 million since May. John Pietrzak sold for the first time since becoming a director of the Chicago-based company in July 2007, according to data compiled by InsiderScore. Board member Joseph Niciforo cut his stake by 28 percent.

“It’s our policy to never comment on any executive sale of shares,” said Allan Schoenberg, a CME spokesman.

Nine insiders at TiVo Inc., the maker of digital video recorders, sold $10.6 million between June 3 and June 11, after the Alviso, California-based company jumped to a five-year high. That was the most by value over a one-month period in more than five years, InsiderScore data show.

A 53 percent jump in TiVo’s stock on June 3 initiated trading plans of some insiders such as CFO Anna Brunelle, who cut her holdings by 17 percent, according to regulatory filings to the SEC compiled by InsiderScore.

TiVo Director

The so-called 10b5-1 programs allow executives to cash out a portion of their holdings when stocks reach predetermined prices. Brunelle also sold through her plan from exercising options with average expiration dates about seven years away, InsiderScore data show.

Geoffrey Yang, a TiVo director since 1997, cut his stake by 8.4 percent, raising $1.5 million. The sale was the first by Yang in almost two years. Chief Technical Officer James Barton reaped an 89 percent profit from selling $2.8 million that he received from exercising stock options that were due to expire in four years, according to InsiderScore.

Whit Clay, a spokesman for TiVo, declined to comment.

Electronic Arts Inc. Chairman Lawrence Probst and two other executives sold a combined $1.2 million worth since May 28, after the world’s second-largest video-game publisher jumped 49 percent from an almost nine-year low.

‘Out of Steam’

Probst, who joined the Redwood City, California-based company in 1984 and was CEO between 1991 and 2007, trimmed his holdings by 25,000 shares on May 28, SEC filings show.

Frank Gibeau, president of the EA games division, slashed his stake by 66 percent after unloading about $538,300 worth the same day, the filings show. The sales came three weeks after Electronic Arts, which makes “Madden NFL,” the world’s most- popular sports video game, reported a narrower fiscal fourth- quarter loss than analysts estimated.

Jeff Brown, a spokesman for Electronic Arts, didn’t immediately return a telephone call seeking comment.

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