Is Plasticon Really As Bad As We Are Told?
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I am reposting the below article listed on another board back on 3 January 2007. At the time we all felt that we had seen enough daily trading shenanigans in the ticker to clearly suggest price manipulation. That, coupled with the constant bash by 5-7 pro's at the task, made most of us feel we understood what was coming at us and could whether the storm. Now, almost 8 months later, it is time to reflect on the events that have occurred since January, and read this again with the clearer eyes of hindsight.
THE EMOTIONAL IMPACT OF SHORT SELLERS ON INVESTORS
Barron's was kind enough to quote my market comment saying that, "From an historical perspective we are approaching the two worst performing months in the market. Therefore, we suggest that you invest cautiously during the next eight weeks."
With a 10% correction in the S&P 500 already achieved and the likelihood of another interest rate hike looming larger, I'm still advising caution. But in the midst of these volatile market retreats, there is a little discussed topic than can be important to small cap investors. During these volatile periods, professional short sellers seem to emerge from their bearish lairs as regularly as ghosts and goblins meander through haunted houses on Halloween.
These fury pessimists do serve a useful and legitimate purpose. They correct excesses in the stock market and often call attention to some of the shenanigans that plague our free market system. In fact, specialists could not function without the capacity to short stocks. Shorting is an emotionally manipulative device-where short sellers not only bet against the success of a company, but through rumor and innuendo, do their best to discredit management and others associated with a company. It is a process subtly carried out by a small minority of investors with the conscious intent of influencing stock prices through manipulating our emotions. Internet chat boards are a prime place for such manipulation.
Because the process is thus far largely ignored by all regulatory bodies (e.g. longs are required to file a 13D if they own more than 5% of a company, but no such requirement exists for shorts), it is important for us all to understand the emotional impact of such actions. For these short sellers often pick on small companies who have yet to produce significant revenues and earnings. It is up to us to recognize the psychological forces at work, and this is very difficult to accomplish when we're nervous about a down market.
The Normal Investment Stance
All of our investments are motivated by hope--the hope that our stock selection will provide 1) the means to achieve some of our most cherished ambitions and ideals, or 2) provide the ability to correct experiences which have been missing or insufficient in our lives. Whether our goals involve accumulating money, power, self-esteem, independence, or other idiosyncratic phenomena, hope of success underlies all investment philosophies. At the same time, most of us fear that any stock selection will repeat previous disappointments or traumatic experiences (losses) from childhood. Each of these two dimensions has unique meaning for every investor, and the understanding of such meaning can illuminate the psychological factors that determine both our rational and irrational behavior. So in this context, let's take a look at how the shorts wittingly or unwittingly impact the dread of repeating earlier feelings of vulnerability.
The Creation of Misunderstanding
One of the primary principles that motivates us all is the organizing and ordering of experience--in other words, making meaning out of our perceptions. Most of us who enjoy investing in development stage companies have done considerable due diligence before committing monies. It is our understanding of the company's products, services and management that leads to a sense of confidence in the face of risk. It is this "understanding" which strengthens our sense of self and allows us to remain invested long term in an early stage company. At the same time there is always a fear that we might be misconstruing or misinterpreting a situation. This is why it is so important for management of development stage companies to continually make themselves available to investors. For as long as we feel knowledgeable and confident, it is possible to tolerate a wide variety of emotions as early stage companies attempt to achieve success against major odds. Without this confidence and understanding, we can't tolerate glitches in the company's progress, and we tend to sell out at just the wrong time.
One of the first ploys of those attempting to manipulate our emotions is to create misunderstanding. For example, reports are published employing emotionally tinged language with highly pejorative connotations--e.g. "It's been reported that highly questionable relationships exist with the apparently unknown investment bankers..." Reported by whom? What questionable relationships? Who says they are questionable? Investment bankers apparently unknown by whom? Why does it matter if they are unknown? These are all reasonable queries in the face of such a statement. But the herd rarely challenges such distortions. Instead we buy into the demeaning and inflammatory connotations that are designed to create confusion and misunderstanding in a contextual absence of any accurate facts to support a particular author's pejorative biases.
When we feel we've misjudged a stock pick, a number of interesting psychological phenomena take place. The containment of strong emotion becomes impossible (thus the normal self doubt characterizing such investments is no longer tolerated); psychological defenses such as paranoia are mobilized, and the confidence in our decisions begins to break down. In a word, the successful creation of misunderstanding leads to significant self-doubt, which is increasingly difficult to tolerate, and eventuates in exiting an important position at exactly the wrong time.
Ad hominem Arguments
An Ad hominem argument is defined as one that is directed at destroying the validity of a proposition, product, technology or service by attacking a person's character rather than addressing the rational flaws in the company's product or technology. For example, a CEO might be attacked because one of his or her shareholders had been involved in an unrelated shady deal ten years ago; thus, by implication, the reader takes away the idea that the CEO might be dishonest also. Or the Chief Financial Officer may have worked for a company that went into bankruptcy in the past, thus implying that the CFO had a direct responsibility for the bankruptcy and will repeat his or her mistakes in the present situation.
Many of us remain with a small company through difficult times because we admire and respect its management. One of the requirements for maintaining our investment confidence is our connection with available others who can be admired, looked up to and felt to be a source of strength and empowerment. (This is one reason, why we become so frustrated and angry when management lets us down, and it is this rage, which fuels many frivolous shareholder lawsuits). By calculating ways to destroy the credibility of such admired others, the enemies of a company attempt to weaken investors' connections to their admired management. Psychologically, this disruption tends to temporarily short-circuit our self-assurance, leading to a drop in self-esteem and vitality--and thus our investment staying power. For it is our imagined (or real) connection with a competent management that safeguards against mistrust and second-guessing ourselves.
So is Plasticon really as bad as we are told? There is no doubt that in a routine Chapter 11 the opportunity for common stock shareholders to recover lost equity is very small. It requires management to make a focused effort to keep faith with it's shareholders... the everyday investors who trust and believe in the dream they had for the future. The US Trustee's position regarding Plasticon management has been very clearly stated and doesn't paint a positive picture. Selling your shares, even at these prices, may no longer be an option if the rulings go against the company. So we are forced to wait out the current process, and for those like me who have taken the optimistic road, suffer the indignities of constant web stalking, harassment and character assassination.
It is my strongest hope that through discovery, the US Trustee will determine that Plasticon management, though not a five-star communications and management team, did not defraud anyone... did nothing illegal, and has a real opportunity to pay off creditors and emerge from this Ch 11 situation. If not, then all the opinions we have expressed over the past 2 years will be silenced in the celebration oratory of those whose agenda has never been clearly defined and financial interest never disclosed. Those who do this American company destruction for "entertainment?" Plasticon will become just another notch on the guns of a vigilante crew of naysayers and immoral sycophants who spend their life building nothing, and enjoy tearing down what others have attempted to build. Though we all may lose money, at least we still have our self-respect. Ask yourself... who stands to lose the most in this situation? Who "medicate" themselves to sleep each night. And who will have to face the almighty with a list of deeds that will certainly reap a lasting and just reward.
I wish all longs the very best of luck and good fortune as we play out the last act... rrm
"It's not the critic who counts, not the man who points out how the strong man stumbled, or when the doer of deeds could have done better. The credit belongs to the man who is actually in the arena; whose face is marred by dust and sweat and blood; who strives valiantly; who errs and falls short again and again; who knows the great enthusiasms, the great devotions and spends himself in a worthy cause; who at the best, knows in the end the triumph of high achievement; and who at the worst if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat." - Theodore Roosevelt |
