Another stock market faceplant. Bigwig investors manipulating shares?
WASHINGTON – Futures predicted a flat Wednesday opening for Wall Street’s three major stock market averages. But almost immediately from the ringing of the 9:30 a.m. (ET) trading bell, the bulk of US stocks began to tank. First a little and then a lot. The selloff continued to deepen Wednesday morning, hitting a 500-point loss on the Dow Jones Industrials (DJI, Dow) at one point, leading to another almost predictable stock market faceplant. One led, perhaps, by bigwig investors.
As we write this column, just after the noon hour, the Dow is now off 513 points (-2.16% on the day). The broader based S&P 500 is doing nearly as badly, down 53.74 points for a nearly 1.9% loss thus far. And even the normally stalwart and tech-heavy NASDAQ is off 164.15 point for a current loss of 1.87%.
Why the Wednesday market faceplant?
Reasons given for today’s market faceplant generally blame the coronavirus crisis and related unemployment issues that led to the current national business shutdown. But this columnist is among those who are noting what very well might be illegal market manipulation via financial news networks comments by well-known investment bigwigs. Interestingly enough, President Trump worries about the same thing, as he did in a recent tweet reported by CNBC.
“In a tweet Wednesday, Trump said to be wary of wealthy investors using their platform to comment negatively about stocks, when they tend to profit from betting against the market.
“‘When the so-called “rich guys” speak negatively about the market, you must always remember that some are betting big against it, and make a lot of money if it goes down,’ Trump tweeted. ‘Then they go positive, get big publicity, and make it going up. They get you both ways. Barely legal?’”
Yes, Mr. President. Either barely legal. Or illegal but never prosecuted.
“While Trump didn’t specify whom he was referring to, his comments followed billionaire hedge fund manager Stanley Druckenmiller’s remarks Tuesday evening about the stock market being historically overvalued.
“‘The risk-reward for equity is maybe as bad as I’ve seen it in my career,’ Druckenmiller told the Economic Club of New York.”
Bigwig investors likely continuing to manipulate stocks, both up and down
Perhaps due to an advance leak of Druckenmiller’s intended comments Tuesday (we can speculate, too), the market took a nasty turn just before yesterday’s 4 p.m. ET closing bell. And it’s selling off hard right now, as another market faceplant develops and appears to worsen.
We tend to get this kind of reaction every time some bigwig mega-wealthy investor pops off on one of the financial networks. Obviously (to this writer anyway), insiders were tipped off on Druckenmiller’s impending words of wisdom and got started selling Tuesday afternoon.
As I’ve warned in these columns for years, these billionaire carnival barkers issue their pronouncements for the plebes, either scaring them into selling shares or exciting them into buying shares.
What investors should realize is that these charlatans are already fully invested in positions that will benefit by any buying or selling panics that follow their remarks. So when investors are terrified by the bigwigs’ “advice,” they start dumping their shares. But the bigwigs are often short and thus profit by the big move down that they incite.
Likewise, if they’ve established a bullish position, they start touting either individual stocks they already own or even the entire market. The more famous the bigwig, the bigger the buying panic that small investors and machine traded funds will make. Putting big money into the pockets of those who scarcely need more of it.
More on how the manipulation game is played via the financial media
The same CNBC report today noted another example of the manipulation game we pointed out just last month.
“Another big investor who has been outspoken about the market is Bill Ackman. The activist manager from Pershing Square made an appearance on CNBC on March 18, warning ‘hell is coming’ and imploring the White House to shut down the country for a month.
“Ackman turned a net profit of more than $2 billion a week following his TV interview. He then used those proceeds to wager that existing Pershing bets, including hotel operator Hilton Worldwide, would rebound. He called the idea that he tried to drive down the market through his comments ‘absurd.’”
Sure, Bill. We’ve seen you play this game many times before. But you know the SEC will never go after you.
When guys like Bill Ackman play these games, tens of thousands or more 401(k) plans owned by regular working stiffs get hit. But who cares about their retirement plans if the big boys can get rich by gouging the accounts of these rubes, right? Normal people simply don’t need another market faceplant in this environment.
President Trump is noticing the market manipulation as well
Interestingly, both President Trump and this columnist enjoy the company of Mad Money’s Jim Cramer, who seems to share the same viewpoint toward this kind of brazen market manipulation.
“CNBC’s Jim Cramer shared similar sentiment as Trump, criticizing Ackman for betting against the market while being apocalyptic publicly.
“‘I’ve had it with these billionaires,’ Cramer said Wednesday on CNBC’s ‘Squawk on the Street.’”
Yeah. So have I. And so, obviously, is the President. Meanwhile, thug-like blue state governments continue the unnecessary house arrest they’ve imposed on both businesses and everyday citizens. Why do so many wealthy globalists and Blue State governators want to destroy the Trump Economic Renaissance? What further use do they find in extending needless coronavirus lockdowns? These primarily hurt small businesses and Deplorables. Maybe that’s a feature, not a bug.
It’s not certain when the current violent downdraft in stocks will come to a halt. So capricious is Mr Market these days that this could happen later this afternoon. Next week. Or, G_d forbid, next year. No one knows. But our dysfunctional government might consider starting to do the job that taxpayers pay “essential” government workers to do. At full pay, while an overtaxed populace and its life savings slowly bleed out. Otherwise, a market faceplant like the one we’re seeing today will become an even more common — and frustrating — experience. One small investors endure constantly when they try to stay invested in stocks.
– Headline image: Faceplant fail. Screen grab via YouTube video still.