Andy Kessler says the collapse of Citigroup, GE, Bank of America, et al, was the result of market manipulation:
Hedge funds shorted the stocks, spread rumours of bombs on the balance sheets, and then spiked the price of credit-default insurance to make it look as though the market thought that the companies were in trouble.
Later in the same article, however, Kessler says these “bear raids” forced the banks to acknowledge the mountains of garbage they had on their balance sheets and thereby saved us 5-10 years of lousy bank earnings as they worked off the crap.
In other words, the hedge funds helped alert the world to the disaster that was already there.
This circular logic highlights the usual absurdity of CEOs blaming their problems on “market manipulation.” Yes, prices can be “manipulated” in the short term, but it’s hard to fool the market for long.
If companies actually are as bombproof as CEOs usually claim, the market usually figures that out, and the “market manipulators” get buried. And if they aren’t? See Lehman Brothers, Bear Stearns, Fannie and Freddie, AIG, Citi, et al.
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