Nelson Hultberg’s Interview in Smart Investor

A German Investment Magazine,

Nelson Hultberg

September 1, 2003

To start with, could you introduce and tell us something about yourself?

I am a freelance journalist based in Dallas, Texas and a graduate of Beloit College in Wisconsin, with a BA degree in Economics. Articles of mine have appeared in publications such as The Dallas Morning News, Insight, Liberty, The Social Critic, The Freeman, and on numerous websites such as and

I am also the author of Why We Must Abolish The Income Tax and the IRS, published in 1996, which is an explanation of how to replace the income tax with a national sales tax. For several years in the nineties, I worked with Citizens for an Alternative Tax System out of Washington, DC doing radio interviews and promotional work for the cause of tax reform in the U.S.

Could you briefly define “manipulation” for us?

Manipulation is when government intervenes into the marketplace to alter factors such as prices, wages, interest rates, currency values, stock markets, commodity markets, etc. from their natural freely chosen levels and direction. For instance our Federal Government manipulates interest rates through the Federal Reserve’s Open Market Committee whenever it thinks they are too low or too high. A division of the U.S. Treasury Department, the Exchange Stablization Fund (ESF) formed back in the 1930’s, intervenes into the foreign exchange currency market (FOREX) all the time to try and change the value of the dollar vis a vis other currencies. Our government “manipulates” many, many aspects of our economy through purposeful intervention. And it is now intervening into the commodity and stock markets to manipulate gold and equity prices. This it is doing through various buying and selling techniques at Comex and the NYSE.

You have written often about the Plunge Protection Team (PPT). What is the PPT exactly? And what is its history?

The PPT is a small secretive group of bureaucrats that intervene into the stock and commodity markets to manipulate prices so as to shore up equity markets like the Dow, or suppress commodity markets like Gold.

The reason the PPT is secret is because it has been designed to intervene into the stock market to shore it up whenever it is in danger of crashing, and there is no real clear cut authority for the Federal Government’s bureaucracies to do this. The Fed and the Treasury Department are clearly not authorized to intervene into the stock market to buy and sell equities. But the Exchange Stablization Fund (ESF), which manipulates our dollar in the Forex market, may be authorized to buy and sell equities on the NYSE. James Sinclair maintains that they are. Though this is not overly clear in the wording of its legal statutes. Since the authority is not clear on this issue, it is my belief that the PPT was designed as a separate and secretive organization by ESF and Treasury bureaucrats to purchase S&P futures to try and “stablize” the stock market whenever it begins to drop severely.

I believe they have formed the PPT as a secret spinoff from their currency operations. It is secret mainly because they do not want the public to be aware of any attempts at equity manipulation, and perhaps also because of its possible illegality. If it were to become widely known that our Treasury Department, through its ESF division, was intervening into the stock market to shore up the Dow and the S&P on a regular basis, the effect on the investing public would be quite detrimental. For this reason, I think the PPT was formed surreptitiously, and remains a secretive organization that no one talks about in Washington or on Wall Street. But the ESF and our Treasury Department are the forces behind the PPT.

How it all came about is through an organization called the Working Group on Financial Markets (WGFM). TheWGFM was formed via executive order in March of 1988 under Reagan’s administration to examine various means to avert another stock market crash like what took place in 1987. It was comprised of our Secretary of Treasury, Federal Reserve Chairman, SEC Chairman, CFTC Chairman, along with the heads of several mega-banks and brokerages in New York City. This group was influenced by an ex-Fed governor named Robert Heller who wrote an editorial in the Wall Street Journal on October 27, 1989 openly urging the Fed to undertake manipulation of the stock market whenever it was crashing by buying massive amounts of S&P futures contracts on margin. In his article, Heller explained how the process was easy to do, and insisted that it should be done as the best precautionary means to avert another market meltdown like October of 1987. From his urging, the WGFM undoubtedly pushed the ESF to institute such a scheme, which brought about, in my opinion, the formation of the clandestine group of operators known as the PPT.

If the team decides to manipulate the market how does it work?

The PPT operation has access to unlimited funds because it was formed by the Treasury which can create money out of thin air. My guess is that the organization is structured through an offshore hedge fund established by the ESF as a front group. They do their buying and selling from perhaps the Bahamas or the Cayman Islands. One thing we know is that they place their orders through several of the big brokerages in New York such as Goldman Sachs, JP Morgan, or Merrill Lynch. This way no one at the brokerage houses or on the exchange floors actually sees any massive buy orders from Washington bureaucracies.

