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Don't Play On The Street... Participate

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!

"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

What the professionals and the securities regulators know and understand, which the rest of us do not, is this.

"RULE #1:

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 #2:

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 #3

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 #4

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 launch pad 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 #5

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 #6

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
deadly silent. As soon as the insiders accumulated all their shares,
they let YOU in on the secret.

"RULE #7

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, market maker 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 #8

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 #9:

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."

(end of article)