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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Mike McFarland who wrote (24447)	12/18/1999 2:48:00 PM
From: Mr. Aloha	Read Replies (2) \| Respond to of 56532

I trade many stocks both long and short (many more on the long side), and I have to say that what you describe (bandits manipulating a stock price to unrealistic levels) happens far more often by longs than by shorts. Many POS stocks get run up by "bandits," insiders wanting to dump their shares, or momentum players searching for a greater fool to sell to. Look at DOCI that ran up from pennies to over $6 last week on message board hype and momentum traders, even though the stock is undeniably worthless per a bankruptcy agreement. Look at ADSP, a $3 stock that got run up to 57 on misinformation, manipulated press releases, and momentum traders. Look at those UCLA students who recently were arrested for hyping a penny stock on hundreds of message boards with false information to run it up and dump it on innocent fools. There are many, many such examples of stock manipulation by longs. I would venture to say that far more people get hurt by these types of manipulations than the one you cite, as the volume of buyers at unrealistically high levels is much higher on these stocks than is the volume of sellers at low levels on the type of stock you got hurt on. I would say far more people bought ADSP way above the current $9 and still hold it than sold the stock you mentioned at 50 cents. These people will probably never have a chance to recover their money, while people who held out on your stock have recovered. I also heard there are shorts who knew that ADSP was really worth only $3-4 that got wiped out on the artificial run up to $57. Sure, they also made mistakes by shorting too heavily, moving stops, and adding at non-peak levels, but I personally know of several quality individuals who got hurt much more badly by this manipulation than you did by yours. While the intentional manipulation you cite burns me up as well, the intentional manipulation on the long side (false takeover rumors, manipulative press releases, misinformation spread on message boards) is far more rampant and severe in this market. I say that many longs are much more dangerous to the average trader than are most shorts, so please stop bashing the "evil short-sellers" without also bashing the, imho, much more evil "long manipulators." Mr. Aloha

To: Mike McFarland who wrote (24447)	12/18/1999 6:00:00 PM
From: xcr600	Respond to of 56532

Sorry about your loss, but reading the SEC filings would have given you a better idea of what was going. Also, don't assume that mgmt is innocent when entering into these types of financing. They know damn well they are making a deal with the devil. btw, there is much more manipualtion with stocks being pumped up than shorted down. ADSP and a lot of the other Linux crap lately. Most of which is worth no more than a couple of bucks. good trading x

To: Mike McFarland who wrote (24447)	12/19/1999 11:36:00 AM
From: Mama Bear	Read Replies (2) \| Respond to of 56532

Mike, I'm very familiar with so called 'toxic' convertibles. I lost a few dollars to the bandits myself until I realized what the game was, and then joined them when I noticed a new one was filed. In this situation, the bandits could not do their dirty deed without a specific invitation and permission from company management. Again in this situation, the destruction of value, i.e. dilution, occurs inside the company. The bandits are simply working within the terms of their agreement. To blame them and not the company for the subsequent decline in price is a mistake IMO. I'll agree with you that this sort of financing should be regulated more fully. Perhaps a regulation limiting the bandits to hedging their loan on an initial tranche, i.e. if they lend $5 million with a ceiling of 10, the maximum shares they could short would be 500k. Better would be eliminating the naked short sales that many enter into. This would be harder though, as effective oversight of offshore brokerages to enforce the affirmative determination rule is next to impossible. Of course this would mean that some companies would go belly up as they would be unable to obtain financing. But as a financial Darwinist, I wouldn't bat an eye if that happened. I believe there has been some change in Exchange rules that has changed the nature of these floorless instruments. I can't swear that for certain, but it has been some time since I've become aware of newly minted toxics. Perhaps companies are just becoming aware of the hazards of entering into such agreements, although I can't believe that all that entered into them previously were naive. Still, it is our responsibility as traders to be aware of anything that might affect our trades and investments. I find it counterproductive to blame the short sellers for my losses in the floorless situations which I was long. While it is one of the more arcane situations one might encounter, it is still something one needs to be aware of, at least for trades of more than the shortest duration. Here's a quote from the thread header: "2. Never blame someone else for losing YOUR money, it was solely your decision to "jump in". Keep a record of those that often make bad decisions." of course this is easier said than done. Regards, Barb