WELCOME TO THE NEW ANCOR INVESTORS:
However, look before you leap .
"In order to successfully speculate, one should presume the
following: THE SMALL CAP STOCK MARKETS PRIMARILY
EXIST TO FLEECE YOU! I'm talking about Vancouver, Alberta,
the
Canadian Dealing Network and the US Over-the Counter markets
(Pink
Sheets, Bulletin Board, etc.). One could also stretch this, with
many stocks, to include the world's senior stock markets, including
Toronto, New York, NASDAQ, London, etc. The average investor
or speculator is not
very likely to have much success in the small cap crapshoots."
Here is the whole article:
"
George Chelekis' HOT STOCKS REVIEW ## Copyright 1996
HOT STOCKS
CONFIDENTIAL ESSAY
By George Chelekis * April 21, 1996
TEL: (813) 251-0030 * FAX: (813) 254-4677
NOTE: I believe this may be one of the most important essays
on the financial markets which you will ever read. This essay will
be the lead article in Hot Stocks Review, Spring 1996 (Part Two).
Up until recently, I knew that I was missing something, but I could
not quite put my finger on it. Now I know what it is. The data
which follows is only as good as you can actually use it. These are
the cold, savage and ruthless facts of market manipulation. I have
not made these up, but have dug them up out of out-dated, generally
unavailable books on Canadian market manipulations, and
pieced the rest together from observations, personal experiences
and conversations with market professionals and insiders. While
the
books are out of date, the manipulations have been passed down
from one generation to another. The only thing missing was
someone to supply you with what those tricks were so you can
become a more educated speculator. Many thanks to Robert Shore
and Vern
Flannery, of Market News Publishing, for finding and sending me
a copy of the book, "The Story Behind Canadian Mining
Speculation" by T. H. Mitchell, first published in 1957 by George
J. McLeod Limited; also Ivan Shaffer's book, "The Stock
Promotion Game." I have been told that many of these tricks are
now illegal. If so, would someone please tell that to the market
manipulators.
THE DEADLY ART OF STOCK MANIPULATION....
In every profession, there are probably a dozen or two major
rules. Knowing them cold is what separates the professional from
the amateur. Not knowing them at all? Well, let's put it this way:
How safe would you feel if you suddenly found yourself piloting
(solo)
a Boeing 747 as it were landing on an airstrip? Unless you are a
professional pilot, you would probably be frightened out of your
wits and would soil your underwear. Hold that thought as you read
this essay because I will explain to you how market manipulation
works.
In order to successfully speculate, one should presume the
following: THE SMALL CAP STOCK MARKETS PRIMARILY
EXIST TO FLEECE YOU! I'm talking about Vancouver, Alberta,
the
Canadian Dealing Network and the US Over-the Counter markets
(Pink
Sheets, Bulletin Board, etc.). One could also stretch this, with
many stocks, to include the world's senior stock markets, including
Toronto, New York, NASDAQ, London, etc. The average investor
or speculator is not very likely to have much success in the small
cap crapshoots. I guess that is what attracted ME to these markets.
I have been trying, for quite some time, to answer this question,
"How come?" Now, I know. And you should, too!
By the way, the premise of these books is uniformly: "While
these speculative companies do not actually make any money,
one can profit by speculating in these companies." THAT is the
premise on how these markets are run, by both the stock promoters,
insiders, brokers, analysts and others in this industry. That logic is
flawed in that it presumes "someone else" is going to end up
holding the dirty bag. Follow this premise all the way through and
you will realize the insane conclusion: For these markets to
continue along that route, new suckers have to continue coming into
the marketplace. The conclusion is insane in that such mad activity
can only be short-lived.
I disagree with this premise and propose another solution (see my
earlier essay: A Modest Proposal) at the end of this essay.
What the professionals and the securities regulators know and
understand, which the rest of us do not, is this.
"RULE NUMBER ONE: ALL SHARP PRICE MOVEMENTS --
WHETHER UP OR DOWN -- ARE THE RESULT OF ONE OR
MORE (USUALLY A GROUP OF) PROFESSIONALS
MANIPULATING
THE SHARE PRICE."
This should explain why a mining company finds something
good and "nothing happens" or the stock goes down. At the same
time, for NO apparent reason, a stock suddenly takes off for the
sky! On little volume! Someone is manipulating that stock, often
with an unfounded rumor.
