STREET DOGS

Renowned US investor Asher Edelman was on CNBC’s Fast Money last week rehashing the old story about how a “working committee on markets”, known as the Plunge Protection Team, established under president Ronald Reagan to “stabilise” markets, is currently keeping US markets at near record highs.

According to Edelman, the team is “run by the head of the SEC, head of the Commodities Trading Group, secretary of the Treasury and head of the Fed”, reports only to the president and works with the banks, “typically, JP Morgan, Morgan Stanley, Goldman Sachs”, to execute orders on all exchanges when they feel the market “is not behaving as they would like it to behave”.

Commenting on the claim, The Reformed Broker, Joshua Brown, says it’s demonstrably ridiculous.

“Especially when you consider the fact that we’ve seen the market cut in half twice during the past 17 years, with dozens of instances of 10% and 15% corrections all along the way over the past 29 years since the end of Reagan’s term. The idea that there could be some clandestine, bipartisan shadow organisation, with enough money to prop up a global stock market, and the solemnity required to faithfully do so across a half-dozen presidential administrations and all manner of Congressional configurations, is akin to believing in the Area 51 myths or the moon landing hoax.

“The problem,” says Brown, “[is that] the market has been gaining for almost eight years, leaving many investment professionals in the dust. As a survival mechanism, it’s only natural to see them repeating increasingly absurd stories about why it wasn’t their fault. We’re talking about ego and human nature and salesmanship, a whole host of other psychological issues that play into the current paradigm. It serves the purpose of giving an easy explanation for those who require one.”