The way they work the scheme is whenever the market is going too low and threatening to crash, the PPT initiates buy programs on margin for S&P futures contracts in large enough volume to check the market fall and panic short sellers into covering their short positions. This creates a “short squeeze” and explodes prices upward. Hedge funds and institutional buyers then rush into the market to buy in order to catch the rally. This extends the rally and effectively ends the potential market crash as investor mood shifts from bearish to bullish. The rally is created in the way that lighting a match to kindling ignites a roaring fire. The S&P futures contracts are so highly leveraged that a $200 million buy can be initiated for $10 million in the PPT account with JP Morgan. A $500 million buy can be initiated for $25 million. These margins are chump change for the Treasury-ESF-PPT operatives. As the rally proceeds, the PPT then sells their contracts back to the hedge funds and institutional buyers that follow after them. The PPT then goes to the sidelines to await the next crisis when they will need to stem a potential crash.

So which markets are manipulated?

The two major markets that are manipulated are the NYSE (S&P 500 and the Dow) and the Comex market for gold and possibly silver. Because the Dow is threatening to collapse and the gold market is threatening to explode, the the Fed fears that they will drag the US economy into a prolonged recession or depression, or perhaps a stagflation like in the 1970’s if allowed to run their natural course. Thus the Fed wants to prohibit the Dow from dropping precipitously below the 7000-8000 range and gold from rising past the $400-$500 range. If it fails to contain gold, then it wants to at least manage the price of gold very slowly upwards, forcing it to trade well below what it would reach if traded freely. If it can do this over the next several years, it hopes that businesses will recover and reignite the growth cycle again. It is hoping that it can somehow avoid going through the necessary corrective of a prolonged recession and debt liquidation.

Do you have any proof for your theory about the PPT, or is it possible that it is nothing other than a kind of a conspiracy theory?

There is no proof in the sense that a scientist defines the concept. But there is so much circumstantial evidence built up over the years, that all savvy traders admit the PPT does indeed exist. As far as how it does what it does, and how it is structured, we don’t know all the details. But every “old pro” that I am in contact with states emphatically that the PPT is common knowledge on the NYSE trading floor (especially in the S&P futures pit). On countless occasions over the past 10 years when the market was crashing, there would magically appear a single mysterious S&P futures buyer of massive amounts of contracts from a so called “offshore hedge fund.” This buy would be so massive that it would create a sharp V-shaped recovery in the midst of severe despair and bearish market mood. This is just not the natural way freely traded markets bottom. Private individual traders do not commit hundreds of millions of dollars in the face of a severely plunging market in order to try and create a dramatic V-shaped recovery. No private person or company would risk their money in such a manner. But a government would because it’s not their money, and their money source is unlimited (they can print up as much as they wish). Therefore, losses are of no concern to government bureaucrats.

One old pro who I am in contact with, Bill King (Ramsey King Securities, Inc. along with his associate John Crudele of the New York Post), state categorically that they experienced PPT buying of S&P futures over and over again throughout the nineties. King ran several equity trading desks in New York at the time and saw the massive mysterious buy program initiated repeatedly from 1990 on. It created so many unnatural V-shaped recoveries that all savvy traders, he says, came to accept the existence of government manipulation. Only a government would buy in such massive amounts prior to a conclusive oversold condition and confirmed bottoming pattern during a severe market crash. No private trading entity would.

Also countless other market pros here in the states, such as Richard Russell of Dow Theory Letters, James Sinclair at, Rick Ackerman of the San Francisco Examiner, Bill Murphy of GATA, Jim Puplava at, James Turk of Free Market Gold & Money Report, Brady Willett of, etc. all concur wholeheartedly that there is a PPT organization that manipulates both the NYSE and Comex gold markets.

It seems that the PPT is very secret. But they need many people for their manipulation. Think about all the stuff that is involved. How can it be that no information leaks to the public?

On the contrary, it does not need to be a mega-conspiracy at all. Suprisingly, very few people need to be involved to pull this off. For example, a Treasury higher-up sends an ex-CIA operative (known as a “stringer”) to the Bahamas to establish XYZ Corp. The Treasury higher-up then establishes a salary of $250,000 per year (easily hidden in today’s trillion dollar budgets) for the stringer to stay there. His mission is to buy S&P futures and perhaps even accumulate inventory of Dow 30 stocks if deemed necessary. The money to fund the PPT’s purchases is created in today’s world by the pressing of a few computer buttons in the Fed and the Treasury Department. And with a little creative legerdemain, it is easily laundered through the convoluted financial derivative dealings and interrelationships of global banking.

The orders for the PPT’s equity purchases then come to the designated U.S. brokers as an offshore hedge fund buy, not as something of government origin. So no brokers have dealings with anything known as the PPT. Other WGFM members such as Greenspan obviously deny the existence of the PPT to the media and in testimonies to Congress because it’s not something they want the public aware of. If members of the establishment press suspect such a thing exists, they quickly dismiss it because it is in their best interest not to bite the hands of the government power brokers that feed them with favors. Since there is no hard proof of PPT existence, and since any belief that such a thing might exist brands one as a “conspiracy nut” at posh Washington gatherings, the lap dogs of the press, so desirous of acceptance by the power elites, conveniently blank out on the issue and help to spread its denial with derisive articles about such an organization’s existence.

