This is a bit dated but it is still 99% true today. Print this out and refer to it often.
Dirty Rotten Secrets
By George C. Chelekis
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The Dirty Rotten Secrets of the Small Cap Markets were previously
unwritten rules, passed along verbally among stock promoters,
company insiders, stock brokerage firm principals and many who are
close to the outer fringes of this very exclusive club. Amazingly,
many US and Canadian securities regulators have also been members
of this very closed group. It is always interesting to discover how the
head of a stock exchange's surveillance department, upon retirement
from "public service," ends up as a senior vice president at the
brokerage house with which he once squabbled or, vice versa, the
favorite son of a brokerage firm later becomes the head of a
securities commission. The financial markets are truly a revolving
door, whereby this year's company insider was once a stockbroker;
whereby a highly aggressive SEC attorney pursuing a scandalous
media personality "suddenly" retires and becomes a senior executive
at the Smith Barney brokerage firm. One thing is for certain, in the
apparently uncertain world of "the business," YOU are on the outside
looking in.
The stock market is rigged against you and in ways you may never
discover. The rules, laws, secrets and axioms I've listed in this essay
should give you a much clearer understanding about the inner
workings of the financial marketplace. No one has previously codified
the "omerta," or code of silence which is rampant throughout the
financial markets. One would become a pariah, an undesirable or an
outcast, by writing these down and broadly disseminating them. You
are NOT supposed to know these unwritten rules and God help the
individual who passes them onto you.
1. LAW OF THE PEZ. This is dedicated to Murray Pezim, once the
most powerful stock promoter in all of Canada. According to legend,
Mr. Pezim, upon hearing that someone had made a killing on his
stock play, immediately remarked, "Shareholder profits are short-
term loans." Ultimately, if you continue your small-cap speculations,
you will lose. Either the markets will turn or you will drop your
guard, but eventually, you will lose. One should understand that the
small cap stock markets run pretty much like a casino.... the longer
you stay at
the tables, the greater your chances of failure.
2. MOTTO OF THE STOCK PROMOTER. Sell when everyone is buying
and buy when everyone else is selling. Actually, more often it is, sell
when everyone else is buying, completely exit the play, and go find
something else for them to buy later. It may even be: Start shorting
your deal when you've sold out your entire position so you can score
even more profit on the way down. There are corollaries to this
motto, such as "never get married to a deal," or "never believe in
your own deal," or "have a new deal ready to rock & roll as soon as
the current one flops."
3. LAW OF THE UPTICKS. Stocks that are running higher are said to
be upticking. Despite every effort I have made to emphasize that the
best time to buy a stock is when it is low and boasts a sorry-looking
flatline stock chart, speculators inevitably chase stocks to new highs.
Stock promoters and insiders buy, or obtain a position, at the low and
sell during the promotion or "discovery." Sadly, there will always be
some type of promotion that will create upticks and speculators will
chase that stock to a new level. Greed generates upticks. What stock
promoters know that you don't is this law: A herd of speculators will
only buy on the UPTICK.
4. AXIOM OF GREED. In an earlier essay, I isolated that greed
originated from a "perceived" lack of speculative opportunities. This
false perception causes a speculator to get greedy and chase a stock
to a new level. If one has a hundred speculative opportunities on
their plate, one is less eager to chase any specific stock. The lesser
the number of opportunities one reviews, the greedier one becomes
to chase a heavily promoted stock. A stock promoter will, thus, make
"his stock" appear to look like the only game in town worth playing.
Greed essentially emanates from deprivation.
5. RULE OF CONFUSION. The only time one rushes into a quick
decision is when they are confused or disoriented or misled. The
stock promoter's greatest weapon is CONFUSION: Catch a speculator
off guard and sucker him into a stock. The more disoriented or
confused the speculator, the greater his chances of being snared.
Stock promotions include an overwhelming amount of data, reports,
corporate reviews and so forth that are packaged in such a way as to
confuse the speculator. If, at any time, you are overwhelmed with
out-of-control emotions or data which you don't understand, it is
better to stay out of the play.
