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Re: [RT] Re: Fed supporting market



PureBytes Links

Trading Reference Links

Except for Benjamin Strong's inflation of the money supply in
the 1920s to bail out Great Britain, pre-1933 ... for both stock
markets and currencies..



----- Original Message ----- 
From: "p8" <pwh112358@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, November 19, 2003 8:14 PM
Subject: [RT] Re: Fed supporting market

The idea does give a warm and fuzzy feeling.  

In reality the so-called free market can't seem to stay 100% free 
for a long time without being intervened sooner or later by the 
government.  The "free" market tends to behave in a pendulum-like 
fashion, swinging perpetually from left to right (too much 
intervension vs no intervension) and passing that center point only 
in a fleeting moment.

Could you provide a lasting, real-life example of a 100% free, 
unadulterated market? 

-p8 



--- In realtraders@xxxxxxxxxxxxxxx, Code 2 <Code2@xxxx> wrote:
>...<snip>...
> 
> A free and unencumbered market can do a better job of deciding who 
should thrive and who shouldn't.

...<snip>...
> 





> 
>   ----- Original Message ----- 
>   From: Dan Goncharoff 
>   To: realtraders@xxxxxxxxxxxxxxx 
>   Sent: Wednesday, November 19, 2003 10:44 AM
>   Subject: Re: [RT] Re: Fed supporting market
> 
> 
>   Because the purpose of the government is to ensure that the 
market exists the next day. That is why liquidity is provided.
> 
>   As you yourself point out, some players went bankrupt, even a 
big bank, and survived. As you also point out, the market stopped 
functioning, and there was no way to hedge.
> 
>   The specialists with negative balances were deciding to commit 
yet more capital, in a situation where they taken significant losses 
already, to 'provide a bottom'. How did they know it was the right 
decision to buy when they did? They were taking yet more risk, and 
could have been wrong.
> 
>   Regards
>   DanG
> 
> 
> 
>   Ira wrote:
> 
>  During the Crash of 87 there were futures, the S&P was traded and 
options
> on futures as well as the OEX.  As for being bankrupt, many broker 
dealers
> on the NYSE as well a market makers on the NASDAQ and on the 
options floors
> and Specialists were carrying negative balances.  In fact a bank 
in Chicago
> did finally go belly up.  There were many that didn't get the 
benefit of
> that very favorable government loan treatment and lost millions on 
that day.
> I personally know of one person that lost $80 million and another 
who lost
> $20 million in a couple of hours.  To lose a million on that day 
was no big
> trick.  There was no way to hedge because every time you went to 
hedge they
> would stop trading that item.  With unlimited borrowing power many
> specialist firms were allowed to stay in business with negative 
balances and
> provide a bottom to that market.  Options on the OEX that were 
almost 100
> points out of the money were quoted  as high as $65 and there were 
no
> sellers for several hours.   What happened to the American way 
then?  Why
> not let those that took the unlimited risk go the way they should, 
bankrupt,
> and those that did have limited risk or those that were short reap 
the full
> benefit of their positions?  Once again the government stepped in 
to protect
> the privileged and the political favoritism goes on.  Will the Fed 
and Bush
> let the Dow go to 5000 in an election year?  How much pressure is 
placed
> upon the Fed by the party in power?  No one really knows except 
those in
> power.  All I can relay is what I have seen happen.  The rest is 
just guess
> work by those trying to find a reason.


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