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Sunday, January 22, 2017

Manipulation: Part 1

I changed my mind as to how we should do this. I found as I was writing, that I was defending my viewpoint based on my definition. Manipulation like beauty may lie in the eyes of the beholder. So first question of the day? What is manipulation? Settling on a definition will allow us to see the other person’s point of view.
Briefly, which of the flowing do you consider manipulation? Action followed by potentially manipulated asset class. 

1) The Federal Reserve cuts interest rates and promises to keep them low to “calm” Bond investors.  (Bonds, Stocks)

2) The Federal Reserve/BOJ promises to buy X amount of bonds and common shares per year for 3 years at least  (Bonds, Stocks)

3) OPEC cuts oil supply to increase the price (Oil)

4) UBS sells stocks from its own inventory during a panic to trigger stop-losses on its customers, in order to purchase them back lower (Stocks)

5) Between 2004-2010 Goldman Sachs fixes the daily Libor rate 1 basis point lower than it actually would have by selling a large amount of a Libor product to a pre-agreed colluding bank on close. It would only impact products that trade of Libor rate close and not influence any daily trading nor the long term movement of Libor. During this time Libor rose 300 basis points and then back down 300 basis points. (Libor rate)

6) US Shale producers differ drilling unprofitable wells to help increase price of oil (Oil)

7) OPEC agrees to keep over producing to bankrupt US shale with the idea of reducing production to bring prices over $200 in 3 years. (Oil)

8) Home Depot gets its major shareholders to agree not to sell any stock for 3 years…promising a large expense cut, large dividend increase and offer to buy 30% of remaining outstanding stock. Stock increases 100% with 1 year as shorts scramble for cover (HD stock)

9) US Shale producers hedge 80% of their oil production for 1 yer by shorting 500,000 contracts (worth 27.5 Billion) of oil futures as prices briefly touch $55. Prices remain depressed for some time (Oil)

So please in your comments please state which of these are example of manipulation and which are not. 

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