In order to make these market manipulations work, the
professionals assume: (a) The Public is STUPID and (b) The
Public will mainly buy at the HIGH and (c) The Public will sell at
the LOW. Therefore, as long as the market manipulator can run
crowd
control, he can be successful.
Let's face it: The reason you speculate in such markets is that
you are greedy AND optimistic. You believe in a better tomorrow
and NEED to make money quickly. It is this sentiment which is
exploited by the market manipulator. He controls YOUR greed and
fear about a particular stock. If he wants you to buy, the company's
prospects look like the next Microsoft. If the manipulator wants
you to desert the sinking ship, he suddenly becomes very guarded
in his
remarks about the company, isn't around to glowingly answer
questions about the company and/or GETS issued very bad news
about the company. Which brings us to the next important rule.
"RULE NUMBER TWO: IF THE MARKET MANIPULATOR
WANTS TO DISTRIBUTE (DUMP) HIS SHARES, HE WILL
START A
GOOD NEWSPROMOTIONAL CAMPAIGN."
Ever wonder why a particular company is made to look like the
greatest thing since sliced bread? That sentiment is
manufactured. Newsletter writers are hired -- either secretly or not
-- to cheerlead a stock. PR firms are hired and let loose upon an
unsuspecting public.
Contracts to appear on radio talk shows are signed and
implemented. Stockbrokers get "cheap" stock to recommend the
company to their "book" (that means YOU, the client in his book).
An advertising campaign is rolled out (television ads, newspaper
ads, card deck mailings). The company signs up to exhibit at
"investment
conferences" and "gold shows" (mainly so they can get a little
"podium time" to hype you on their stock and tell you how "their
company is really different" and "not a stock promotion.") Funny
little "hype" messages are posted on Internet newsgroups by the
same cast of usual suspects. The more, the merrier. And a little
"juice" can go a long way toward running up the stock price.
The HYPE is on. The more clever a stock promoter, the better
his knowledge of the advertising business. Little gimmicks like
"positioning" are used. Example: Make a completely unknown
company look warm and fuzzy and appealing to you by comparing
it to a recent success story, Diamond Fields or Bre-X Minerals.
That is the POSITIONING gospel, authored by Ries and Trout
(famous
for "Avis: We Want To Be #1" and "We Try Harder" and other
such
slogans). These advertising/PR executives must have stumbled
onto this formula after losing their shirts speculating in a few
Canadian stock promotions! The only reason you have been invited
to this seemingly incredible banquet is that YOU are the main
course.
After the market manipulator has suckered you into "his
investment,"exchanging HIS paper for YOUR cash, the walls begin
to close in on you. Why is that?
"RULE NUMBER THREE: AS SOON AS THE MARKET
MANIPULATOR HAS COMPLETED HIS DISTRIBUTION
(DUMPING) OF SHARES, HE WILL START A BAD NEWS OR
NO NEWS
CAMPAIGN."
Your favorite home-run stock has just stalled or retreated a bit
from its high. Suddenly, there is a news VACUUM. Either NO
news or BAD rumors. I discovered this with quite a few stocks. I
would get LOADS of information and "hot tips." All of a sudden,
my pipeline was shut-off. Some companies would even issue a
news release
CONDEMNING me ("We don't need 'that kind of hype' referring to
me!). Cute, huh? When the company wanted fantastic hype
circulated hither and yon, there would be someone there to
spoon-feed me. The second the distribution phase was
DONE....ooops! Sorry, no more news. Or, "I'm sorry. He's not in
the office." Or, "He won't be back until Monday."
The really slick market manipulators would even seed the
Internet news groups or other journalists to plant negative stories
about that company. Or start a propaganda campaign of negative
rumors on all available communication vehicles. Even hiring a
"contrarian" or "special PR firm" to drive down the price. Even
hiring someone to attack the guy who had earlier written glowingly
about the company. (This is not a game for the faint-hearted!)
You'll also see the stock drifting endlessly. You may even
experience a helpless feeling, as if you were floating in outer
space without a lifeline. That is exactly HOW the market
manipulator wants you to feel. See Rule Number Five below. He
may also be doing this to avoid the severe disappointment of a
"dry hole" or a "failed deal. "You'll hear that oft-cried refrain, "Oh
well, that's the junior minerals exploration business... very risky!"
