Quoting Jesse Livermore “ Nothing new occurs in the business of speculating or investing in securities.” Market manipulation is as old as the hills. A good book to read is “The Plungers and the Peacocks” by Dana L. Thomas. The author is quite cynical “The price of a stock frequently consists not of the intrinsic worth of the company it represents but in what people think it is worth.. Edward Harriman asked by a business associate whether he would be able to unload for him at 80 a line of stock of Southern Pacific, at the time priced at 70, Harriman replied that he didn’t believe he could. But, he added, he could boost the stock from 70 to 150 and then sell it down to 100 without any trouble at all. The reason for this, he explained, was that with the stock selling at 70, a mere 10-point rise would not excite the imagination of the public, but an 80-point advance would whet the appetite of a huge number of people and would create such a broad market that it would be easy to unload virtually any amount of the stock on a fall of 50 points.
William O’Neil talks about it in his book “How to Make Money in Stocks” that distribution or selling is always down on the way down. “Manipulators have to turn their paper into profits- Due to a surprising quirk in human psychology, the public has been led to deduce that if a stock has gone from $15 to $50 and then tumbled to $40, it must be alluring bargain at $40. And so the public moves in to take the stock off the manipulator’s hands. The master plungers - (Livermore) Gould, Keene, Harriman - frequently made their financial killings not on the way up, but on the way down, unloading their holdings on declining prices. This has been their cardinal strategy.
Finally to Joe Average out there - “Don’t get shaken out of Stock” that you know more about then what the so called experts are saying or doing.
“Harrimans strategy of market manipulation - “To get a stock at a bargain price before he began a large-scale accumulation of it, he didn’t resort to heavy selling to drive it down precipitously. On the contrary, he so manipulated the stock as to create a sluggish market. He realised that nothing so tired out and discouraged the public as an inactive market. Many investors can be coaxed out of their holdings in a sluggish market than a declining one, since on a sharp break traders tend to cling to their stocks, waiting , even if deludedly, for a rally on which they can sell and minimise their losses. With this in mind, Harriman would begin a campaign to accumulate a heavy position by pushing the price of a stock to as low a point as he considered feasible. If some of the stock stock he wished to obtain was still held by stubborn investors, he would shake them out by launching further downward flurries, weeding out traders who had placed stop orders and who got frightened at a sign of weakness. Then Harriman would keep his stock inactive for weeks at a time, so no one could make any profits in the stock, and flushing out the last intractable holders, who would despairingly move into more active stocks. The activity in the stock would slow down to a virtual standstill, just before the big move upward began.”
Regards Dean |
