Specialists, The Managers Of The Managers Of The Stock Exchange: The Stock Exchange establishment includes the stock exchanges, along with the Eastern Banking establishment, the major investment banking houses, and the regulatory agencies that serve as the guardians of the establishment. Because the average investor fails to perceive the magnitude of this establishment’s power, or the manner in which it has immobilized his financial resources, he fails to see that he is looked upon as an object rather than a person, a commodity to be consumed and disposed of rather than the consumer that he should be. The Federal Government has the authority to institute the fundamental changes that are needed that would greatly improve the investor’s chances for success. The fact is, however, that the unprecedented magnitude of the Exchange establishment’s coercive powers long ago reached into the government to establish its sources of control. Perhaps the most distinctive feature of our democracy in the United States is the extent to which the financial establishment dominates the mechanics of government. There can be no punishment when the government is your bedfellow. Within the limits fixed by their material conditions, time, and capacity, investors can learn to compete successfully against the insider by following the transactions of the specialist for his own accounts. It is remarkable how successful the average investor can become at solving his or her investment difficulties once they learn how to manage in their heads two entirely different concepts, the market as the specialist wants you to imagine it is, and the market as it is because of past and present specialist intentions.
The specialist is the person who, in the exercise of his role at the center of the market, acts as your broker’s broker on the floor of the exchange. However, at the same time, he is also acting as both an investor and a trader for himself. For now it is sufficient to point out that, in the exercise of his role, he is able to determine the long – and short – term movements of the stocks under his control. Many investors have been surprised and disturbed to learn that although a specialist may seem to do very poorly in the market for his customers, he does very well for himself. With the specialist’s ability to totally control the price movements of his stocks, how can he possibly be expected to deny himself the opportunities for maximizing his personal profits while trading against his very own customers? Why should anyone expect the stock market specialist to behave any differently from any store merchant who sells his products at retail prices once he has purchased those products at the wholesale price levels? There is only one reliable method by which investors can accurately predict the future course of stock prices. This method is based on the premise that specialists well in advance of their happenings know the market’s major trends. It is for this reason that, in determining the relevance of a specialist’s past merchandising practices to those of his present practices, investors are then able to determine what events are necessary for the attainment of the specialist’s future merchandising objectives. It is important to note that traditional analysis totally ignores the existence of the specialist. It concentrates entirely on the assumption that the average investor’s success or failure in the market place depends on selecting those stocks whose underlying economic fundamentals will cause them to become objects of public demand, and that public demand will cause those stocks to advance in
price. The basic principles that I use are based in the assumption that specialist’s, as the active core pieces at the markets center, determine a stock’s and market’s trends because they are in the position to manipulate public supply and demand. Heavy demand for a stock by the public, once it is exhausted, enables specialists to drop stock prices profitably, whereas heavy selling by the public, once that selling dries up, provides the specialists with the incentive to advance stock prices. The second major difference between my thought’s and traditional analysis involves understanding of the decisive role played by the specialist’s use of short selling. Short selling not only enables the specialists to set a ceiling to the markets/stocks advances, and his short covering, to set a floor for it to decline to, it also provides them with the financial incentives to create a “Bear “ Bear ” market when their short sales have been established at the market’s highs and to create a “ Bull” Bull” market once they have “covered “ covered”” their short sales to establish a market bottom. Traditional theory totally ignores specialist short selling. The total dimensions of the specialist’s powers are such that he can be said to be the only individual in the market truly endowed with the power of choice. Since this is so, the priorities of traditional theory are merely abstractions in which investor’s profits are an unrealizable dream. The power of the specialist can be most effectively exercised by investor’s when they recognize that if they are to achieve success in the market place they must gain insight into the direction of specialist thought patterns. This will then enable investors to anticipate the upcoming decisions of the specialist’s. Even though the specialist is the dominant agent in the market’s affairs, the investor is able to avoid the consequences of this total domination once he or she is able to predict the specialist’s action.
Written by:
Richard W. Wendling Comments should be sent to:
[email protected] 08/26/07