6. SECRET OF EXCITEMENT. You've heard about the "forbidden fruit"
or "unknown pleasures." As long as something remains a mystery, it
can create an "excitement." Excitement is a sensation which one
commonly associates with pleasure. Therefore, when an exciting
proposition is offered, you may readily accept it in order to
experience THAT sensation. When someone heaps excitement after
excitement, upon you, in either the written or spoken word and/or
with graphics (visuals, photographs, charts, drawings, etc.) and
especially in a loud or emphatic manner, you become disoriented and
confused. One overcomes this "sensation of the unknown or
forbidden" through experience, often with a rude and unpleasant
awakening. Stock promoters abuse your inexperience, and naiveté, to
sell you stock. ALL mining speculations are exciting until the assays
come back or a mine goes into development. Then reality sets in.
7. LAW OF WAITING. The longer you wait, the greater your chances
for failure. This applies to both holding a stock which is declining and
to a stock which is running. The odds are greater than 90% against
you... that you will fail in a speculation, if you wait for it to recover
or if you chase a stock which has already begun its run. Generally, a
stock moves up in less than two weeks, often in two to five days. The
waiting period, for a stock to allegedly recover, is the slow, dragged
out retreat you later observe in the share price. As believers stop
believing, the share price declines, often never recovering. Of course,
if one wants to wait forever, then eventually the stock may recover.
The longer one waits, during a runup, the smaller one's potential
profits and the greater one's exposure to losses. (One important
caveat: Occasionally, there are a few good deals--about 20 or 30
annually--when one SHOULD wait for the company to mature. Almost
always, they come out of left field and, rarely, does anyone know in
advance which company will become tomorrow's success story.)
8. AXIOM OF BELIEVING. The higher your expectations in a stock,
the greater your chances of losing money in that speculation. All of
the promotion is geared to make you a "believer." Most speculators
are betting on a tip or a rumor. They are taking someone else's
"word" for the outcome. Absolutely no one should invest or speculate
in a stock without understanding the risks as well as the reward.
Stock promoters create believers by providing ONLY the reward
potential, without also including the risk factors. Believers eventually
discover the risks, long after the stock has begun its decline.
9. LAW OF LOSERS. Oddly, those most attracted to speculative
markets are failures in other aspects of their lives. They may be
wealthy, but consider themselves, in some way, as having "failed."
Medical doctors are prime targets of stock promoters, as they are not
only affluent may have "settled for less" in their lives or feel they
"are owed more" for the work they do. Whoever has failed, in some
key aspect of their life, often tries to make up for it by
gambling....often speculating in these markets. The loser is always
trying to compensate for a failure in another part of his life and
continues to heavily lose as a speculator. (Note: I stay in touch with
certain losers and use them as a yardstick for my trading -- when
they buy, I sell; when they sell, I buy. The loser has a knack for
exiting his position, a day or a week before a major runup; or he/she
simply always buys at the top of the runup. The downside to
communicating with losers is that they are so darned indecisive and
fretters; their worrying can and does rub off and creates a confusion
for oneself.)
10. LAW OF THE SUCKER. PT Barnum was right: A sucker is born every
minute. For every speculator that is wiped out, a fresh one is
champing at the bit to start betting. Stock promoters prop up their
plays by finding new blood to drain. The greener the speculator, the
redder the carpet laid out for him. If there were no new suckers
coming into the game, it would all be over.
11. SECRET OF THE AREA PLAY. Virtually all area plays fail. Rarely is
there a long-term beneficiary to that area play, other than the initial
company which made the discovery. The secret of the area play
depends upon #1 (Law of the Pez). Those who profited from the
share price runup of the company making the discovery are then
offered a "second chance" or a third or a fourth with the rush of new
companies into that area. Primarily, these companies are trying to
finance other explorations elsewhere, but the fact that they staked
some ground or bought some cheap claims doesn't stop them from
parlaying that into an artificially inflated market capitalization.
