If you’re not familiar with the President’s Working Group on Financial Markets, you should be. Also known as the Plunge Protection Team, the group works behind the scenes to shore up financial markets. Consisting of the Treasury Secretary, Federal Reserve Chairman, and the Chairmen of the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), the Plunge Protection Team covers all the major financial firms, exchanges, and markets. And when markets are threatening to collapse, it pulls out all the stops to keep markets running.
How exactly the Plunge Protection Team works, no one really knows. We suspect that the members of the team are in close contact with major Wall Street CEOs, encouraging them to boost liquidity, purchase stocks, and otherwise prop up financial activity. And in the event that isn’t successful, there’s no reason to think the Plunge Protection Team doesn’t have the ability, means, and will to pledge government resources to bail out markets. And there’s every indication that the Plunge Protection Team is hard at work.
Just look at movements in stock markets in late trading last Friday. At 3:40PM on Friday, the Dow Jones was down around 1,000 points on the day, the day after its worst one-day points loss ever. But in the last 20 minutes of trading, the Dow rocketed upwards almost 700 points, to close with a moderate loss. The S&P 500 did much the same thing, down about 100 points at 3:40PM before shooting upwards in the last 20 minutes. Then the Dow made its biggest one-day points gain ever on Monday. Coincidence? Hardly.
We’re entering an era in which the federal government is poised to do everything it can to keep stock markets propped up and keep up the illusion of a functioning economy and financial prosperity. A stock market crash and recession right now would harm President Trump’s reelection chances this fall, which is why he is putting extra pressure on the Fed and Treasury to keep markets chock full of liquidity.
Expect the Plunge Protection Team to remain hard at work over the coming months, as stock markets want to and need to drop, but the government doesn’t want to let them. We’ve been warning investors for a while that what goes up must come down, but many didn’t want to heed those warnings. Now they’re learning the hard way that stocks can be subject to sudden corrections.
Many of those nearing retirement remain over-invested in stocks. That’s not terribly surprising, as many investors still hoped to make up for the losses they took in 2008. But in keeping their portfolios in stocks, they put themselves at risk of taking huge losses once again as this current stock market bubble begins to pop. Those who want to protect their retirement assets need to start thinking about investing in gold, silver, and other hedges, if they haven’t done so already. Otherwise they’re putting the security of their retirement savings at risk.