Specialist Manipulation of Individual Stocks And Markets A Question Of Fact Or Fiction? In my opinion the market place as a hole and individual stocks in general are under heavy accumulation by the specialist system and more importantly by individual specialists. The problem I have with this is the fact that individual investors continue to sit on their hands and watch as specialists continually and consistently rob their hard earned money from their financial accounts. Investors are still under the belief that the stock market is an “Auction Market”, driven by their buying and selling of individual stocks and mutual funds that they invest in. Nothing could be further from the truth. For the entire 20 th and start of the 21 st centuries specialists have exerted their control over the market place creating the booms and busts of market cycles. If you don’t believe this ask yourself the following questions, during the Great Depression of the 1920’s and early 1930’s as individual investors and corporations were wiped out how is it that specialists made massive profits for themselves and their corporations?
Also, why is it that during every major recession that this stock market has weathered in the last 1 00 plus years those same specialists have made exorbitant profits? And most importantly why is it during the market crashes of 1963, 1987, and 1998 specialists made record profits for themselves and their companies at the expense of investors?
The answer is simple; investors don’t understand how the market place works. When they invest in a stock and they make a rare profit they are overjoyed with their success. When they lose money on a stock their broker simply tells them they made a poor investment choice and moves on. Specialists are able to continually cheat investors of their profits by hitting them with a three-pronged attack. These three levels of attack are as follows, the use of the “media “ media”” to control investor’s insights and knowledge of
the market place and individual stocks. The Federal Reserve and its control interest rates and money supply for both corporations and individual investors. And finally the specialists’ use of his “short “ short sale” sale ” to control market and stock tops and his “short covering” to accumulate stock and stop market declines at their cumulative lows. Now you ask yourself how is this all possible, well the answers are simple, when one has been indoctrinated from the time he or she has learned how to handle money in the wrong manner, it is virtually impossible to make the proper decisions when buying and selling stock. All of the information that the individual investor receives, whether via the internet, his morning stock pages, or via the electronic news media, (IE) TV and cable networks is generated on the 14th floor of the New York Stock Exchange. The Exchange fabricates all of the information about stocks prices, splits, mergers, scandals and potential failures. It is therefore impossible to get the proper information from them to make the educated investment decisions necessary to be successful in the market place. They are also used to continually inundate the investor with shaded information when it comes time for them to either enter of leave the market place. As stocks are reaching their collective all time highs and investors should be selling out to prepare for the imminent decline, but instead they are coerced into staying into the market place and buying more stock at these inflated highs as specialists and market and Exchange insiders are themselves leaving the market place. The same can be said as the markets approach their collective bottoms. As investors should be considering buying more stock as their issues move down they are again
coerced into leaving the market place as the media paints a picture of major catastrophic disaster for the investing public. They paint such a bleak picture that investors throw up their arms in disgust and sell everything at massive losses just to try to save face. The “Federal “Federal Reserve” Reserve ” is another tool that specialists use to force investors to make the wrong decisions. Recent history has again proved this point to be true. Just last month the Federal Reserve dropped interest rates 1-¼ points in order to keep investors in the market place. As they dropped rates the market rallied for several day’s giving the appearance of strength while specialists unloaded stock back to the market place that they had picked up as they cleared their collective books of sell orders. After that unloading process was concluded specialists again moved the market lower. Now we are again in the throngs of a major decline and the Federal Reserve will more than likely step in at next weeks meeting and cut rates by another 1 percent. This will have a two-fold effect on the market place. First it will give specialists the opportunity to again unload stock picked up during the decline back to the public before moving lower. It will also force investors to stay in the market at the very time that they all know that they should be selling out. They can’t leave the market for the safety of cash instruments because in their minds the 2% plus rate of return won’t justify their needs. The third and last dagger in the hearts of investors is the specialist and his use of the “short sale, and short covering .” As stated earlier specialists rallied the markets sharply higher last fall creating their highs in August 2007. At those highs they sold out their trading accounts and more importantly their personal long-term investment accounts . They then continued to rally stocks while they sold 100’s of millions of shares of stock short.
After completing those short sales they began the decline that we are in now. When they approach their lows which I believe will be in the range of the 9,200 level they will use their short covering abilities to again refill their trading account, and more importantly their personal long term investment accounts. For those individuals who don’t believe that this type of manipulation is possible in today’s society look at the following examples of stocks. The issues listed below are all issues that will come under heavy accumulation at their lows by specialists and market makers. Notice how each is now dropping sharply from its previous highs last year: STOCK: AAPL: GS: NYX: WB: LEH: BSC:
HIGH $204.00 $240.00 $112.00 $60.00 $172.00 $173.00
CURREN CUR RENT T PRICE PRI CE $126.50 $157.00 $59.50 $26.50 $39.25 $30.00
The next several weeks will be very volatile for the average investor. He will be beset with major declines in his stocks prices and more than likely will be forced to sell them at losses. One final point on the specialists’ manipulation of individual stocks and the help it gets form the Fed and the Media in its quest to accumulate said stocks. Yesterday it came to light that two of Bear Stearns funds were becoming insolvent and that they were going to have major capital withdrawals from the company. The media announced this news after the market close the previous day. This allowed the specialist to manipulate the stocks price at the open in order for him to maximize his profits for the following day’s open. He opened the stock down $4.00 on a trade of 500 of 500 shares and then dropped it another $28.00 another $28.00 on the next trade of 1500 of 1500 shares. How can you justify taking $32.00 from a stocks price on 2000 shares traded?
After those two trades were made he was able to absorb the bulk of the day’s trades at or near their lows and then rally to unload in the last hour of trading. Volume was 15 times daily average. He used the information that JP Morgan and the Federal Reserve were going to bail out Bear Stearns to rally the issue. The media was used to announce the impending doom and gloom at the company and its potential demise to churn investor’s fears and force them to sell off the stock in the morning and then to buy it back in the afternoon. The specialist in this issue knew that there were problems with the funds late last year as he was rallying the issue to its all time highs. He unloaded his stock at that time and sold the issue short. He will use his short covering in the near term once he drops the issue down to the price range he desires and then will buy all the stock he can lay his hands on. People say, why buy a company that is insolvent or going to become insolvent. Specialists love banks and brokerages. They allow them to massively manipulate the market place by letting specialists borrow stock for there short selling for special considerations later. Having said this consider the following: In 1997 LEH, Lehman Brothers Holdings a brokerage house was at its all time highs of $84.00 a share. Then it was made known k nown that they were having money problems and that the company might be going to have to declare de clare bankruptcy. The public dropped the stock like a hot potato down to the $27.00 level. Once the specialist in that stock covered his short sales the bankruptcy words went away and the stock rallied to $164.00 a share, split 2 for 1 and then rallied again to the $172.00 level before again splitting 2 for 1.
In the final analysis do your own do diligence. If you use the media or follow the actions of brokers and TV commentators and so called experts and economists you will always be on the wrong side of the market or your stocks movements.
Richard W. Wendling 03/15/08
[email protected] [email protected]
