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.
- PROFESSOR PENNY
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?
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
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 orchestraÿ
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
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."
- PROFESSOR PENNY
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.
- PROFESSOR PENNY