Or the oft-quoted statistic, "Nine out of 10 businesses fail each
year and this IS a Venture Capital Startup stock exchange." Don't
think it wasn't contrived. If a geologist at a junior mining company
wasn't optimistic and rosy in his promise of exploration success,
he would be replaced by someone who was! Ditto for the high-tech
deal, in a world awash with PhD's.
So, how do you know when you are being taken? Look again at
Rule #1. Inside that rule, a few other rules unfold which explain
how a stock price is manipulated.
"RULE NUMBER FOUR: ANY STOCK THAT TRADES HUGE
VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION
PHASE."
When there was less volume, the price was lower. Professionals
were accumulating. After the price runs, the volume increases.
The professionals bought low and sold high. The amateurs bought
high (and will soon enough sell low). In older books about market
manipulation and stock promotion, which I've recently studied, the
markup price referred to THREE times higher than the floor. The
floor is the launchpad for the stock. For example, if one looks at
the stock price and finds a steady flatline on the stock's chart of
around 10 cents, then that range is the FLOOR. Basically, the
markup phase can go as high as the market manipulator is capable
of taking it. From my observations, a good markup should be able
to run
about five to ten times higher than the floor, with six to seven being
common. The market manipulator will do everything in his power
to keep you OUT OF THE STOCK until the share price has been
marked up by at least two-three times, sometimes resorting to
"shaking you out" until after he has accumulated enough shares.
Once the markup has begun, the stock chart will show you one or
more spikes in the volume -- all at much higher prices (marked up
by the
manipulator, of course). That is DISTRIBUTION and nothing else.
Example: Look at Software Control Systems (Alberta:XVN), in
which I purchased shares after it had been marked up five times.
There were eight days of 500,000 (plus) shares trading hands,
with one day of 750,000 shares trading hands. Market
manipulator(s) dumping shares into the volume at higher prices.
WHENEVER you see HUGE volume after the stock has risen on a
75 degree angle, the distribution phase has started and you are
likely to be buying in -- at or near the stock's peak price.
Example: Look at Diamond Fields (TSE:DFR), which never
increased at a 75 degree angle and did not have abnormal
volume spikes, yet in less than two years ran from C$4 to
C$160/share.
Example: Look at Bre-X Minerals (Alberta:BXM), which did not
experience its first 75 degree angle, with huge volume until July
14th, 1995. The next two trading days, BXM went down and
stayed around C$12/share for two weeks. The volume had been
60%
higher nearly a month earlier, with only a slight price increase.
Each high volume and spectacular increase in BXM's share price
was met
with a price retreat and leveling off. "Suddenly," BXM wasn't
trading at C$2/share; it was at C$170/share.... up 8500% in less
than a year!
In both of the above cases, major Canadian newspapers ran
extremely negative stories about both companies, at one time or
another. In each instance, just before another share price run up,
retail investors fled the stock! Just before both began yet another
run up! Successful short-term speculators generally exit any
stock run up when the volume soars; amateurs get greedy and
buy at those points.
"RULE NUMBER FIVE: THE MARKET MANIPULATOR WILL
ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST,
AND
SELL AT THE LOWEST PRICE POSSIBLE."
Just as the manipulator will use every available means to
invite you to "the party," he will savagely and brutally drive you
away from "his stock" when he has fleeced you. The first
falsehood you assume is that the stock promoter WANTS you to
make a
bundle by investing in his company. So begins a string of lies that
run for as long as your stomach can take it.
You will get the first clue that "you have been had" when the
stock stalls at the higher level. Somehow, it ran out of steam and
you are not sure why. Well, it ran out of steam because the market
manipulator stopped running it up. It's over inflated and he can't
convince more people to buy. The volume dries up while the
share price seems to stall. LOOK AT THE TRADING VOLUME,
NOT
THE SHARE PRICE! When earlier, there may have been 500,000
shares
trading each day for eight out of 12 trading days (as in the case of
Software Control Systems), now the volume has slipped to
100,000 shares (or so) daily. There are some buyers there, enough
for the
manipulator to continue dumping his paper, but only so long as he
can enlist one or more individuals/services to bang his drum.
He may continue feeding the promo guys a string of "promises"
and "good news down the road." (Believe me, this HAS happened
to me!) But, when the news finally arrives, the stock price goes
THUD! This is entirely orchestrated by a market manipulator.
