Financial Sense University ~ Market Manipulation by Sol Palha & Dr. Janice Dorn 07/11/2004

MARKET MANIPULATION
by Sol Palha & Dr. Janice Dorn
Tactical Investor
July 11, 2004

from Sol Palha...

The search for conspiracy only increases the elements of morbidity and paranoia and fantasy in this country. It romanticizes crimes that are terrible because of their lack of purpose. It obscures our necessary understanding, all of us, that in this life there is often tragedy without reason.
~ Anthony Lewis ~

Let's talk about market manipulation. If the manipulators have always been in the market and the only thing that has changed is that now we have tools to spot them, it could be argued using simple math that the market is actually constant when expressed in terms of an equation.

If you have A+B+X=Z, A represents the public, B the manipulators and Z the outcome. Since we have always had manipulators in the market, in a very warped way, we could argue that the market is a not really manipulated. If something was always manipulated and you know that, then you are entering into an arena that has a consistency to it. We have never really had free markets in the true sense of the word. Since the above equation has always been constant, we can effectively state that manipulation is part of the market and if we make that assumption, we have to embrace the fact that the markets are really pretty stable and in an absurd way fair. I decided to add a little X factor. This represents the group of elite investors, who have decided not to be bears or bulls, but look for the trend and jump on it.

Another interesting concept is that without fail, we get what we want when we least need it. Perhaps it is our desperate desire to get it that blinds us and causes us to make mistakes that we might not have made, if we were just a bit more relaxed and objective about the whole thing. It is very closely tied to the �programmed desire to lose syndrome.� In simple terms most individuals feel very comforted if they have lost and they are around other losers. Yet take them and place them among winners and they feel out of place.

Another strange thought is how would we recognize a free market, if we have never ever had one? If we never had darkness, we would never really understand the concept of day and night, would we?

Think also about the fact that if it were not for market manipulation, we might have crashed and burned completely; and in a meltdown, the good and the bad all get creamed (that includes those so-called, lovely gold shares).

If one really examines all the issues in detail, you will see that almost everything in life is manipulated in one way or another, the only difference being the level of subtleness.

This whole topic came about as result of a random thought and I will probably do a follow up that is more detailed where the concepts of market manipulation and market intervention are examined in detail.

I envy paranoids; they actually feel people are paying attention to them.
Susan Sontag 1933-, American Essayist

© 2004 Sol Palha, Tactical Investor
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Sol Palha
Tactical Investor
38-11 Ditmars Blvd.
Astoria, NY, 11105
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from Dr. Dorn...

MARKET MANIPULATION

Janice Dorn M.D., Ph.D.
Contributor
www.tacticalinvestor.com

Let's talk about market manipulation. Let us assume that the markets have always been under the influence of manipulation, and the only thing that has changed it that we now have the mechanisms/tools with which to discern this.

Pick any chart...it doesn't matter if it is stock, bond, currency, commodity or anything else that trades on the major exchanges. The ebbing and flowing of price and volume over time is nothing more than a repeating pattern of manipulation.

Though cycle after cycle, the big money, smart money or savvy investors and traders "decide" that something has been depressed or beaten down too long and it is time to begin accumulation. Warren Buffet and the so called deep value big money investors step in quietly at first and begin to build up positions. With the passage of time, combined with subtle and not-so-subtle promotion tactics, the general public begins to find these issues desirable and they step in and buy. Demand now begins to outpace supply. Demand begets demand and now everyone wants to own some. Price rises and continues to rise and the little guy gets hungrier and hungrier. There is now a raging bull market in these issues. Slowly and with great facility, the manipulators relieve themselves of their shares as more and more people climb on, trying to get in on this incredible situation. It can't go down. It's going parabolic. It's going to the moon so you have to jump in now before it's too late.

Oops.

During all this time, the manipulators who bought at rock bottom are slowly and steadily selling to Joe Six-Pack who is standing in line to buy, like a lamb to the slaughter.

Suddenly it stops, and the manipulators go off into the sunset and their newly furbished yachts, leaving the people who came late to the party wondering what happened and why the price is starting to fall.

This may seem cruel and unfair, and maybe, at some level it is--especially for top tickers left holding the bag and now desperate to sell at any price as the tower of greed collapses.

Yet, it is in the nature of all markets to move in bull and bear cycles and this manipulation is a large part of the dynamic of this phenomenon. Manipulation makes markets orderly. It defines support and resistance and trends and orderliness within chart patterns. It can be said that everything that is known about an issue, including every bit of fear and greed is seen within each tick. Without manipulation, there would be chaos, and technical analysis would be an exercise in futility.

Not part of this articles, but critical to making distinction is the difference between market manipulation and market intervention.