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Author: Barcoo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6186  
Subject: Stock Manipulation Date: 3/3/2000 1:12 AM
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Recommendations: 7
Just got this from a daytraders site.
Should be read by everyone who dabbles in a few specs.



fEB 2000
THE ART OF STOCK MANIPULATION

Subject: Essential reading - the deadly art of stock manipulation...


Essential reading - 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. 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 rumour.

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,
he 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 orchestra├┐

Market Manipulation Rules (cont.)

Here are the other rules for post #6358. My computer disconnected, so I went
to bed. By the way, I don't claim to be the author; source is unknown.

"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.
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