Inevitably, 99% of these companies fail to deliver, which is soon
reflected in their vaporized share prices. Stock promoters, knowing
well their chances of success were always very slim at best, long ago
dumped their shares. The last one into the area play tends to have
the worst chances of success.
12. THE GURU AXIOM. The least profitable time to follow any guru
(stock promoter, newsletter writer, company insider) is immediately
following his last successful play. The cliché that "he is only as good
as his last play" is a promotional device effectively utilized to attract
new money into a new play. If one looks at some of Canada's recent
success stories in the mining business, the BEST time to follow the
guru is immediately after his or her failure. Those who "had it,"
failed miserably and later bounced back seem to offer the highest
probability of success. Often, there is a rush of money into the guru's
"new play," which quickly exits when they discover that "this ain't
the same one as the last one." It never is. Of course, every guru is
keen on pointing out all of his previously successful plays and forgets
about his failures. Self-fulfilling prophesies require substance in
order to survive. Catch the "gurus" when they are down and out and
heed their advice at that point in their careers. You may increase
your chances of success. Hint: Sheer desperation drives them to
repeat their success or to completely leave the business.
13. CANADA'S BEST KEPT SECRET. Many Canadian speculators don't
pay for their stock. These Canadian speculators bet on stocks, against
the equity in their account. We've heard about T-3, etc. That is bull.
The truth is often, more like T-12 or T-20 (as in 12 or 20 days to
settle instead of the required three days). Brokerage firms have been
known to extend, to their best clients, the time they can hold "unpaid
stock" for weeks. What is also not very well known is that brokerage
firms can, and frequently do, short sell any stock which remains
unpaid (they do so to protect themselves). Thus, during an exciting
runup, one observes (or hears about) massive shortselling of a stock
-- the stock wasn't paid for, so the brokerage firm shorts it. A
brokerage firm's credit manager can quite excitedly extend your
"credit terms" so that you have "more time to pay for your stock."
Essentially, you end up betting against yourself, under these
circumstances, because the brokerage firm is shorting your purchase.
Later, you end up selling at a loss and the brokerage firm covers at a
profit. The house nearly always wins. Your stockbroker gets his
commission whether you lose or not.
14. THE CANADIAN LAW OF SHORT SELLING. While it is very
expensive and deadly for the unsophisticated speculator to short a
Canadian stock, brokerage firms can easily short stocks. They short
against their "inventory." Generally, any rush of excitement into a
stock is done under a short, speculative time frame (whereupon the
speculator doesn't actually pay for his stock). Brokerage firms short
sell against the unpaid speculation and drive the stock price down,
down, down. As very large Canadian brokerage firms also accept
many US stock orders, they short sell virtually every order which
arrives. While the US investor pays for his/her stock, the Canadian
firm can short sell against it, because rarely is delivery ever taken on
that stock. As long as the certificates remain in the brokerage firm, it
can be shorted.
15. AXIOM OF MOTION. What emotionally upsets any speculator is a
LACK of motion. It is the absence of motion which prevents a
speculator from patiently accumulating shares in a flatline stock (the
share price remains constant at, or near, the floor of its stock chart).
Speculators are eager to make their money work for them. Thus, if a
stock doesn't move, they panic. Gradual downward motion rarely
creates a panic. Imagine yourself in a well-lit room with a dimmer
light. Stock promoters gradually turn down the lights until you
finally discover you are sitting in the dark. Conversely, when they
want to create the excitement, they abruptly turn on the lights. A
stock forever trading at the same price creates an emotional upset,
thus the gradual "up and down" motion manufactured by stock
promoters and insiders and brokers. "Get it to move" is their motto if
they want you to hold your position. UP offers hope and a recovery
of your initial investment or (finally!) a profit after having waited so
long. DOWN drives fear up your spine and you remain fixated in the
stock, like a deer in a car's headlights.
