Going Down the Big Hill

If we put the pieces together, we can easily track the event the led up to Monday’s closing of the Russian Trading System (RTS).

It started Sunday in France when President Nicolas Sarkozy lost the first round in the French election. This doesn’t yet mean he has lost office. However, the situation doesn’t look good for his continued presidency.

Then, on Monday, Dutch Prime Minister Mark Rutte suddenly resigned.

This one-two punch caught Germany Chancellor Angela Merkel in the gut as she realized she may lose two key allies in her effort to maintain economic stability in Europe. Germany, led by Merkel, has been the kingpin in attempts to keep the Euro relevant.

Roller coasterThe changes in France and The Netherlands may mean that the solidarity of those who are attempting to prop up the European economy through printing fiat currency is falling apart.These two events powered the European markets to the top of the big hill and may have pushed it over the edge.

This appears to be the message received by those trading in the European stock markets Monday when European companies lost more than one hundred twenty billion pounds in value.

I also believe this message was received by the RTS as commodity prices collapsed during Mondays trading.

My opinion is that lots of shares were sold. Besides driving down prices, this overloaded the system and created an emergency so big that RTS had to cease operations for the day.

This is not unprecedented.

Software programs, built within the stock exchanges, do not allow trading when certain market conditions are met. In most cases, these halt trading for a few minutes, usually on a selected stock or two. In dire conditions, they literally close the doors by preventing all trading.

This is designed to protect the investor so that he or she doesn’t lose too much too quickly in a sudden selling of shares. Of course, it also gives the exchanges time to manipulate the market or find government and institutional investors to prop up the market and adjust the charts so that things don’t look so bad when it reopens.

I suppose this shut down could close the doors for good if those investors can’t be found.

I believe this is what happened in Russia Monday. This time, the investors were found and the market reopened on Tuesday.

No, there is no official story to support my theory.

However, there are indicators that this is true.

One indicator is Russia’s purchase of more than sixteen tonnes of gold last month. An increase in gold purchases usually means a less stable stock market as funds leave it. Europe’s news took down an already weak Russian market. International markets are connected and markets in one country often affect markets in other countries.

To me, the biggest indicator is that the RTS story was ignored by both media and government in an effort to make this a “non-story.” If the goal was to downplay this event and if mainstream media was complicit in this effort, this is exactly what they would have done. The only story I have found beyond the stories I linked in yesterday’s article is this one from The Moscow Times. It claims the backup system failed.

This means the main system failed too. Otherwise the backup system failure wouldn’t have been noticed. My question is, “What caused the failure?”

The lack of detail available in the reporting of this chaotic situation speaks volumes.

Of course, it is possible this is a non-story. It is possible that Sunday and Monday’s happenings had nothing to do with the RTS suspending trading. It is possible the RTS data wasn’t manipulated and the value wasn’t propped up by government and institutional investors in an effort to demonstrate stability in an unstable market.

However, if that’s the case, we would need another explanation for Monday’s closing and, so far, nobody is providing one. Until they do, I suggest you hang on tightly because this roller coaster ride has just begun.