The story appears in the Striking Price column at Barron’s…it’s a conspiracy theory, and what it is in a nutshell is that some BIG institutional traders and BIG investors are trying to pressure the markets into another Flash Crash or Meltdown as we head into the spooky September/October period in which stocks usually crumble.
The reason for the conspiracy (and my interpretation of it is) by these big traders is that they want to scare the public into thinking that the world is falling apart…this in turn, will make the general populace vote against the Democrats in the November elections.
Further conjecture would lead one to conclude that once the public votes out the Dems in Congress, then Obama will lose his mandate. The new Congress will then vote to extend the Bush tax cuts into year 2011 (they were due to expire end of this year)…with Washington then in gridlock for next year and the tax cuts extended, the theory goes that the BIG players will move their money back into stocks by November…and a major stock rally will ensue in late 2010 and into 2011…as the stock market loves when Washington is in gridlock! …and when Obama is held in check from instituting his new socialist programs.
I don’t know how true this conspiracy theory is…but I find it interesting that this theory is circulating among the professional traders in the options exchanges! However, as one long-time investor pointed out to me, there would be a lame-duck Congress between teh elections and early January, and one would have to assume the Lame Ducks would press hard to push through as much legislation as possible to please the Democrats and the President. He makes a good point! The link is below: