Yes. There is a plunge protection team and it was created by Executive Order by President Ronald Reagan. For obvious reasons, no president since has felt the desire to eliminate this executive order.
The PPT team consists of the following heads:
- Secretary of the Treasury
- Head of the Federal Reserve
- Chairman of the SEC
- Chairman of the CFTC
Their God-Like Power. The myth is that this “PPT” has vast power to control the stock market and the economy. This is just pure fantasy. The markets move in a phi structure just like any other living organism. Markets have a life of their own and crashes cannot be prevented.
Larry Summers, the father of negative interest rates, admitted in a Bloomberg interview that those in power can “NEVER” forecast a decline because it is a complex system.
My 30+ years of experience simply combat the reality of the God-Like power attributed to the PPT. I just do not see ANYTHING in the market behavior and patterns that would indicate something abnormal.
The reality is that stock market movements are complex and based on cycles and global correlations to other markets. Primarily a local market will move because of those reasons and because of capital flows in and out of the country. This has been the pattern for 100’s of years. Another reality is that If there is a panic, it usually happens before a close of the market for fear of the unknown. Thus, stories whispered amongst friends about the Plunge Protection Team stepping in and doing something powerful are fantasies created to allow adults to sleep well in the hopes that someone else is taking care of them. Kind of like a “tooth fairy” fantasy that maybe when you wake up in the morning “the money will be back in your account!”
If the PPT had real control to save us, why did we have a 3-year “Dot.com” bear market crash starting in late 1999 that wiped out 53% of retirement account value? Do you remember that it took until early 2007 to get back to even from that decline? Let me ask you, did the Plunge Protection Team leave money under your pillow any morning during the 2008 Financial collapse that wiped out roughly 50% of US retirement account values?
A similar fairy tail prevailed in Japan that the government would NEVER allow the Nikkei to fall. It did, and the Japanese PPT helped so much that it led to a 19-year depression in their stock market, but a 26-year economic depression which did not begin to shift trend until 2016,
So, the Plunge Protection Team is real, but so is their ability to do very little in terms of crash prevention.
Remember to brush your teeth!
InterAnalyst has been serving over 500,000 investors globally since 1990. Authoring hundreds of financial articles, publications, and almost a million buy and sell trading charts. Mr. Nespoli’s Premier Bull & Bear blog is been read by more than 500,000 investors globally.