Mlsoft - PPT - Thanks for the pointers. I read quite a few of the articles. It is a very interesting subject, and one that I've thought about a lot recently.
I really can't connect the PPT to the bear-market rallies that we've seen over the last two years, with the exception of the immediate aftermath of 9/11. For one thing, I don't see how the few people involved are able to goose the Market. Granted, the Fed can lower rates, but until last week, they hadn't done that in a while. Even when they did, the Market's answer was often to decline. The Fed can increase the money supply, but that does not have an acute effect on the Market, only a gradual one. As for the other participants, I don't see a direct connection to rallies, other than occasional arm-waving they might engage in.
What I think actually is happening would seem to be, on the face of it, somewhat less likely. I suspect an informal, even virtual, conspiracy of DaBoyz, as you called them. I am normally very skeptical of conspiracy theories, if for no other reason that I think it's nearly impossible to keep them secret. I think, though, that there can be an almost tacit understanding between the conspirators, and that they can prepare to act when certain conditions are present:
1) Market indicies down to lows, or near lows.
2) Short selling at a crescendo.
3) Some piece of news coming up that can "plausibly" be used as an excuse (CSCO earnings, for example). Along these lines, "earnings season" is now the best time for generating rallies, because the warnings and lowered expectations have made it almost certain that the great majority of reporting companies will appear to be "doing well".
When these conditions are met, the "conspirators" have, probably via phone or lunch conversations, agreed that the Market is presenting a "buying opportunity". There's nothing really wrong with that agreement, as long as they leave unspoken the assumption that they will sell out to the suckers and short-coverers just as soon as they think they've achieved maximum returns.
Once they start buying, they do it whole-hog. To make it easier, and to make surer they are goosing the appropriate indices, they do a lot of buying of SPY's and QQQ's, so that the prices of those ETF's lead the prices of their constituent stocks.
If they have timed it correctly, they catch the bears with their shorts down, and scare them into covering. Considering how large the short positions have gotten, and how many people are now engaging in short-selling, the short-covering rallies do not have to be just one- or two-day affairs any more. The most stubborn or shorts, seeing the failure of earlier bear-market rallies, may hang onto their positions for weeks, even in the face of relentless bidding up of prices.
At the same time, the yahoos and mo-mo boys have woken up and are jumping in. You'd think that, after 2 1/2 years of decline, these people would be broke and dispirited, but neither seems to be the case.
Between the short-coverers and the yahoos, DaBoys have ample opportunity to sell out (and buy more stable stocks, if they have to be fully invested).
As mentioned above, "earnings season" is the best time for this. It's no coincidence that three of the four earnings seasons this year have been occasions for big rallies. The October rally started just a little bit early (maybe a week early), but I would suggest that the 11/5 election had quite a bit to do with that. DaBoys (and even the PPT, if you will) very much prefer a Republican administration and Congress, so that they can relax or prevent oversight of the big players.
So much for now. Please let me know what you think. Especially, give me some idea of the "how" by which you believe the PPT influences the Market.
On another note, do you have any thoughts about RIMM? I got nailed the other day on their announcement that they were licensing some software to Nokia. I have no idea if this is a big deal, or just sounds like one. I really was caught off guard, because their management quite recently predicted heavy losses next year, and no breakeven until 2004. Since they must have known about the Nokia and Palm deals, I have to wonder if they were lying about their prospects, or if these deals just aren't as great as people seem to think. Any ideas?
AI
