Who is behind these market moves?

Author: Value Investor  Date: 2020/05/04

It seems like this is rhetorical question. Everybody knows that financial markets are moved by, well, market forces, which, as one famous economist/investor (John Maynard Keynes) put it, are subject to animal spirits. But more specifically, what are these market forces, and why animal spirits?

I am not going to give you a lecture on the basics of economics - you don’t need one. What I question, however, is whether this notion of market behavior is correct all the time. Especially now, observing what is happening in the US stock market, I start to suspect that these “market forces” that supposedly are moved by “animal spirits” are not what we think they are.

The whole stock market dynamics that started with a selloff in March and then followed by a remarkable recovery, to me seems like a series of separate well orchestrated events.

I have no proof of it, but, nonetheless, things for some reason appear quite obvious to me. I have a feeling that the market is manipulated by a consortium of players who control vast amounts of capital. For sure, they cannot move the market against its inherent tendency for long, but for a few days or, when the liquidity is low (as it is now), for the maximum of 2-3 weeks at a time. Then they withdraw, let the market to adjust - return to its normal equilibrium position, and wait for an event that they can use to accelerate the market move and then play against ordinary uncoordinated investors in the resulting volatility.

So, when you see the market going berserk don’t try to make money on it, because, unless you are part of that powerful consortium of players, you will lose. The game is rigged. That the whole purpose of this exercise: to draw gullible and “smart” investors (the ones who think that they know how to interpret events, news and macroeconomic situation and their effect on the markets) into making leveraged bets.

The consortium that plays against you does not know in advance in what direction they will push the market. They wait until there are enough stakes on the table, and then push the market against the prevailing market position - they make a killing when those poor soles they are playing against will be forced to liquidate their leveraged positions.

Is the stock market is a viable option for investing your money, then? Sure it is. Just play it long. Don’t try to get rich overnight. It just does not happen. The game in the short term is set up against you.