16. SECRET OF PANIC. If you hold a position in a stock and are
panicking, you should not be holding that stock position. You
probably don't know enough about the company or have mentally
spent that money for some other purpose than speculating in that
stock. You are also very low on the food chain of information. A stock
promoter's investor relations department primarily exists to
minimize, reduce or eliminate the panic you feel in obtaining and
holding your stock position. Panic is manufactured in approximately
the same way excitement is created. The secret to overcoming panic
is this: When it all looks like the end of the world, that may be the
best time to buy; when it all looks like the world is made of cream
cheese, run for the exit doors. Please realize that, generally, if
someone has created a panic within you, it is for some ulterior
motive -- they are aggressively trying to get you to do the opposite
of what you should be doing.
17. LAW OF STOCK OPTIONS. Insiders like to hold free stock, just like
anyone. Stock options exist so that insiders and promoters can cause
runups, thus selling off their stock and subsequently issuing new
stock options. This law reads as follows: The ONLY reason stocks are
runup is because of incentive stock options. If stock options didn't
exist, we wouldn't see any stock runups. Because most small cap
companies are broke, they pay promoters with stock options. Thus,
the promoter has a vested interest to get a company's share price
above a particular level.
18. AXIOM OF HISTORY. Leopards almost never change their spots.
The same guy running a shoddy stock promotion, a few years ago, is
going to run a similar disaster again. It behooves every speculator to
dig deep and find out who are the characters in this current play.
Many times, the dishonest stock promoter runs the play from a
background cover using a front man. You will find them, by looking
for their associates. Crooks run in the same circles. Occasionally, you
can be thrown off by a new name. He has a history. Find out what it
is before speculating. No matter the cost, it is a lot cheaper than the
losses you may incur in your speculation.
19. LAW OF PAPER. Share certificates are like corpses until a stock
promoter gives them life. All paper is intrinsically worthless unless
there is someone who wants to pay you, to take the stock off your
hands. If there were no promoters in this world, then you would
never be able to exit your position.
20. RULE OF THE EQUIPMENT. The speculator who has the most
sophisticated quotation equipment, knows how to use this
equipment, understands the quotes and what they represent,
effectively uses his equipment, and also the fastest phone line to the
trader, gets in and out of his paper the fastest.
21. LAW OF THE INSIDER. The speculator who actually knows what
the insider is doing, whether it is accumulating or dumping his
position, will be the most successful speculator. Everyone else is
guessing and will have a greater or lesser degree of failure in his
speculation.
22. THE SPOUSE FACTOR. This could also be a corollary to Murphy's
Law for a deal. The wife wants a new house, a new car, etc. And the
promoter or insider sells, sells, sells to afford these new toys. Down
goes the stock price.
23. AXIOM OF THE BID. A new wave of buying into any stock is a
method for an insider, promoter or disgruntled shareholder to exit
the position. One should look at "the bid" as the key which unlocks
the door and permits one to exit a stock position. Conversely, one
may wish to consider "the offer" as the trapdoor which could send a
speculator to the bowels of hell.
24. LAW OF THE HOLY ROLLER. Jesus threw the moneylenders out of
the temple. Anyone running his play under the guise of Jesus would
anger the Almighty and bring ruin to his shareholders. I guess the
only reason a promoter might turn to religion is that no one except
God will forgive him for what he has done to his fellow man.
25. THE LAW OF WASH TRADING. Insiders, stockbrokers and
marketmakers "fabricate" trading volume by trading shares among
each other, in order to deceive investors into thinking that the stock
is liquid. In the hands of a madman, of which there are many, wash
trading becomes an artistic manufacturing of massive trading in the
stock. A promoter or insider (market manipulator) can set up three
to twenty brokerage accounts and cleverly trade the stock, up and
down the charts. As soon as "new blood" comes into the stock,
suckered in by a quick runup, down comes the stock as the market
manipulator dumps and shorts his own stock. In one recent case, the
intricacy of one promoter's trading got so complex that he relied on
computerized buy/sell signals so he, himself, didn't lose his shirt.
