augieboo's PPT Archive

[augieboo]

How Stocks Turned Back From The Abyss
By John Crudelle, New York Post -- April 5, 2000
http://members.rogers.com/fallstreet1/plungeprotection/april500/april500.html

SOMETHING happened at around 1 p.m. our time
yesterday that pulled the stock market back from the
edge of the cliff.

Traders say it was almost like divine intervention. One
minute the Nasdaq was down 11 percent -- say it out
loud, "Eleven percent in one day" -- and then it suddenly
rallied several hundred points in the matter of an hour.

The Dow followed suit. Down 500 points around
mid-day, the blue chip index's decline -- along with the
horrible showing of over-the-counter stocks -- was
destined to make yesterday's market an unqualified
disaster for investors and the country.

Then, traders said, someone started buying large amounts
of stock index futures contracts through two major
brokerage firms -- Goldman Sachs and Merrill Lynch.
These transactions are usually done on the QT so we
don't really know how many of these contracts were
purchased.

And unless the brokers tell, there is no way of knowing
which of their clients were making the purchases.
Goldman wouldn't comment on this and Merrill did not
return a call for comment.

But traders said enough were bought to catch everyone's
attention. In fact, the buyers seemed to want people to
know they had an appetite for stocks.

Then the market rebounded.

It didn't go all the way back. At the end of the day the
Dow Jones index had still lost lost 56 points or half a
percent on the day. And the Nasdaq lost another 74
points, or the equivalent of a 1.77 percent drop.
Yesterday's loss by over-the-counter stocks nearly put
the Nasdaq index back to ground zero for the year -- in
two days all but 2 percent of its gain for the year was
gone.

It was real nice of Goldman and Merrill to stick their
necks out like that. In fact, it was downright
uncharacteristic for Wall Street outfits to put the thought
of possible losses aside for the greater good.

Because of the purely unselfish nature of what went on,
traders are naturally suspicious. Hell, so am I.

"I think some one or more persons saved the market
today. There was a suspicious urge to buy stocks at an
opportune time," says one trader. "Why drive the Dow
up 350 points in a half hour? That's never serious buying.
That's someone trying to establish prices," he adds.

I'm especially suspicious when the market suddenly
rebounds at nearly the very same moment that a member
of the Clinton administration -- economic advisor Gene
Sperling -- is on TV telling investors not to worry.

And there's the obvious connection between Goldman
Sachs and the administration, the Wall Street firm having
given Robert Rubin to the Clinton administration as its
Treasury Secretary.

Plus, what better way to make investors not worry than
by having the stock market recover a lot of the ground it
had just lost. That gesture almost makes a guy want to
buy some stock -- bottom fish, if you are into sporting
analogies.

I'm not saying that government intervention in a
collapsing market is wrong. In fact -- except for the
obvious contradictions with the free-market system -- it is
politically and socially a very right thing to do.

I've written about this before. And I've mentioned that
Washington has had a secretive group call the Working
Group on Financial Markets, made up of investment
industry and government people, that would be in just the
right position to rescue the market.

Informally the folks on Wall Street call this the "Plunge
Protection Team." In February 1997, the Washington
Post did a piece on this team, just in case you don't
believe it exists.

And while I can't swear that Goldman and Merrill are
captains of that team, they sure acted like it yesterday.


(:

augie