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doctorate in stock manipulation notes

  1. 1,006 Posts.
    It's hard to cheat an honest man.

    How could one explain this statement ?

    Well an honest person is able to look at a situation from an objective stance. He has no vested interest and really doesn't care one way or the other. He can afford to be objective. On the other hand the sucker, well he has already bought into the scheme. He wants something for nothing. He wants the big reward for returning the lost wallet, the fabulous stock tip, the winning horse, turning lead into gold. His objectivity is already gone, he has bough in. Because the sucker already knows the game is rigged he can't go crying to the ASX or ASIC about what happens in the end.

    Now with stocks there are only five possible plays.

    1\ External ramping of a stock on boards or in the media
    2\ Combination of both company releasing irrationally exuberant news combined with external ramping.
    3\ Internal company releasing irrationally exuberant news on the ASX.
    4\ Combination company/ external flaming of a stock sometimes innocent but alarm bells when the stock is a possible takeover target.
    5\ Company releasing deliberate down playing of prospects erring on the other side of cautious.

    Of these, the rare manipulations come from the category 4 and 5. Some very very good companies are extremely conservative and tend to err on the side of caution.

    Of the others at a guess the ratios are.

    1\ 30%
    2\ 45%
    3\ 20%
    4\ 2%
    5\ 3%

    Now most I am sure of a completely innocent nature as the ASX and ASIC would love us to believe. Company releases partial results and talks up it prospects prior to full results being known. This just opens the door for the rampers to manipulate the stock by talking it up on message boards or being able to get their mate who works for a newspaper to publish some bullish article.

    Warning bells should start ringing very loud if a company releases partial results before the drilling has finished. Things like visible gold, or mineralization seen prior to the full results being released is a dead giveaway. Other tricks include comparing the results to an already known massive ore body. Another big warning should be sent up if the company has just completed a placement. More often than not the company talking up its prospects just after its placement is a dead giveaway. Even worse is the company announcing a placement just after releasing partial results talking up the deposit prior to the full results being known. Lastly is the company that uses a different measure than is normally accepted when reporting a deposit. A gold company saying the intersection was 555 g per tonne as opposed to 15.4 oz per tonne .... Same sort of thing with anything else. Copper at 1,250 part per million ... Well that's more impressive than the 0.125% which we all know is not commercial.

    These above refer to types 1 and 2 for manipulating a share. There are of course numerous variations but all along the same theme.

    Type 3 is the company pushing all by itself. Normally after a while some sucker falls for the story and starts promoting the company on message boards so it becomes a number 2. But some great examples of this were seen back with the Tech boom in 2000/2001. How many companies talked of multi billion dollar markets for their products. Not many left today. Very few making money.

    Some amazingly still able to sustain themselves even now and on the same diet of fabrication fed for many years. Always good to branch out and be listed elsewhere. Moving to a new pool of suckers always helps. A move into the US, Canada or UK always helps. Just amazing to myself the companies still 4/5 years on never seem to make a profit, losses seem to get worse every year. Even more amazing some still able to make placements and raise more funds to be frittered away. The promises made to the offshore investors almost the same fed to the domestic market a few years prior to that.

    Two other warning signs for the first three types of systems is to look at the accounts and see what it costs to run the company. If the directors are rewarding themselves with both big pay packets and/or low cost shares and options its another black mark. The other is if they spend an awful lot on public relations or promotion. You may find out the idiot on the chat site you are berating for pushing some awful share is in fact employed by a public relations company which in turn has been employed by the company in question.

    If a company has more than one of these traits, it is normally advised to stay away. If it has three or more, hold on to your wallet. If a company announces partial results, compares the results to a well known massive discovery, talks it up in the media, is pushed hard on chat sites, has excessive pay for directors, excessive option schemes, and on top of this a new placement either just done or being done ..... Well thats a total of 7 warning signs. Still they buy.

    Now onto the last two types.

    These are very rare. Some very good companies do play down their prospects and like to surprise with the results. On one hand this may be innocent, on the other somewhat covering any gribbles shareholders may have against them. So when shareholders have a go at them they come back and say well our results were 10% higher than our projections.

    The other sector 4 and 5 fall into is when the stock is a takeover play. Sometimes their already has been a bid, maybe rejected by the ACCC or Foreign Investments Review Board. Sometime it leaves the potential bidder still wanting to take over the company but sitting with a block of 25- 49% of the shares. Hoping that at some stage down the track things may change he is able to virtually control the company with the voting block. At the AGM all he has to do is not support directors packages and bonus and not vote the proposed ones in. Sounds far fetched but you might be surprised at the number of times it happens and is happening now.

    What I always find amazing is the stupidity even after the facts have come out. Just usuing a hypothetical mining company. Looking sick and trading at say 8 cents. Hush hush rumours start and its at 12 cents. Then the company comes out with a partial result and hints at a bigger discovery. Stock shoots up normally 400% to say 50 cents. So what happens when all the dust settles. Results come out and nothing. The normal thing is the stock goes down but not as far as it should. Too many suckers still believing the hype. Remember the stock before all this happened was 8 cents and looking sick. Stock falls sharply of course on the actual results but typically remains at 150% of the starting point for some time. If they are very good the manipulators can get a few rallies out of it but eventually is will go back below the starting point but depending on how good they are this may take up to 12 months. What amazes me is that they don't do it as soon as the results come out and it is as plain as day you have been taken for a ride. So many shares fall into this same pattern each year it is just so sad.
    As an honest man it saddens me all the dead bodies left behind with this sort of scheme. It is played out at least 10 times a year on the ASX alone.

    Now as to our fearless watchdogs. ASX and ASIC, well, see no evil hear no evil and catch no evil. How many times have wee seen tiny minnow companies out with the partial results, or being pushed so hard on stock chat sites it makes our eyes water. The rumors, sat next to him on the plane, spoke to the director, director gives an interview to the media and says "We downplayed our announcement to the ASX but we are very excited". It goes on and on. One companies release contradicting anthers release when they are talking about the same thing.

    One would really love to know the extent of reality but even when cases are reported they are not investigated it is not much use going to the ASIC. Selling on inside information prior to a company being placed in administration, nothing. Substantial shareholders selling without reporting, nothing. The rest ..... Gee wonder who had the massive short position in CFD's prior to the bad news being finally released ? ..........

    A honest man is not easily conned, however there really is no justice when a director knows a company is going to announce voluntary administration in 7 days and starts dumping his shares. The shareholders were blissfully unaware of this until the final day. Much the same for the bogus results coming out, after the placement has been made or if it was made prior to that the initial buyers have been able to dump the placement and short thru CFD's or both.

    It's hard to cheat an honest man.

    Just don't buy into the hype in the first place. Be objective ! I would ask you to report to the ASX or ASIC if I thought it would do any good, however since I have reported myself on a few occasions over the years and nothing happens I am not sure what to make of it. Even when the facts come out confirming what I presumed was happening regarding insider trading or any other illegal activity, no one is charged.

    Just remember the warning signs with spec stocks. The more factors I have mentioned the less likely the company would appear to be genuine and the greater propensity for you loosing your money.

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