How Stocks Turned Back From The Abyss
By John Crudelle, New York Post -- April 5, 2000

                           SOMETHING happened at around 1 p.m. our time
                     yesterday that pulled the stock market back from the
                     edge of the cliff.
                      
                     Traders say it was almost like divine intervention. One
                     minute the Nasdaq was down 11 percent -- say it out
                     loud, "Eleven percent in one day" -- and then it suddenly
                     rallied several hundred points in the matter of an hour.
                      
                     The Dow followed suit. Down 500 points around
                     mid-day, the blue chip index's decline -- along with the
                     horrible showing of over-the-counter stocks -- was
                     destined to make yesterday's market an unqualified
                     disaster for investors and the country.
                      
                     Then, traders said, someone started buying large amounts
                     of stock index futures contracts through two major
                     brokerage firms -- Goldman Sachs and Merrill Lynch.
                     These transactions are usually done on the QT so we
                     don't really know how many of these contracts were
                     purchased.
                      
                     And unless the brokers tell, there is no way of knowing
                     which of their clients were making the purchases.
                     Goldman wouldn't comment on this and Merrill did not
                     return a call for comment.
                      
                     But traders said enough were bought to catch everyone's
                     attention. In fact, the buyers seemed to want people to
                     know they had an appetite for stocks.
                      
                     Then the market rebounded.
                      
                     It didn't go all the way back. At the end of the day the
                     Dow Jones index had still lost lost 56 points or half a
                     percent on the day. And the Nasdaq lost another 74
                     points, or the equivalent of a 1.77 percent drop.
                     Yesterday's loss by over-the-counter stocks nearly put
                     the Nasdaq index back to ground zero for the year -- in
                     two days all but 2 percent of its gain for the year was
                     gone.
                      
                     It was real nice of Goldman and Merrill to stick their
                     necks out like that. In fact, it was downright
                     uncharacteristic for Wall Street outfits to put the thought
                     of possible losses aside for the greater good.
                      
                     Because of the purely unselfish nature of what went on,
                     traders are naturally suspicious. Hell, so am I.
                      
                     "I think some one or more persons saved the market
                     today. There was a suspicious urge to buy stocks at an
                     opportune time," says one trader. "Why drive the Dow
                     up 350 points in a half hour? That's never serious buying.
                     That's someone trying to establish prices," he adds.
                      
                     I'm especially suspicious when the market suddenly
                     rebounds at nearly the very same moment that a member
                     of the Clinton administration -- economic advisor Gene
                     Sperling -- is on TV telling investors not to worry.
                      
                     And there's the obvious connection between Goldman
                     Sachs and the administration, the Wall Street firm having
                     given Robert Rubin to the Clinton administration as its
                     Treasury Secretary.
                      
                     Plus, what better way to make investors not worry than
                     by having the stock market recover a lot of the ground it
                     had just lost. That gesture almost makes a guy want to
                     buy some stock -- bottom fish, if you are into sporting
                     analogies.
                      
                     I'm not saying that government intervention in a
                     collapsing market is wrong. In fact -- except for the
                     obvious contradictions with the free-market system -- it is
                     politically and socially a very right thing to do.
                      
                     I've written about this before. And I've mentioned that
                     Washington has had a secretive group call the Working
                     Group on Financial Markets, made up of investment
                     industry and government people, that would be in just the
                     right position to rescue the market.
                      
                     Informally the folks on Wall Street call this the "Plunge
                     Protection Team." In February 1997, the Washington
                     Post did a piece on this team, just in case you don't
                     believe it exists.
                      
                     And while I can't swear that Goldman and Merrill are
                     captains of that team, they sure acted like it yesterday.                    
      

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