With the election just a week off, there is a lot of talk in certain quarters about how the market is being "manipulated" for political gain. The theory is that the Republicans are driving the market up in order to give the impression that economic conditions are good, which would in turn cause voters to support the incumbent party. That certainly explains the market action and has a great appeal to the conspiracy theorists but is it realistic?
I have a great aversion to the idea of conspiracies simply because I don't believe that its possible for a large number of politicians and bureaucrats with big egos to keep anything a secret. They can't handle basic governmental functions but when it comes to some highly complex conspiracy involving huge money and lots of people, they are suddenly highly capable as well as secretive?
Furthermore, if the political parties had the power and financial ability to manipulate the stock market for days and weeks, couldn't they find some other way to use their vast power to obtain their ends? If some shadowy conspiracy is buying billions of dollars' worth of stock at higher and higher prices, how do they exit? Is the market suddenly going to collapse when these folks dump their shares the moment the election is over.
Wall Street is made up of quite a few big and powerful players and they are all watching out for themselves. If someone is manipulating the market in a certain direction, you can be sure that there is someone else equally big on the other side waiting to take advantage of the artificial price action.
The market does react to political pressures, but it is downright naïve to assume that any political party has the capacity to move it for a sustained period. Maybe the Fed can do that to some degree, but not secretly, and not for long.
James "Rev Shark" DePorre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.
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