You'll see it in
the trading volume, most of which is CONTRIVED. A market
manipulator will have various brokers buying and selling the stock
to give the APPEARANCE of increasing volume and price so that
YOU do start chasing it higher.
At some point during the stall stage, investors get fed up with
the non-performance of the stock. It drifts for a while, in a steady
retreat, with perhaps a short-lived spike in price and volume (the
final signal that the manipulator has finally offloaded ALL of his
paper). Then, the stock comes tumbling down -- having lost ALL
of the earlier share appreciation.
Sometimes, with the more cruel manipulators, they will throw
in a little false hope... giving you a little more rope so they can
better hang you. Just after a severe drop, there will be a "bottom
fishing"
announcement which sends the share price up a bit on high
volume, rises a little more after that and then continues to drift.
Meanwhile, you keep getting "shaken out" through a cruel drip-drip
water torture of the share price's slow retreat. Again, virtually
every movement is completely orchestrated.
"RULE NUMBER SIX: IF THIS IS A REAL DEAL, THEN YOU
ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED
OR WILL
BE DRIVEN OUT AT THE LOWER PRICES."
Like Jesse Livermore wrote, "If there's some easy money lying
around, no one is going to force it into your pocket." The same
concept can be more clearly understood by watching the tape.
When a market manipulator wants you into his stock, you will hear
LOUD noises of stock promotion and hype. If you are "in the
loop," you will be bombarded from many directions. Similarly, if
he wants you out of the stock, then there will be orchestrated
rumors being
circulated, rapid-fired at you again from many directions. Just as
good news may come to you in waves, so will bad news.
You will see evidence of a VERY sharp drop in the share price
with HUGE volume. That is you and your buddies running for the
exits. If the deal is really for real, the market manipulator wants to
get ALL OF YOUR SHARES or as many as he can... and at the
lowest price he can. Whereas before, he wanted you IN his market,
so he could dump his shares to you at a higher price, NOW when
he
sees that this deal IS for real, he wants to pay as little as possible
for those same shares... YOUR shares which he wants to you part
with, as quickly as possible.
The market manipulator will shake you out by DRIVING the
price as low as he can. Just as in the "accumulation" stage, he
wants to keep everything as quiet as possible so he can snap up as
many of the shares for himself, he will NOW turn down, or even
turn off, the volume so he can repeat the accumulation phase.
In the mining business, there seems to always be another "area
play" around the corner. Just as Voisey's Bay drifted into blivion,
during the fourth quarter of 1995 and early into 1996, the same
Voisey Bay "wannabees" began striking deals in Indonesia. Some
even used new corporate entities. Same crooks, different
shingles. The accumulation phase was TOP SECRET. The noise
level
was deadingly silent. As soon as the insiders accumulated all their
shares, they let YOU in on the secret.
"RULE NUMBER SEVEN: CONVERSELY, YOU WILL OFTEN
BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS
OF
FAILURE."
Twenty-twenty hindsight will often show you that there was a
"little stumble" in the share price, just as the "assays were
delayed" or the "deal didn't go through." Manipulators were
peeling off their paper to START the downslide. And
ACCELERATE it. The quick slide down makes it improbable for
your getting out at more than what you originally paid for the
stock... and gives you a better reason for holding onto it "a little
longer" in case the price rebounds. Then, the drifting stage begins
and fear takes over. And unless you have serves of steel and can
afford to wait out the manipulator, you will more than likely end up
selling out
at a cheap price. For the insider, marketmaker or underwriter is
obliged to buy back all of your paper in order to keep his company
alive and maintain control of it. The less he has to
pay for your paper, the lower his cost will be to commence his
stock promotion again... at some future date. Even if his company
has no prospects AT ALL, his
"shell" of a company has some value (only in that others might
want to use that structure so they can run their own stock
promotion). So, the manipulator WILL buy
back his paper. He just wants to make sure that he pays as little
for those shares as possible.
"RULE NUMBER EIGHT: THE MARKET MANIPULATOR
WILL
COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP
ITS PRICE SHARES."
Placing a Market Order or Pre-Market Order is an amateur's
mistake, typifying the US investor -- one who assumes that thinly
traded issues are the same as blue chip stocks, to which they are
accustomed. A market manipulator (traders included here) can
jack up the share price during your market order and bring you
back a confirmation at some preposterous level. The Market
Manipulator will use the "tape" against you. He will keep buying
up his own paper to keep you reaching for a higher price. He will
get in line ahead of you to buy all the shares at the current price
and force you to pay MORE for those shares. He will tease you
and MAKE you reach for the higher price so you "won't miss out."
