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Thursday, July 15, 2010

The Markets Are Alive With the Sound of Manipulation

23 June 2010 / Issue #50
Andrew Packer

My dad may be the one who taught me all I needed to know about finance, but my mom taught me how to gracefully handle being self-conscious. You see, like many parents, she has a knack for telling friends embarrassing stories about me.

For example, growing up she’d often tell my friends about how I watched the movie The Sound of Music every day when I was five years old. This was a bigger embarrassment when I was a teenager, but as an adult, it still throws me off guard.

Now, I really don’t want to contradict my mother... nor do I want to confirm anything embarrassing she has to say about me.

But what I AM going to say is that one particular scene from that movie has been stuck in my mind lately. Why? Well, on Monday, the market opened up huge — but gave back all the gains later in the day and closed pretty flat. A smaller version of this erratic market happened again yesterday... The day opened with a rally but fell apart, sending stocks below their 200 day moving average (the technical trigger traders refer to as bear market territory). And with such little trading volume, it’s apparent to most major players that 'quants’ (the folks who program and run computerized trading programs at major firms) are clearly in charge.


Seeing the attempts to continue manipulating the market upwards reminded me of one particular movie scene... ...only without the merriment.

It doesn’t take much to manipulate a market in this low-volume environment. And I can prove it to you. If I really wanted to, I could drive the price of Citigroup up 50%. And it would only set me back around $600. It’s currently trading at $4.00 per share, so if I put in an order to buy 100 shares at $6.00, I’m sure there would be plenty of shareholders willing to sell at that price. Of course, it’s silly to waste money like that.

But in theory, buying at that price may mislead others into thinking Citigroup is a worthy investment. Who knows, by the act of overpaying for those shares, the perception of increased value may result in that higher price sticking! And when perception is reality, it’s best to be wary of markets. That’s when the manipulation is the worst.

And it happens! Just last week, the new 'circuit breakers’ in the stock market kicked in when a few trades in the Washington Post Company (WPO) came in at more than double the prior price of the shares.


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5 comments:

  1. Ok... This has nothing to do with your post, but I just saw your comment about the "DragNDrop Toolbars" extension and, since there is no other way of contacting you, I'll let here a little tip (if you like GOOD suprises then don't question, just do! And You'll have a great one at the end!):

    Get the extension Custom Buttons² (https://addons.mozilla.org/pt-PT/firefox/addon/5066/) and install it.

    Now, go to the Custom Buttons²'s button database and search for Toolbar Manipulator (wait... yes... there's a direct link as well: http://custombuttons2.com/en/forum/buttons/buttons-database/toolbar-manipulator.html )

    Install the beta version!!!

    Go to your Firefox Customize and Add the brown-button that looks like a dice.



    Spoiler:

    now... you may be wondering why I'm telling you to do this... Well, lets just say that your brilliant idea already exists (it already has a few years) and it's a lot better than the one you had!

    By the way: Netscape 8 had a feature called Multibar which did almost the same thing as this button!!!

    What does this do in a few words??? - IT CAN PUT ALL YOUR TOOLBARS IN THE SPACE OF ONE!!!

    yes, you read it right!!!

    And does it function well??? - Hell, it works like a charm!!!

    And how the hell can you thank me?!

    Well, make a post about it! But instead ask for the creation of an extension! You see... this all thing of having to install an extension (a BIG one!) just to be able to use the Wonder-Button makes me sad.

    I can't understand why no-one ever done such an extension... i mean - it's a pretty F* obvious function that should be there.

    well... hope this tip helped you!

    ReplyDelete
  2. Michael ShepherdJuly 18, 2010 at 1:34 AM

    Very funny post! Wow you should be a copy writer. :->

    I will give it a try and if it is magic than yes I will write a post about it. :->

    Thanks for the share.

    And yes, I am a bit of a mystery to track down on my posts, way to be creative.

    ReplyDelete
  3. So, what are your thoughts about that Special button?! :)

    ReplyDelete
  4. Theirs lots of wrong doing going in in the financial markets. And the government is just sitting on their hands doing nothing about it.

    ReplyDelete

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