Excerpt from a commentary that Dan posted yesterday about last weeks rumor. Just in case some of you missed it.
>>>Such mood enhancement is decided to be carried off by the floating of a sensational rumor, something that will inject a jolt of confidence into traders and stampede the equity shorts to cover and the gold longs to dump. This will accomplish two things. Number one it will bolster JPM's and Goldman's manipulation trades making them that much more effective while requiring less money. And number two, it will provide a reason for the sudden turnaround, which will diminish any suspicion about blatant intervention by all the cynics and conspiracy theorists.
Seeing that one of al-Qaeda's top operatives, Khalid Shaikh Mohammed, has just been captured in Pakistan, it is decided that the rumor plant will be that two of bin Laden's sons have also been captured. This will be positively electrifying to the market, because it will imply that the apprehension of bin Laden himself is close at hand, and that al-Qaeda is just about finished.
To initiate the plan, PPT authorities call a low level CIA contact in Pakistan. They tell him to plant the rumor that U.S. forces have just arrested two of bin Laden's sons in a fierce gun battle near the Afghanistan border. The CIA contact is instructed to pick a local village politician to relay the information to, someone he knows will spread it. Baluchistan Home Minister Nawab Sanaullah Zahri immediately comes to the CIA contact's mind. Zahri is well respected among his peers, but not overly sophisticated in the ways of the U.S. Government. So he readily believes the CIA contact when he phones him with the false report about the capture of bin Laden's sons. Being human, Zahri is eager to spread such startling news right away. Being a public official, he seeks to publicize it and notifies several reporters in the area. Being human, the reporters accept the rumor as "confirmed" because it came from a "public official" with CIA connections. They then rush it onto the international wire services.
The frenzy begins as the news hits New York City about 11 AM and proceeds to make the rounds. CNBC quickly picks it up, and being human, they run with it over the air. Flashing "Alert" graphics appear on their telecast, and gushing talking heads spell out the wondrous news to millions of investors throughout the world. The report streaks throughout the trading floor in the way electricity lights up a city after a blackout. The story is reported and enhanced repeatedly. "President Bush to soon make an announcement about the capture!" flashes on one of CNBC's bulletin bands. Fear pulverizes the shorts, and they stampede to cover. Longs rush in to catch the train before it leaves the station. Equities rally big time, while over at Comex just the opposite is happening. PPT's banker buddies have shorted gold substantially and the price of all delivery months tank over $10.00 in 30 minutes. The threatened move past $360 is defeated. Long closeouts descend into the pits like balloons coming down at a political convention.
After the dust settles at days end, a different picture evolves, however. A Los Angeles Times story reports on the wondrous news, "Although the latest report came out of Pakistan, Major Gen. Rashid Qureshi, a presidential spokesman, accused anonymous U.S. sources in Washington of feeding, in some cases, what he called false information to reporters."
In an interview on Friday Qureshi states, "I don't know how these reports based on Washington sources are claiming that there have been arrests in Baluchistan. I have checked up with the intelligence agencies, and there is absolutely nothing. I don't say that sources in Washngton are liars, but they are certainly not telling the truth." [Reprinted in The Dallas Morning News, March 8, 2003, p. 18A]<<<
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