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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (1821)	8/20/1998 10:43:00 AM
From: LLCoolG	Read Replies (2) \| Respond to of 4509

Mr. Mindmeld, There are three principle reasons why MM's do, in fact, depress stock prices: 1. Options--they will lose a lot more money if the stock goes to 40 than if it stays around 35. These are usually temporary in nature, and occur very frequently. This is where the Max Pain theory of technical analysis becomes a tool. 2. Greed. In a lot of cases, the MM's will hope that people get tired of holding the stock, and sell. Then they can scoop up shares at very low prices, getting a bigger run for themselves, and more volatility. Everybody wonders why there is such high volatility these days. M's make money whether people buy or sell, and by taking some small short-term losses--the kind where you think they "lose their shirts"--they get multiple times that in gains when people just give up. Look at SMOD over the past 4 months for a prime example of this. 3. Revenge. MM's will typically punish a stock if the management does not cooperate with them, or misleads them. In this case, though, they will again load up on the stock, if it is a good company, after people give up on the stock and sell it at low levels. You may think that this is from Conspiracy Theory, but this is the reason that the Houses make so much money, nt because they are any better than everyone else. The system is heavily tilted in their favor, and until small institutional and private investors have access to the boards, the NASDAQ is ripe for this type of manipulation based on the bid/ask system of trading. It is much harder to do this on the NYSE, although more subtle types of manipulation, at higher costs, can happen there, too. But the Street wants everyone to discount the Conspiracy Theory, because the cash register keeps ringing for them. And for the record, I vote for reason #2. I sincerely believe we see 40 next week. Look at the Max Pain analysis based on the options. Regards, G