26. AXIOM OF FREE STOCK. Everyone would love to get free stock.
Clever speculators, insiders and stock promoters are generally those
that actually DO get free stock. Insiders simply blow out all of their
paper into the strength of any liquidity and then re-load with stock
options and/or warrants, maintaining their stranglehold on the
company while lining their pockets. Stock promoters secretly
demand under-the-table share certificates, channeled usually
through an "independent" third party into a hidden account.
Successful speculators monitor stock charts, buying low and selling
most (or half or all) of their position, wait for the stock to retreat,
and then re-load. There's no free lunch in this business. All of the
above takes work. IF all speculators/investors knew this, there
would probably be less market manipulation, or at the very least,
market manipulators would have to come up with a new bag of
tricks.
27. LAW OF NAME-DROPPING. In an effort to strengthen bidding in a
stock, promoters and insiders may claim a BIG name is getting
behind the company, i.e. a famous (wealthy) individual is buying the
stock (lots of it), a big-time promoter is getting behind the stock, a
highly regarded analyst will recommend the stock, or a well-known
newsletter writer will bring his subscribers into the stock. It's all just
"noise," generated by the promoters so they can prop up their share
price and offload their on paper. This law is a variation of the next
law.
28. LAW OF THE TAKEOVER. If you hear there is going to be a
takeover, someone is offloading their position in that company and
anticipates doing so at a higher price. Takeovers are done quietly and
carefully so that the conquering company doesn't have to overpay
for their shares.
29. AXIOM OF THE LEAK (RUMOR). Any rumor is manufactured by
an insider or stock promoter in order to dump their position onto the
gullible. Unless one is a prankster.
30. LAW OF THE MEDIA. The Media are the last to know about
anything. No one in their right mind trusts or likes the media. The
media, in order to appease the regulators, only report bad news and
routinely challenge or distrust good news and put a "bad news spin"
on good news. Further, the media distrust anyone who makes more
money than they do, especially the guy who owns the newspaper.
31. SECRET OF INVESTMENT CONFERENCES. These occur at a hotel or
convention center where insiders and promoters exhibit their wares
and praise their company's future in order to dump part or all of
their stock position onto investors, stockbrokers and money
managers who don't know any better.
32. AXIOM OF MOTIVATION. When properly motivated, stock
promoters can create "miracles", if only temporary in the share price
appreciation. Generally, the greater the payoff, the more liquid the
trading volume. Signs to look for include lucrative investor relations
contracts and/or plenty of stock promoters all touting the stock to
their groups. Nothing replaces the best motivation of all, for the
insider, like private placement paper becoming free trading.
33. SECRET TO QUICK MONEY. The quicker you try to make your
money, the faster you lose it. Quick money is usually made
dishonestly (drug dealing, racketeering, insider trading, etc.) or in a
lottery. Nothing replaces burning the midnight oil, long hours of
toiling, effective data gathering and data analysis and bright ideas.
Many try using short-cuts, which ultimately become dead ends.
34. THE TRUTH ABOUT MOTHERS. Everything your mother ever told
you about life, applies to the stock markets. Everything parents told
their daughters about boys also applies to stock promoters.
35. LAW OF ORPHANS. No one is willing to own up or take
responsibility for a disastrous crash in a stock or a failed stock
promotion. Whenever there is a major success story, everyone takes
credit for that company's success. The further you are out of the loop,
the harder it will be for you to determine who was responsible for a
company's success or failure.
36. FLAVOR-OF-THE-MONTH AXIOM. No individual ever survives as
a Flavor of the Month. One can have an enviable string of successes,
but eventually the insiders, shortsellers or stock promoters will
destroy him. Failing that, the media will ruin him. Failing that, the
regulators will handcuff and gag him, or even jail him. No one has
ever survived past all of those roadblocks. Each roadblock wears the
superstar down to the point, where he can no longer think straight
and wonders if "all of this is worth doing anyway." Flavors-of-the
month, like ice cream, eventually melt down to a dribble.
