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Stock Market Manipulation Print
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Sunday, 05 May 2019 08:36

Stock market manipulation

The second story is how the stock market is about to collapse. The story is getting a little stale now as each mini sell off leads to another rally. Is it because the US Fed has put on hold any more rate rises or is it because of the impending wonderful US-China trade deal, etc?

Back in 1982 stock market manipulation was made legal. Not all manipulation of course but just share buy backs by companies. US congress is now getting hot and bothered. They have only just realised that Trumps tax cuts, and offshore repatriation of overseas company profits, were spent buying back their own shares, not paid out as special dividends. And so they want to ban buybacks again.

Buybacks have reduced the float of shares available and now represent a substantial lump of the S&P's market capitalisation. Without buybacks and Sovereign nation buying such as the Swiss National Bank, would the market be as High as it is? Unlikely.

Who benefits from buybacks? Just the insiders from share options and only those who decide to sell their shares. You can read more here.

Goldman Sachs have pointed out that should buybacks be banned, the stock market will collapse. Since 2007/8 over $5trillion has helped fuel the market with $900 billion last year and much the same expected in 2019.

This could be the biggest risk to the Trump rally, but by looking at the S&P pushing towards it's 2016 high the market this week suggests there is no chance of congress reversing that 1982 directive.


From the blog

Think the Fed's Emergency Rate Cut is Proactive?

Think the Fed's Emergency Rate Cut is Proactive? Think Again.

As we all wait for the great man Donald to announce his "very, very, substantial relief" for the US economy, we wonder if the markets will take him at his word and buy the dip. So far, so good - today.

Back in 2012 it worked out for Mario Draghi's  " We will do whatever it preserve the Euro...". So will confidence return?

Take a look at this Elliott Wave International article, perhaps the Fed really is omnipotent?!


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