So great numbers of people do not need to be involved; this type of conspiracy could go for decades without surfacing. After all, the CIA is involved in hundreds of illegal covert activities that have never found the light of day throughout the past 50 years and have never been exposed by self-servers in pursuit of large book contracts. Police and prosecutorial corruptions are covered up by scores of participants for entire lifetimes. Why then could not a couple of high-level Treasury bureaucrats and a clever CIA stringer orchestrate the operations of the PPT while the other higher-ups of the WGFM group remain conveniently silent year after year?

Another factor works here also to keep the issue submerged and out of the limelight. Most of today’s pundits, politicians, media, and investors subconsciously want the PPT to exist because they feel it will provide more stability for the economy and more security for them as individual investors. Thus, they blank out on any potential detrimental effects of PPT manipulation and ignore those of us who are raising a warning. It becomes very easy to dismiss us as “wackos” and “alarmists” because they secretly want the PPT to exist for personal security reasons. They fail to see the long range dangers that it presents to the integrity of the stock market. They don’t understand that it will create more volatility rather than less in the long run because the stock market will no longer be a stock market if it can never go down. Investors will change their whole mindset if they know there is no fear of large loss. They will cease to be prudent investors and gradually become wild speculators and bid valuations of stocks up much higher than warranted. This will increase the potential for bubbles, rather than decrease it. But todays media and investing public fail to grasp this; they are thinking short range only.

Are there any proven signs which show manipulation? Is there a special pattern which can be seen over an over again or is it more a “feeling”?

It’s not just a feeling. There is indeed a pattern. Whenever the market is threatening to crash badly, a mysterious buyer begins making massive S&P purchases, and continues the purchases until the shorts give in and cover. It’s always the same pattern, and it always creates a V-shaped rally. Many of the traders in the pits now have the action down pat and immediately pull their offers at the first hint that the usual suspects are about to light the fuse with massive S&P purchases. Listen to the CNBC commentators next time the market plunges and recovers dramatically. Someone such as Bob Pissani will usually come on and attribute the recovery to buying from a “large offshore hedge fund” or an “overseas buy program that kicked in.” That’s the PPT in action.

You said that the PPT is active on the NYSE and buys S&P futures. But as far as I am informed the S&P futures can’t be bought on the NYSE. The S&P Futures (the big Caps) are traded in Chicago. And the E-mini can be traded via GLOBEX. Can you make that point clear for us?

When I say that the PPT is active on the NYSE, I mean that it influences the NYSE in New York through its purchase of futures in Chicago. Large purchases of S&P futures contracts will influence the prices of S&P 500 stocks in New York. Since the S&P 500 and the Dow trade in the same direction, massive money coming into the S&P will also affect the direction of the Dow on any given day. So both indexes in New York can be moved by large purchases or sales of S&P futures contracts on the Chicago Mercantile Exchange.

With the advent of index trading in the futures market, it didn’t take long for big money interests to realize that they can affect the price direction of both Dow and S&P stocks on the NYSE by gunning the S&P futures in a substantial way, either long or short. It’s not easy to do for private entities, for it requires millions of dollars and the risk of substantial loss. But a government that has unlimited funds and no concern over loss can start buying up massive amounts of S&P futures contracts and effectively move the NYSE on any given day.

If the PPT always buys near the low and creates a reversal, they must make lots of money. Do you have any information about their profits and losses?

Since the PPT is a secretive arm of the Treasury Department’s Exchange Stablization Fund, there are no disclosures of its profits and losses. Also their purchases are not always guaranteed to make profits. Stopping a dramatic fall of the market with massive buys of S&P futures can require large losses before a trend reversal is finally brought about. Once the short sellers are finally forced to cover, a rally then ensues and the PPT will look to sell its long contracts onto the hedge funds and institutional buyers that are then streaming into the market. This closes out the PPT’s positions and puts them on the sidelines. But if they incurred large losses in the process of getting the market to stop plumeting, then they might not be able to close out at a profit in the ensuing rally. It is by no means a clean and easy way to profit. It often results in losses. But the point is that when a government entity does this, they don’t care if they have to take a loss because it’s not their money. Their only concern is to stop the crash, to act as a floor of support below which the market won’t be able to move.

Let’s assume the PPT buys loads of futures to manipulate the market. After the successful manipulation they have to sell those contracts. Would that not degrade the market again?