Miss out on what? Getting your head chopped off, that's what!
One can avoid market manipulation by not buying during the
huge price spikes and abnormal trading volumes, also known as
chasing the stock to a higher price.
"RULE NUMBER NINE: THE MARKET MANIPULATOR IS
WELL AWARE OF THE EMOTIONS YOU ARE
EXPERIENCING DURING A RUN UP AND A COLLAPSE AND
WILL PLAY YOUR EMOTIONS LIKE A PIANO."
During the run up, you WILL have a rush of greed which
compels you to run into the stock. During the collapse, you WILL
have a fear that you will lose everything... so you will rush to exit.
See how simple it is and how clear a bell it strikes? Don't think
this formula isn't tattooed inside the mind of every manipulator.
The market manipulator will play you on the way up and play you
on
the way down. If he does it very well, he will make it look like
someone else's fault that you lost money! Promise to fill up your
wallet?
You'll rush into the stock. Scare you into losing every penny you
have in that stock? You'll run away screaming with horror! And
vow to NEVER, ever speculate in such stocks again. But many of
you
still do.... The manipulator even knows how to bring you back for
yet another play.
What actors! No wonder Vancouver is sometimes called
"Hollywood North."
"FINAL RULE: A NEW BATCH OF SUCKERS ARE BORN
WITH
EVERY NEW PLAY."
The Financial Markets are a Cruel, Unkind and Dangerous
Playing Field, one place where the newest amateurs are
generally fleeced the most brutally.... usually by those who KNOW
the above rules.
Just as I have a duty to ensure that each of you understand
how this game is played, YOU now have that same duty to
guarantee that your fellow speculator understands these rules. Just
as I would be a criminal for not making this data known to you,
YOU would be just as criminal to keep it a secret. There will
always be an unsuspecting, trusting fool whom the rabid dogs will
tear to
shreds, but it does NOT have to be this way.
IF every subscriber made this essay broadly known to his
friends, acquaintances and family, and they passed it on to their
friends, word of mouth could cause many of these market
manipulators to pause. IF this effort were done strenuously by
many,
then perhaps the financial markets could weed out the crooked
manipulators and the promoters could bring us more legitimate
plays.
The stock markets are a financing tool. The companies
BORROW money from you, when you invest or speculate in their
companies. They want their share price going higher so they can
finance their
deal with less dilution of their shares... if they are good guys. But,
how would you feel about a friend or family member who kept
borrowing money from you and never repaid it? That would be
theft, plain and simple. So, a market manipulator is STEALING
your
money. Don't let them do it anymore. Insist that the company in
which you invest be honest or straight... or find another company in
which to speculate. Your money talks in LOUDER volumes than
any stock
promotion scheme. ALWAYS refuse any deal which smells wrong.
Refuse to tolerate the scams prevalent in the financial markets.
This can ONLY be accomplished by KNOWING and USING the
above rules. Thoroughly COMPLETE your due diligence on a
company
before risking a dime. Dig up the Insider Reports to find out who is
blowing out their paper, how often they are blowing out their
paper and whatever happened to their "last play."
Begin to use this as YOUR rule of thumb: If the insider's paper
is really worthless, then avoid it. Find another's whose paper
DOES hold promise and honest possibilities. In these small cap
stock markets, you are investing more in the INDIVIDUAL behind
the
play, than the "possibility" of the play itself. Ask yourself before
speculating: Could I lend this person $5,000 for a year and hope to
get it back? If not, then don't! Do it for your own good and the good
of everyone else who is so foolish as to speculate in these
financial markets!
The truly sane and only somewhat safe solution to all of this:
FIND GOOD COMPANIES IN WHICH TO SPECULATE AND
GET INTO THEM AT THE GROUND FLOOR LEVEL. Anything
else is
criminal or stupid. This is a case where there really isn't a gray
area. It's either Black or it's White. The company and its
management are scamsters or they really intend to bring value to
their shareholders.
COPYRIGHT (c) 1996 by George Chelekis. ALL RIGHTS
RESERVED.
George Chelekis is not an investment advisor, money manager or
stockbroker (past or present). George Chelekis holds a
substantial position in Software Control Systems, prior to going to
press and may sell part or all of his position without advance
notice.
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