Here's the second part to my last post.
If nothing else. The lessons learned about CSMA and other penny
stocks will hopefully make it easier for me to swallow the losses
I've taken.
Trial Basher, I hope you are learning something here!
~~~~~~~~~~~~
MORE ABOUT STOCK OPERATORS
After perusing numerous chat forum subjects, we concluded that the average investor is in the dark
about how a small cap deal really works. While many blame the promoter(s), few are even aware a
stock operator manipulated them into their misery.
Examine any thread with several thousand postings and you will hear, after the stock's demise, the
pathetic grumbling of the believer. The investor believed the story. The investor blamed the stock
promoter or newsletter writer, often for his own failings. The regulatory campaign against newsletter
writers exists only to beat the bushes and flush out the true crooks: the stock operators. This strategy
is hardly working and stock operators continue fleecing the public.
Early in our own education on Wall Street, we learned about newsletter writers. If they are so good,
why are they writing about the stocks instead of trading those stocks themselves? Successful traders
are often too busy to share their secrets with you. No professional trader, in his right mind, would tip
you off to a hot stock until AFTER he accumulated all the stock he could, even if went into hock to
do so. Successful stock operators operate along that same course.
Professional currency operators, hedge fund operators, only begin their media campaigns to generate
bids so they can cover their positions. Did you notice recently the media uproar, over the Japanese
Yen, just before that currency reversed course? That is how they manipulate the media so they can
close out their positions. A hedge fund operator, on the order of George Soros, lends money to help
bail out governments, as he earlier did with Russia, with a $200 million bridge loan.
The most successful stock operators were once stockbrokers or traders that turned to the promotion
game because it paid better. Only when they mastered marketing did they become operators.
In the penny stock world, stock operators turn to this vocation because they were banned from
promotions or censured because of one or more failed promotions. Have no sympathy for such
characters because their incompetence or criminality generally rings up more than $10 million in
losses before the regulator stings them. In their shadow world, and often-extravagant lifestyle, the
promoter sinks deeper into the bog and becomes an operator. When his name has been sullied, he
becomes an operator.
The stock operator is the truly dangerous force in the penny stock market. Because he is hidden and
very effective, the operator has the capability of creating high drama in a stock. He is the one who
feeds hyperbolic phrases to his stable of unwitting, but bought, stock promoters. He is the one who
hires the slugs to riddle chat groups with flowery projections about the stock, the same slugs that
howl about the shortsellers and ridicule detractors. It is the stock operator who trades the stock to
higher price, forcing shorts to cover and enticing the average shareholder to buy more and more and
more.
The stock operator bribes brokers to recommend the stock to clients. He is the one who greases the
wheels for funds to add positions. He weaves the story for the promoters and captures their souls
with options, cheap or free stock. Others he locks into private placements, which means you'll keep
hearing about that stock until the letter writer or promoter has cashed out.
The best stock operators are more effective in a bear market. Speculators are more desperate for a
good score to bail them out of their previous losses. Most of the tricks used by today's stock
operators were perfected before and during the US Great Depression. Indeed, the greater part of
US securities law was born after the bottom of that economic collapse because of the scams that
conned investors during the long drought of that period.
If you recently lost in the western Canadian or OTC markets, you are among the best candidates for
the next big scam. You will be eager to recoup your losses. Your name is on an email or fax list.
Someone has your phone number or your address. You attended an investment conference,
subscribed to a newsletter or joined a chat forum, right? They will find their way to you. But, in
actuality, it is you who will reach for their next story.
There is no shortage of lemmings itching for the quick buck. Penny stocks offer a leverage
unavailable in the senior markets. Where else can you potentially gain by 1000% or more? That, at
least, is the hope. More lose 70, 80 or 90 percent of their investment than those lucky few that score
a double or better. Just as there are great numbers of future losers lining up to spin the penny stock
roulette wheel, there are dozens of new promoters champing at the bit to launch a new career.
Hundreds of new speculators, who think they can beat the odds. This game won't stop because of
the regulators.