Yes, it can. And this is where it gets tricky. The only way it works is if enough hedge fund and institutional money can be lured off the sidelines once the short sellers are squeezed into covering. Once the crash is stopped and reversed, a rally ensues, but it will fizzle out once the PPT proceeds to sell its positions if there are not enough longs streaming into the market to absorb their selling — especially if the PPT has large amounts of long contracts to sell. In a bull market, it is easy for the PPT to sell back without degrading the market because there will be massive amounts of hedge fund and institutional money that are streaming into the market to take advantage of the rally. Sentiment is optimistic in a bull market, so crashes can be turned into rallies by the PPT very easily. But as the bear market gets more and more entrenched, it gets more and more difficult for the PPT to create strong rallies because it has to purchase far more long contracts to get a crash stopped, and it doesn’t attract as many hedge fund and institutional buyers to jump enthusiastically back into the ensuing rally. Sentiment is not as optimistic and thus buyers are not as reckless in jumping back in. So the PPT induced rallies are often fizzle affairs. This brings about a very choppy sort of market where it goes sideways.

In the nineties, the PPT could ignite extremely strong rallies with small purchases of S&P futures contracts. Over the last several years, however, with the onset of the bear, the rallies it creates have been much more moderate with numerous fizzles. And as the bear market proceeds in the upcoming years, I believe that the PPT will become less and less effective. It will have to purchase much larger amounts of long contracts to stop the crashes, and it will thus have much larger amounts to dump into the ensuing rallies. Because sentiment will be less optimistic, this will lead to more and more fizzled rallies, more and more choppy price direction. And finally there will come a time when the market will simply overwhelm the PPT. Sentiment will have turned so negative that the PPT’s massive buying will be ineffective. As they say, no person or group is bigger than the market. And that means even government groups.

One of the major critiques (by John Mauldin) of the PPT theory is that if the FED (or PPT) wants to pump liquidity into the system (stock markets/future markets) they would have to decrease liquidity somewhere else. That means they have to take money away from the Treasury Notes. But if the money supply stays constant everyone would know it.

Mauldin’s contention was based upon two errors. The first was his belief that it would take massive amounts of liquidity to bring about a reversal because he thought the market was too big to manipulate. He assumed that it would require “hundreds of billions of dollars.” This is not true at all. The daily trading volume amounts to around $15 billion that has to be manipulated, which requires a small margin to control. Fed governor Heller understood that the volume of trading was quite manageable, which is why he recommended that the Fed take on the task in his famous October 1989 Wall Street Journal article.

Secondly, because Mauldin assumed the needed liquidity would have to be massive to move the market, he thought the PPT would have to decrease liquidity somewhere else (from Treasury Notes as you say) in order to hide this massive injected liquidity. As Heller understood and pointed out, however, massive amounts of money are not needed to bring about this kind of manipulation. Mauldin just didn’t do his homework on the figures.

But all discussions about amounts of liquidity and the need to hide it miss the point, for no new liquidity ever actually comes into the system over time because the PPT’s long purchases are always closed out. Thus, any new liquidity is removed shortly after it is injected. The liquidity involved is always manageable, and it is injected and removed in a short period of time. The PPT has been at this for some time now and knows what it is doing. Mauldin simply wanted to believe that such manipulation was impossible, so he bought into numerous erroneous facts and assumptions that were passed on to him from Wall Street contacts who had the same built in biases as he did. There is so much gullibility in so many people regarding Wall Street. The establishment here in America wants desperately to believe that the NYSE is on the up and up. But it’s not. Both the stock market and the gold and silver markets are rigged, and the government is the rigger through Treasury’s ESF division and its secretive arm, the PPT.

We now come to our last question. Why is it dangerous when the markets are preserved from a crash? Is it possible that the huge overvaluation of US stocks is because of the manipulation?

It’s dangerous because it changes investors from prudent buyers to reckless speculators. If there is no fear of loss, then why not double or triple the amount you are investing? Why not mortgage the house and put those funds into the market? Fear of loss is what keeps people sane in the investment world. This fear will be removed once the public realizes that the government is protecting them from a market crash, and they will act accordingly in an “irrationally exuberant” manner.

I believe that, to the extent that such manipulation is known by investors, it will cause them to bid up valuations higher than they would have normally done. As the nineties progressed, more and more people began to realize that the government was there behind them to provide a floor under which they could never fall. Greenspan and the Fed intimated this in their testimonies all the time. Many savvy traders, large institutional buyers, and hedge funds have now come to accept the existence of the PPT as a fact. This cannot help but embolden them when caution should be called for. It cannot help but bring about a more fervent buying mindset, which will lead to excessive valuations. This cannot make for a healthy market in the long run.

Thank you very much for your time and effort with our interview. We enjoyed the conversation with you very much; it should really open people’s minds.

It’s been my pleasure. I hope it is informative to your readers.