37. THE SECRET OF THE NEWSLETTER WRITER. Any newsletter writer
providing ongoing reportage on Canadian mining or small cap stocks
has a vested interest, whether disclosed or not. Someone is paying
the freight and rarely is it the subscriber. (The writer either has a
position or is being paid or hopes to become "famous" by covering a
specific stock.) Publishing a newsletter is a very expensive
proposition, with a high casualty rate. Look at which "popular"
newsletters were published during the late 1960s or the early 1980s
and see if any are still being published today.
38. AXIOM OF SECRETS. If there really is going to be a big discovery
or a big contract or a big deal, the stock promoter or insider will
never tell you first, if at all, until the news is made public. He knows
it would be illegal to give you inside information so he won't.
Whatever he does tell you may have no bearing in reality.The more
desperate the promoter, the more outrageous the promises; the more
incredible the deal.
39. THE SECRET TO HOWE STREET. All any of these stock promoters
want to buy with the profits they make off you is this: Respectability.
Instead, they buy drugs and booze. They utterly lack any self-
respect, from the best to the worst. They are criminals who have
whistled past the graveyard, more times than a cat with nine lives,
praying that they can avoid being caught. At the very best, they
hope to parlay their worthless share certificates, through a somewhat
credible promotion, into bigger real estate and cash. At their worst,
they merely wish to cover their annual bar tab. The average person,
whom they routinely fleece, has far more self-respect than any of
these promoters will ever achieve. None of them will ever become
respectable, especially not in their own minds. This absence of self-
respect may help explain the rampant alcoholism and drug abuse
among stock promoters in Vancouver.
40. THE LAW OF MONEY. History shows us that Money is attracted to
the individual who can effectively and articulately communicate.
Stock promoters routinely can repeat a good story. The most
successful speculators are those whose communications skills match
or surpass the best promoters. The best CEO is the most effective
communicator.
41. AXIOM OF TECHNICAL ANALYSIS . Technical analysis does not
deceive the speculator. A stock promoter's worst enemy is the stock
chart. Correctly interpreted stock charts never lie, although many
speculators have no clue as to how to read a stock chart. Analysis
may also vary from chartist to chartist.
42. THE HYPE FACTOR . Hyperbolic statements can artificially inflate
a stock's price, temporarily. Long enough for a shortselling syndicate
or a group of professional traders and insiders to reap huge rewards.
Often, a combination of a speculator's naiveté and his enthusiasm
about a company can lead to "over the top" statements. Eventually,
he learns his lesson. Stock promoters favor newsletter writers who
are inexperienced in the business, as they can be told what to write
and are eager to be offered that opportunity.
43. THE LAW OF SEASONS. When it comes to mining plays, buy in
December and sell in May. Buy when the promoters are out of town;
sell when they are in full swing.
44. AXIOM OF DRILL RESULTS. Buy when the drill goes down; sell
when the shaft comes up. In other words, the heady promotional
statements and expectations are issued during the drill campaign and
while awaiting assays. That is when a speculator most likely benefits
from a stock's runup. Because most drill results are disappointing,
the smart speculator is completely out of his position before the
assays are announced.
45. THE LAW OF NEWS RELEASES. Buy on mystery, sell on history.
Buy on rumor, sell on the news. These are well-worn clichés that
rarely disappoint. Occasionally, a company's stock will run strongly
after a news release. In the small cap stock sector, most news
releases are a promotional device, used by insiders, to generate
fantastic trading volume so they can exit a portion of their position.
