Stock Manipulation: Is It Good, Bad Or Inconsequential?

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Stock Manipulation

Stock Manipulation

Let us be thankful for the fools. But for them, the rest of us could not succeed.
Mark Twain
 1835-1910, American Humorist, Writer

Yes, it’s real and exists. It’s a neutral thing neither good nor bad and actually in a twisted way it is necessary.

Let’s start off by looking at a predator in the wild, a Jaguar. When there is plenty of food, all the Jaguars can feed well and relax as there is plenty to go around. If one looks at the situation from the prey’s side, it seems unfair. The poor deer is just trying to get a drink of water or eat some grass, but each time it has to play Russian roulette with its life. If the jaguar were eliminated from the equation, then you would have too many deer and this would result in overgrazing and a severe constriction of the existing food supplies.

So the Jaguar is needed to maintain the equilibrium. If suddenly the number of Jaguars goes up, then we have another imbalance and the existing food supply is now threatened (not enough deer to feed all the jaguars). Once again nature intervenes and the weakest Jaguars start to die off; only the strong ones remain.

Stock Manipulation and Mass Psychology

Applying the above analogy to the markets, we get the following:

The masses are the Deer; they just want to find a way to grow fat without doing much. Even worse, they want to build lots of money for a time in their lives when they least need it. This period is called retirement. What is extremely amusing is that everything is sacrificed, good health, youth, pleasures etc. to put money aside for a time when practically nothing works as well as it once used to. If the masses are so happy to kill themselves slowly, why should it be terrible when the predators come in and do the same job but 100 times faster?

The Jaguars represent a few sophisticated investors, big brokerage firms etc. Their function is to wait and watch the deer (masses) get nice and fat; then they strike their fatal blow. In this case, the markets crash when the masses are net long or suddenly take off when the masses are net short.

Then you get times when the food supply is thin and so even the Jaguars are now threatened as they start to turn on each other to survive. (By the way, this is what has been going on in the markets for the last few months). This is when you see big companies go down (Long Term Investment Capital is an example.) and many big investors suddenly find themselves penniless. The jaguars that survive this period of hardship emerge even stronger, leaner and will feed 10 times as much as soon as the supply of food is replenished to equilibrium levels.

Taking it one step further, in the good old cavemen days we had to worry about wild animals attacking us and either we ended up killing them or we were killed in the process. So perhaps the markets are just an extension of the kill or be killed lifestyle our ancestors were once subjected to and whose genes we still carry. Fast forward: instead of hunting or defending ourselves against wild animals, we are now hunting each other because the amount of food out there is limited. So the only way to survive is to make sure that the masses are kept fat and stupid. Thus, when the fatal blow is delivered, there will be ample food to get the predators through the coming winter.

Basically, when everyone screams that the markets are manipulated, they are looking for someone to come in a make sure everyone wins. In this case, it’s just another form of socialism as everyone will remain thin and will not feed well. We all know nothing is fair in life, that in most cases it’s not your studies, but a matter of who you know that really helps you climb up the ladder. As the number of participants increases, so will the so-called level of manipulation because even more individuals are now competing for the same food supply. In the end, this ratio is king; 90% must and will lose to sustain the remaining 10%. This ratio will never change; no amount of whining or screaming will help you. The only escape is to become a predator or perhaps a parasite and ride on the back of the predators. Stock Manipulation exists and will continue to thrive; the crooks will always find a way to break the rules as the jackpot is huge.

The best way to win this game is through education, training and pray that all your neighbours don’t do the same as then it will make your odds of winning even harder. Manipulation is here to stay. We are the only ones that will die off and die off with most of the lessons we learned. That’s why history repeats itself.

Some examples of manipulation and how we keep quiet about them:

  1. Being fooled into believing that one must do everything possible to save for one’s retirement. In other words, give up the best years of your life to try and enjoy the worst years of your life.
  2. Absorbing all the rules that come with your culture. Were you actually given the option of studying the rules in several cultures and then come up with your own set of rules?
  3. Being told that working like a dog from 9-5 pm is the right thing to do and that doing that for 30 years plus is what life is all about.
  4. Being told that higher education is the key to everything, in many cases, this higher education is actually the worst education one can receive. However along comes Tom the neighbourhood idiot and oops his Pa just happens to know the CEO of IBM. Tom now has a 6-figure income and drives a top car, while you slave away after graduating with honours.
  5. Being told that the American dream is to buy a house with a 30-year mortgage strapped around your neck, to give you the illusion that you actually own the place. If that same money were to be invested in an investment yielding 5-8% a year you would be far better off.

Conclusion

You know the markets are dangerous. You know that most people lose and yet you still enter. Oh yes, you are going to be the lucky one that strikes gold. Yet you enter without educating yourself, armed with nothing but your innocence/stupidity you think you can take out all the seasoned predators; when you get bitten you scream. You have two options: stay out and live the safe life or jump in, but do so with the knowledge that you will be attacked several times and that you will most likely lose the first couple of rounds.

However if you spend some time educating yourself before and while you are going through those painful experiences, you can emerge victorious down the line. Every war is nothing but a composition of battles and sometimes one has to lose several battles in order to win the war. So next time you get ready to scream, redirect this wasted oxygen to your brain and sit down and work on a plan. This way you might actually find a way to join the winners.

Now we will demonstrate why market manipulation is really inconsequential. All that is necessary is a pencil and ruler and some understanding of the concept of trend analysis. (You have to spend time learning this. However, the concept is very easy and in the future, we will be putting up some free lessons on our site)

Let’s look at the most manipulated market in the world, The Gold Market.

Source: www.prophetfinance.com

If you are familiar with basic trend analysis, all the nonsense about manipulation can be put to rest with a stroke of a pencil. The red lines represent downtrend lines and the grey ones represent uptrend lines. So if you look at the last hyper bull phase, you will see two grey trend lines; one could have sold or shorted the gold markets the moment either trend line was violated. By the way, we are using monthly charts, if one uses weekly or daily charts, the moves can be timed even better.

Go long gold in 1977, sell end of 80 or end of 1981 when the main up trend line was broken. Go long again in the middle of 1982 and sell around the beginning to middle of 1983. Go long in 1985 and sell 1988. Go long in 1993 and sell in the middle of 1996. Go long again towards the end of 1999 and sell in early 2000. Finally, go long toward the end of 2001 or early 2002 and hold. However, it looks like we might be close to generating another sell signal.

Off course if you have no knowledge of trend analysis, then this will look a bit difficult but remember you cannot play any game without learning the rules. Trend analysis is not that complex to learn and if you are going to play in one of the most dangerous areas in the world, you owe it to yourself to spend more time learning and less time whining.

It is by the fortune of God that, in this country, we have three benefits:
freedom of speech, freedom of thought, and the wisdom never to use either.
Mark Twain
 1835-1910, American Humorist, Writer

 

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