ALL and DM..
DM...hope your day goes better today! You can do it!
ALL... I found this article on LS thread this morning. Interesting...MMK
To: LastShadow (12515 )
From: AlienTech
Tuesday, Apr 13 1999 12:48AM ET
Reply # of 12519
HOT STOCKS CONFIDENTIAL ESSAY By George Chelekis
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 While the books are out of date, the manipulations have been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 NEWS
PROMOTIONAL 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 oblivion, 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 him 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.
You can read more of the author writting at the hotstock review.
|
