Michael,
Here is a possible reason that Micron may be able to go up in a terrible tape like today (this from Fleck):
"The not-so-invisible hand. . . Russell comes to the same conclusion that I have come to, that Jim Cramer has come to, and other folks that I talk about have come to -- that there appears to be a fair amount of manipulation occurring on a regular basis. And no, I don't think it's the plunge protection team, I think it's the folks in the investment industry themselves painting the tape. You may ask, Why do they do that? Because they can. Many of the rules are antiquated and many of the firms have gigantic positions and are in a position where if the price goes up they can make their overall position look good by buying a small amount of shares.
It's not uncommon to see firms own more than 10 percent of a company's securities -- sometimes north of 15 -- so the temptation to diddle the tape may get the better of folks sometimes. There is an example in today's release of recent filings. As of the end of March, Capital Research owned 111 million shares of Micron -- they bought 71.5 million shares in the March quarter. That gave them a 21 percent holding as of the end of March, which means they bought 15 percent of the company in the quarter. Fidelity owned about 12 percent as well, even though they had been selling during the quarter. This means two firms owned more than 30 percent of the company. (Of course, proving that the stock is being ramped is impossible, but knowing that it's being ramped is pretty easy.)
Motive and opportunity. . . We've seen this kind of thing in the past, where a few firms have owned sizable chunks, and a) the ability to manipulate exists because the stocks then become thinner, and b) the incentive to manipulate is there as well. I don't know this is happening, but I think down the road when the rules change, certain restrictions should be put on firms that own more than 10 percent of companies.
After all, the rules require other investors to file 13-D's once they get to approximately 5 percent ownership, and every subsequent purchase must be noted as it takes place. I don't see why these large mutual funds with these huge holdings should be exempt from rules that other folks have to abide by. That may be a reason why it doesn't matter where Waldo is in the special case of Micron, because when you've got a couple firms that own so much, anything is possible."
It seems to me that Capital and Fidelity could just keep selling shares back and forth to each other at artificial prices. It would sure explain the absolutely ridiculous action and valuation given to a POS company. How do you see something like this getting unwound?
Thanks,
/Kit |
