What's the deal with the PPT?

It's the stuff conspiracy theories are made of.... Men in Black suits who don't exist, doing a job that doesn't exist...

Ok for those of you that are lost, I'll fill you in. I've often wondered if perhaps from time to time, governments or mega rich bankers step in and manipulate the market for reasons unknown to the average Joe. A few weeks ago I came across the term Plunge Protection Team (PPT) in an article I was reading and having not heard of it before, I Googled it.

I can't really say I was all that surprised to read there's a school of thinkers out there who believe the government step in from time to time to buy the market to prop it up.
But what did surprise me was coming across this clip of a CNBC panel discussion in which Damon Vickers of Nine Points Capital states...

"unless the plunge protection team comes in over the next couple of days, the markets are looking very dicey here"


Now you have to wonder, here is a guy who makes his living from the markets, you'd think he'd have a pretty good idea of the goings on, did he actually mean to divulge this information on TV or did he simply forget where he was?

Either way, it appears that after Joe Kernan tries to deflect Damon's statement by asking him if he was joking, he replies with

"Absolutely not, it's common knowledge that the government steps in and does things to step on the gas on the buy side here and there"


See for yourself, it's quite comical really, in particular the way in which Byron Wien and Joe Kernan try to make light of Damon's belief in the PPT. After you watch it, consider the events of May 6 2010 and the intra-day plunge of almost 1000 points on the Dow. The suggestions as to how it happened ranged from a fat fingered trader to faulty algorithmic trading of e-mini's. Regardless of how it happened, what interests me most was how it came back, and the subsequent ruling that effectively drew a line in the sand and anything traded below that line is considered not to have happened, with all trades below the line cancelled.

So if there is a PPT, and they did step on the gas on the buy side to reverse the plunge on May 6, drawing that line in the sand meant that most of the buying they may have done to reverse the plunge on that day would have been below the line and in effect would have been cancelled and not required to be settled.