46. THE SUCCESS FACTOR. Most mining success stories are complete
accidents. On the order of a "Jed Clampett" finding oil in the TV
series, "The Beverly Hillbillies." With many important discoveries,
throughout the history of mining plays, one or many insiders had
virtually blown out of their entire position and/or were shorting
their own stock, in anticipation the company's drill results would be
a disappointment. Part of the stock's runup might also have included
covering their shortselling and obtaining a fresh, new position.
47. AXIOM OF NOISE . The more noise you hear during a stock
promotion, the harder the stock will fall when the promotion is
completed. Stock promoters are only interested in trading volume,
for share-dumping purposes, which can only be created with a series
of loud bangs in the media world. Generally, by the time you hear
about the stock, the runup is over and the distribution phase has
already started, followed by a slow or abrupt decline in the share
price.
48. THE LAW OF LIARS. They repeat their lies and falsehoods again
and again and again. They don't just tell one white lie and feel guilty.
They lie in every aspect of their life. One can use this against the liar
by doing the exact opposite of what he tells you to do. Liars are
suckers for other liars.
49. AXIOM OF TRADING VOLUME. Trading volume is increased solely
to distribute a large position from a single shareholder, or a few
shareholders, to the masses. All an insider ever wants is trading
volume so he has enough liquidity into which to dump his position.
This is the only reason stock promoters are hired.
50. THE ULTIMATE RULE. Paper is paper and cash is cash. The only
reason you are holding paper instead of cash is you honestly believe
your paper will eventually be worth more than the cash. Amateurs
buy paper. Professionals convert their paper to cash. Cash is King.
Paper is essentially worthless if there are no buyers.
Conclusion...
This essay was not intended, but may serve, as a sociological study of
the criminal minds at work within the financial marketplace.
Speculators also have to agree to be criminals, to a degree, in that
they expect something for nothing. The essence of the criminal is to
get something for nothing. While theft, larceny, insurance fraud and
burglary are broadly condemned within this society, it appears
perfectly "all right" for the speculator to swoop into and out of a
stock, for a quick profit. That is pickpocketing, plain and simple, and
should be branded as such. Thus, it is no great surprise, to me, that
an increasing number of the Internet "gurus" have told me they'd
like to launch their own deal, i.e. to become an insider or stock
promoter, themselves. It is a quick slide into the loony bin for
anyone aggressively speculating in these markets.
The entire problem of the small cap stock market is the illegal
transfer of wealth from the naive investor to the sophisticated
trader. Institutional fraud runs uncontrolled throughout the fabric of
these markets. Bribing stockbrokers appears to be the "only way to
do business" in many circles. Bribing fund managers is nearly
mandatory if a mining company wants European financing. What
amazes me is that October's FBI sting of insiders and stock promoters
wasn't even the tip of the tip of the iceberg -- they didn't even
scratch the surface, nor did they nab the key figures. For all the
hoopla and the celebration of the regulators over the recent
successes in "stopping fraud," they all know, too well, that hardly a
dent occurred. The actual depth of the amount of stock fraud,
outright deception, bribery and dishonesty in the financial markets is
far greater than any securities regulatory body is willing to admit.
They know about the fraud -- but then, they have "their future" to
look out for, as well. There's a job at Merrill Lynch, Charles Schwab,
Canaccord or Smith Barney waiting for them. It's OK to "get the little
guy," but they know better than to tangle with the powers that be,
which run the financial markets from New York to Tokyo, from
London to Vancouver, and everywhere in between.
Essentially, the securities regulators hold their esteemed positions,
and are backed by their respective state/provincial/federal
governments, for no other reason than to ensure that the small
investor CONTINUES to get screwed every which way but Sunday. For
if all the small investors always made a profit in their investments or
speculations, the poor professionals wouldn't be able to steal as
handsomely as they do now. This may also explain why
marketmakers continue to FREELY rape small companies, while the
regulators focus their attention on the stock promoters and insiders.
It is a dirty business, one which is filled with rotten tricks. The
intricacies of the scams, which are run on the innocent investor, is
the subject for a future essay.
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Copyright 1996 by George C. Chelekis. All rights reserved.
