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Rigged Markets and a Question from Quora

 



Found on Quora recently: 


Does it make a lot of people angry how "rigged" the stock market seemed in 2020 and lately in 2021? Why or not? How is it true that the stock markets are more rigged than any time in history? 

Let us consider that question. It represents the failure of generations of finance journalist, including your correspondent, to convey to the public any real sense of how markets work. It also represents a stark case of presentism, the impulse to give the latest things the greatest importance, ad all superlative words, so that the latest rigging, whatever exactly it may consist of, must be the most rigged ... ever. 

Our friend may certainly be making reference -- since he has in mind the last year and a half -- to the Paycheck Protection Program and its fallout. As the severity of the pandemic became obvious, Congress passed the CARES bill, including the PPP. As a consequences, hundreds of millions of dollars seem to have been fraudulently allocated. A recipient in Texas poured $1 million of it into cryptocurrencies. More than half of all PPP funds went to just 5% of the recipients, and some of them were large and well-capitalized public companies.

In August 2020, President Trump announced that the government was underwriting a $765 million loan to Kodak, the venerable camera company. This wasn't part of PPP, officially, but it qualifies under "rigging." Trump said that the idea was to bring drug manufacturing back into the United States, so he was helping Kodak with its loans with that goal. The deal would also, he said, create 360 new jobs. Manufacturing jobs. The kind that make America Great!

The number 360 seems pretty micro for a deal on this scale. How much money per job is that? Will 369 new jobs materially shift the global supply chain in pharmaceuticals? 

Kodak's stock price soared, beginning days before the announcement. Bright observers immediately wondered if stock speculators had been tipped off, hose hand they had greased for that end, etc.  

The loan never actually happened. It had accomplished its purpose -- chiefly, allowing a megalomaniac in the White House to act like he was accomplishing good stuff -- and then disappeared. Some people of course made money on the rise and fall of the stock price created by the promise and its non-fulfillment.

So let us answer our friend's question. Yes, stock market rigging takes place, usually with the seal of sovereign approval. Does it make a lot of people angry? Not enough of them, I fear. Why not? in this instance, because the fire hose of news washing us all down through the period made the Kodak story into a mere bagatelle. 




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