The veteran stock operator is far too clever to be caught. His attorneys skillfully devise a strategy to
detect and eliminate regulatory reprimand. Poor suckers, those newsletter writers - they are bribed
by the operator and would also harm themselves by blowing the whistle. The same goes for others
trapped in his web. Regulators can do little in stopping even the most treacherous operator. A
handful every few years are nailed, but rarely are those the best operators.
Many stock operators are merely auditioning for the job. One finds those half-baked stock
promotions that helplessly sputter, leaving investors bid-less, after a few short weeks. Amateur
promoters, with not much of a position, bluster and fumble while their following sinks down the drain.
IR staff that cash out their options during the first rocket ride. Traders and shortselling syndicates
obliterate their promotions. Indeed, these traders and groups accelerate the upswing so they can
obtain a large enough short position to make it worth their while. Financiers who initially fund these
mock operators blow them away during the roller-coaster ride.
The better the stock operator, the more glorified the presentation. The price target will represent a
stratospheric valuation. The story will include the overcoming of known obstacles, which are always
to the company's benefit. The opposition will be painted as incompetent or desperate for what this
company has. In the final, sometimes in the earlier, stages there will be takeover talk. After all, if the
property or product is so good, a brand-name company will want what your tiny company has in their
stable of acquisitions. Because there are the occasional, if infrequent, successes, the possibility alone
sounds worth the minor speculation. If you've been had before, you may even take the quick profit,
kick yourself for missing the "big run" and then find yourself back in the stock at a higher price. That,
again, is one of the stock operator's tricks.
Blaming the promoters for your losses is as senseless as blaming a gun or bullet for someone's
murder. Who pulled the trigger? The stock operator. He designed the battle and already knows
who's going to win or die.
Once you are hooked into a story, the exit doors seal shut and you can not escape. At the exact
moment that you begin to care about the small-cap company, you are hooked. There is little to
separate yourself from the fantasy that is being created, for you, too, have become imbedded in this
dream. How pathetic are the defenders of those manipulated stocks when you read their comments
on the Internet chat forums. The operators are howling in laughter. So are the professionals. Without
the little suckers, there is no one to fleece.
An entire industry has grown around the penny stock marketplace: newsletters, specialized quote
services, news release services, stockbrokers, stock promoters, traders, shortsellers, whistleblowers,
chat forums, financiers and others. Regulators are too busy and under-funded to eliminate the gross
fraud perpetuated in this industry. The infrequent indicted or penalized promoters are but grains of
sand across an entire beach. The powerful broker-dealers, especially in Vancouver, Calgary,
Montreal and Toronto live too well to resign from this industry. The US penny stockbrokers love the
fast and easy money of the small cap business. They get cheap paper, dump during the promotional
runup and then shortsell for the ride down the tubes.
Where does this leave you? If you are fortunate, you will suffer minor losses and walk away from
the game. That is unlikely. What drove you to the penny stock markets will keep you there.
Speculating in penny stocks will never restructure the missing discipline in your life, which led you to
the hot tip in the first place. Your options are slim: walk away disappointed, continue losing until you
are broke, evolve into a cynic using stock certificates for wallpaper, or learn the discipline
professional traders use to play these markets. At some future point, a new promotion will strike
your fancy and you may again be suckered into the irresistibility of it all. A new mining discovery
might bring you back into the exploration market. And so it goes.
The hallmark of successful trades, that which separates the professional winner from the novice
loser, is technical analysis. There is no substitute. Some use it but not enough and even fewer
analyze consistently well. With the breadth of available technical indicators, most shun this subject or
barely grasp more than a few basics. In this business, knowing a little makes you dangerous.
Technical analysis is not a toy, but a powerful weapon. Judging from our cursory review of
numerous Internet chat groups, technical analysis is only occasionally mentioned proportionate to the
great number of postings discussing daydreams and fantasies, rumors and wishful thinking, defenses,
complaints over shortsellers and promoters, soaring hopes and crushed expectations, and general
drivel.
It is our hope to radically alter the course of penny stock swindles and Internet discussion groups.
The next issue you will receive from the Cyriuss group of publications: The Technical Register. This
Internet service will evaluate the most active venture issues traded on the speculative stock
exchanges, solely on the basis of technical indicators.
Happy investing!
KZAP |
