Biderman: Fed, Gov't Likely Rigging Market Rally

Wednesday, 06 Jan 2010 08:43 AM

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Charles Biderman, head of Trim Tabs Investment Research, suspects the Federal Reserve and the U.S. government are rigging the stock market.

“We have no evidence they are, but they could be,” Biderman writes at zerohedge.com.

Since the middle of March, the market cap of all U.S. stocks has soared more than $6 trillion, serving to soothe investor’ frazzled nerves, Biderman notes.

But the source of the money that pushed stock prices up so far so fast remains a mystery because for the most part, the money did not from the traditional players that provided money in the past such as companies, retail or foreign investors or pension or hedge funds.

“If the money to boost stock prices did not come from the traditional players, it had to have come from somewhere else,” Biderman observes. 


“The U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers.”

“Why not support the stock market as well? So far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures. Moreover, several officials have suggested the government should support stock prices.”

Next year corporate profits and the economy's stamina will be put to the test as the government slowly turns off the life support, The Chicago Tribune reports.

Some Wall Street strategists are predicting a new 10 percent to 30 percent downturn in the stock market in mid-2010 as investors second-guess the rally that's carried stocks up 66 percent since March.

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