Bruce/All --- I have now emailed about 15 people in government, the media, etc. It will interesting to see if anyone responds. Most recently I sent an E-Mail to Carrie Lee of the WSJ.
May 6, 2002
Dear Ms. Lee,
I think you may have been the one at WSJ that interviewed me a couple years ago (Dave Gore, Siliconinvestor.com)
Regardless, as a 25 year veteran of the stock market and recipient of a recent Forbes Magazine award, I wanted to make you aware of some manipulation going on that is making it nearly impossible for the little investor to win. This information is not new. In fact, that is what is most troubling about it. Nothing has ever been done that I can find.
The Senate recently published statistics showing 70-90% of daytraders lose in the stock market, but Mutual Funds and more conservative investors are losing too. Here's part of the reason why. Can you help in any way? This is a serious problem where the very rich are getting richer at the expense of those trying to have some success in the stock market. This is not what America should be about.
I just posted the following on SiliconInvestor.com on my discussion thread, recently named by Forbes Magazine at one of the "Top Ten Stock Messages Board on the Net".
What heightened my search for some answers is the recent treading action in ESS Technology (ESST, PE of 13, PEG of .48). The company recently beat earnings by a whopping 10 cents a share and upgraded guidance as well. They are in a very strong growth sector, DVD sales. Yet the stock has fallen from $20 a week or so ago just after earnings release to as low as $12.76 today (monday, May 6). It's fellow competitor, ZRAN, has a PE closer to 90 yet has had less than half the EPS in the last 4 quarters. Bashers are running rampart on Yahoo.com under the names of Alamo777, Sponge-Bob, Dogma, Nvtl_wireless, etc.
Short position increased from about 5M to over 12M in mid-April with about 35-40% of the float short. But why when fundamentals scream "Strong Buy".
Fundamentals at Nasdaq.com: earnings.nasdaq.com`&selected=ESST
My theory is the specialists bought up the stock that the Chan Family sold (CEO of ESST) when they were asked to reduce their share of the Company down from 35% to 20%. That extra float probably resulted in this pure manipulation play. Please see esst.com and listen to the replay of their recent Conf. Call at the 36+ min mark.
Chart on another low PE stock that had a sudden increase in short position and resultant stock drop, followed by a short squeeze (planned?):
siliconinvestor.com
Note: Maybe, if nothing else, you might have a suggestion on who else might be helpful.....thanks!
****
So, the big question: "Is the Small Guy Being Used"?
What do you think? This thread has seen strangely-timed, large "short action" in low PE stocks like ACF, SGR, and ESST resulting in unusual slides, then sudden dramatic turnarounds in ACF and SGR a few weeks later. Also, EXPE has been a bit strange the other way, going up some 450% in the last 52 weeks with good, but much weaker fundamentals than the above three stocks.
Could this be manipulation at its worst?
Are the specialists really at the heart of it and have they been protected by the good ol' boy network for decades?
Richarn Ney's article:
w3.trib.com
Excerpts from the above article
"The specialists are the heart of the exchange. The exchange, in turn, has practical control of the major corporations, banks, insurance companies, and brokerage houses in this country. These, in turn, influence news reporting and the regulatory agencies."
"The specialist has absolute control over price. He can match the buys with the sells in any way he sees fit. He can raise the price of the stock 3 points in three trades, and open the next day down 5."
"When the specialist has sold all his inventory, and has sold short, he will then begin a downward slide of prices so necessary to his plans. Slides are a mirror of rallies. Near the bottom, the specialist will increase the angle of price decline, alarming investors, scaring them into selling their shares to the specialist who needs them to cover his short sales, and to build a new inventory at wholesale. The media will remain bullish, or cautiously optimistic throughout a slide, until the last two weeks, when they will turn suddenly bearish (3Ney, 158)."
"The specialist, one of his partners, a friendly broker, their lawyers, or their bankers, often sit on the company's board of directors, which makes the specialist privy to information before the average trader. Where an officer of a corporation is held strictly accountable to the SEC for his use of 'inside information', the specialist and fellow brokers are accountable to no one (1Ney, 54-55)."
"The seeming unpredictability of stock prices is due to the fact that prices exist at the whim of the specialist."
"A stock is only worth what the specialist is willing to pay for it at the moment. The fluctuations you see are, in fact, the evidence of how the specialist is working out his inventory problems to meet his short-term, intermediate-term, and long-term goals (2Ney, 172). The specialist will sometimes 'leap frog' his prices up or down, creating a gap. This is done to keep a group of investors from buying or selling at a particular price. 'Leap Frogs' show specialist intent."
"The specialist has many advantages, many tools to use to pry dollars from unsuspecting investors and mutual funds. Chief among these advantages is his book. In his book he can see at a glance all the buy and sell orders from the public and the funds. His book tells him of potentially massive sales above and below his current price. This gives him a great advantage when he is trading on his own investment and omnibus accounts."
"Because of his book, the specialist sees shifts in trends long before anyone else. This gives him a great advantage. The specialist will buy heavily at the bottom of a slide (at wholesale) then advance prices and sell, at heavy volume, at the peak of the rally (retail). He will then sell short and take prices down. The turning points of a rally will be marked by heavly volume in the Dow 30 (3Ney, 85-89)."
"When he desires he can even make large block trades without entering them into his book. In this way the public is never made aware of those trades. Should the specialist want to supply a buy or sell order from his own accounts, rather than from public orders on book, he can and will do so (1Ney, 156). Ney cites specific examples when his customers orders were ignored while the specialist completed orders for his own accounts."
"It is highly unlikely that we will see news reports critical of U.S. stock exchanges, or of the specialist system. There is a simple reason for this. All news organiztions are corporations and do but reflect their management's views. Corporations that own media have specialists influencing the choice of management. Newspapers, magazines, and television are but extensions of the corporate world."
"When Richard Ney's first book, The Wall Street Jungle, came out it was on the New York Times best seller list for 11 months. Yet the New York Times would not review it. The Wall Street Journal refused to take an ad from a New York bookstore that featured The Wall Street Jungle (2Ney, 30)."
"All three of the major networks were wary of having Ney appear. NBC banned only two people from appearing on the Tonight show with Johnny Carson: Ralph Nader and Richard Ney. Not only do large banks, brokerage firms, and corporations advertise on television, they also are the largest stock holders (2Ney, 33- 34)."
LINK:
Message 17428836
Respectfully, |
