Back in August things were falling apart. Macro-economic indicators were steadily worsening, corporate profits and revenues were suddenly falling, and US unemployment came in far worse than expected.
Of course in today's bizzarro logic, that meant only one thing: the equity “”markets”” were going to be bid up, and gold was going to be held in check.
Both have not only come to pass, but have done so in spectacular fashion.
The S&P 500 is up more than 230 points since the jobs disappointment with hardly a break along the way, while commentators everywhere are left scratching their heads:
What are we to make of this?
Well, one possibility is that as we are in the grips of the largest bubble in all of human history, we should expect its expansion to exceed our wildest imagination — and then go a bit further than that. Perhaps that’s where we are.
More likely, however, is that the world’s central banks are on a mission, one on which they believe they must nt fail. That mission has narrowed down to one thing and one thing only: keep the world’s financial markets elevated and heading UPWARDS.
That is, I fully believe that an audit of the Fed would reveal that it or its proxies are buying the heck out of this “”market”” at key moments to prevent it from failing. Do that more than twice and all of the various so-called independent market traders get the message. Once that happens, they more or less do the central banker’s bidding for them without being prodded too vigorously.
This is why the Fed and other central banks have a “preferred buyer incentive program” at the CME, the key exchange in the world where the most effective and highly leveraged trading instruments are bought and sold. Nobody would ever dream of trying to influence the “”market”” by buying stocks directly – that's too slow and ineffective. Instead, any competent manipulator prefers to step into the futures and options markets and set the stage there.
That's much more effective, which explains why the central banks have those accounts and special buying programs there.
In a recent interview with Bill Black, the former bank regulator and expert on the current lack of effective bank regulations, he shared my long-held suspicion that the Fed has bought up very toxic MBS paper from the banks, not by accident, but as a matter of course. They did this to take some very bad debts off the books of the banks, and then sought to protect their "investment” by driving down interest rates so that mortgage rates would go down — so that, over time, their $1.3 trillion pile of steaming MBS paper would slowly become less of an issue.
by davefairtex 
