By understanding how the Wall Street con game operates, you can at least avoid being taken to the cleaners and perhaps go on to study enough to profit from this knowledge.
The unwary investor is made to believe - by a press owned by the very people who are part of the Wall Street scam - that they can make a killing in the stock market if they get lucky. Over the years outsider, small-time investors have lost billions of dollars to the insiders who control and manipulate the stock market to take money from the ignorant.
The brainwashed investor believes that the stock market goes up and down according to what he reads in the Wall Street Journal or hears about on his evening TV program: interest rates, inflation rates, wholesale prices, gross national product, public fears about foreign and domestic events, and the rantings of the head of the "Federal" Reserve Board. This is all a con game to make the hapless investor believe that the rise and fall in stock prices is not being manipulated by the specialists. The astounding fact is that specialists, working at the behest of their investment banker cronies, are creating the ups and downs of the market to bring them obscene profits!
This is how the specialists pull off the scam:
1. The specialists must first buy stocks at the lowest possible price, using one of the magic tricks of the market called short selling (selling stocks you don't yet own in the hopes that the price drops, so that you can purchase it back at a lower price; the difference between what you sold it for and what you purchased it back at is your profit): 1
2. When the specialists have purchased their inventories of stocks at the lowest possible price (let's say a million shares at an average of $20 a share: $20,000,000 investment), they then begin increasing stock prices.
- Since they control the stock prices, they simply begin lowering the prices
- They "borrow" the stock from their or another brokerage firm's pool, with the understanding that at a later date they will return the shares
- The Wall Street Con Game News will announce that stock prices dropped sharply on light trading, which is a cover for the specialists' actual manipulation of the decrease in stock prices. The specialists don't want heavy trading and straight-line lowering of stock prices, else they might have to buy a lot of stock at a higher price than desired. So they usually lower prices through a series of ups and downs of the market, dealing with small investors' shares as they go.
- The SEC rules prohibit NYSE members from "demoralizing the market by effecting short sales at or below a price lower than that of the last sale." But specialists have an insider loophole allowing them to sell short on downticks (drops in stock prices) without having to report these transactions as short sales. Those same SEC rules force the hapless, small-time investor to sell short only on upticks - when stock prices are higher than the last preceding price. A very neat scam indeed.
- They will wait until the stock prices reach a top price where they can realize windfall profits - let's say the stock reaches the price of $40 a share.
- At this point the specialists sell their million shares at $40 a share and receive $40,000,000. A profit of $20 million is easy if the con game is fixed in your favor.
3. When the specialists want to buy stocks, they lower prices - and wait till the stocks are at the lowest price possible before buying. The investors have been herded into "panic buying" as the prices drop. When the specialists want to sell stocks, they raise prices and sell at the highest price. The uninformed investor is told that he or she must get in on the skyrocketing market boom. The roller-coaster of the stock market is not a natural phenomenon at all, as the Wall Street con game would have it, it's simply the Insiders doing their thing to take billions of dollars from hapless investors.
But meantime the unwary investor has purchased the stocks at their highest price, being conned by their stockbrokers to believe that they must get into the "rising market." Then when the stock prices plummet, the brokers tell the witless investors they should "cut their losses" and sell. That $20 million has to come from somewhere - from the small investors who didn't have a clue about what was going on.
1 This is how short-selling defrauds the ignorant ordinary investor (IOI): IOI bought 300 shares of Enron at $80 a share, $24,000. When Ken Lay bailed out with his millions and the company went belly-up, IOI had to sell his stock at 69 cents a share. Where did the extra $23,752 go? It went to the person who was short those 300 shares: Mr. Insider--who knew ahead of time that Enron was heading for the shoals. As an example, the shady Panamanian-registered Pilgrim Investment Trust,controlled by the Bush family, in April 2000 was about 78% long. By the end of 2000, they were 78% short. And, by the end of 2001, that trust was 98% short. In essentially the same short position was the equally shady Houston Energy Trust, another deep offshore Republican trust whose investors include Henry Kissinger, Paul Bremer, James Baker, and George Schultz.