Mr. Practical asks a question...

Strange Days
What if the government/Fed realized the most efficient way right now to "print" dollars and "reflate" the economy was to get stock prices up? What better way to do that than print dollars to buy stocks?

There's ancillary evidence that stocks are acting "artificial". Stocks aren't only climbing a wall of worry, they're scaling the Mt. Everest of bad fundamentals. Tick data is extreme, especially when the stock market is down. We constantly see 1000+ tick prints when stocks are down; this is very strange indeed. Volumes are down at least 20% from normal levels (and much more if you discount for high-frequency trading), making it easier to get stocks up.

Under TARP, the fine print allows dealers to REPO stocks to the Fed as collateral (holy cow is right).

What if there were an arrangement where large dealers buy stocks and stock futures through the day and REPO them to the Fed at the high closing prices? The dealer would book the profits derived from the difference at no risk.

If you look at the trading patterns of the largest dealers, one in particular lost money trading in only one day last quarter. Statistically that's like finding a needle at the bottom of the ocean.

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