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[quote author="awgee" date=1223539461]Just curious. Is there anyone who thinks that naked shorting is <strong>NOT</strong> a stock manipulation tactic used by hedge funds? I am not trying to start an argument, nor will I try to convince anyone of anything. I just want to know.</blockquote>


awgee Posted: 23 September 2008 07:03 AM [ Thanks! ] [ Report ] [ Ignore ] [ # 191 ]



Custom Estate





Total Posts: 3167

Joined 2007-05-01 ?If you want to be popular and poor, spend a lot of time and energy talking about how markets are manipulated. If you want to be rich, figure out how to to measure the psychology of investors.?



Bob Moriarty









Hmmm... what happened to that statement?
 
This somewhat interesting thread has definitely taken a turn for the worst.



Good luck to all who are trying to win the "lowest Dow guess" contest. I'm out.





I really DO miss the olden IHB days... Can't remember bad arguments like this back then, only when housing bull trolls came on the board.
 
[quote author="muzie" date=1223545501][quote author="awgee" date=1223539461]Just curious. Is there anyone who thinks that naked shorting is <strong>NOT</strong> a stock manipulation tactic used by hedge funds? I am not trying to start an argument, nor will I try to convince anyone of anything. I just want to know.</blockquote>


awgee Posted: 23 September 2008 07:03 AM [ Thanks! ] [ Report ] [ Ignore ] [ # 191 ]



Custom Estate





Total Posts: 3167

Joined 2007-05-01 ?If you want to be popular and poor, spend a lot of time and energy talking about how markets are manipulated. If you want to be rich, figure out how to to measure the psychology of investors.?



Bob Moriarty









Hmmm... what happened to that statement?</blockquote>


That is pathetic if you are insinuating that my one question is spending a lot of time and energy about how markets are manipulated. Your portfolio must be taking quite a beating to be lashing out at someone asking an innocent question.
 
[quote author="ipoplaya" date=1223534415][quote author="blackvault" date=1223531377][quote author="ipoplaya" date=1223530957]blackvault, do you have any idea what acpme does for a living?! I'm thinking probably no...</blockquote>


What does that have to do with anything? When he actually doesn't know how manipulation works in the market, or for the fact that he even believes that stocks are manipulated, or for the fact that he doesn't understand the psychology of the stock market which is correlated to money flow.



But please humor me. AIG exec on a retreat? Ex Lehman CEO? go ahead pull the "I do X for a living, so you should agree" card.</blockquote>


In your book, it probably doesn't have anything to do with anything... I was curious if you knew or even cared. Pay it no mind.</blockquote>


No. In my book I don't evaluate peoples opinions based on what they do. Maybe you do, but I don't. Perhaps he's a CFO like you, but when he clearly doesn't understand how market operates then doesn't matter who he is. Experience is different then reading a book.



You play poker? I do casually, but happen to be pretty good at it. You see it's just like the market. It's psychological. You need to anticipate your opponents moves and know what he is holding at all times. You can't "learn" that or "educate" yourself on that matter. You need to experience it, and many times for me it actually happend by losing money.



But based on your comment, I'm going to assume you agree with acmpe and don't understand how manipulation feeds right into the psychology of people which translates to money movement, then I understand why you just made your first trade in over 5 years. You're just not good at it, but maybe happen to be a great CFO. Everybody has our nitch.



Here is the way I see it, and feel free to call it out if it isn't true. You are very intelligent when it comes to finances, I've read plenty of your posts and took value in many. At the same time reading a book or studying about something is completely different from experience. I breathe the market on a daily basis. I watch it every day fromt he morning it opens to the moment it closes the past 11 years. (call it an addiction, but I enjoy my job). When you follow every heart beat of the stock market for years you get to know it. You get to know it real well. You get to know your opponent (other inevstors) and anticipate their moves. You spot certain behaviors and know what behavior will lead next because of "experience".
 
Here's my 2 cents. Technical analysis, future value of dividend payments, discounted cashflow, forward earnings, etc...are all just "fundamentals" of an investors psychology. If you get enough people to follow one pricing theory then it becomes relevant. There isn't any concrete scientific way to quantify or qualify equities. It comes down to perceived value, which is a derivative of psychology.





In addition to this concept, we don't really have a "free market" that operates in a vacuum absent of manipulation. Government and Regulator intervention are additional variables that are out of the average investors control. Sometimes a stock does the exact opposite of what the "fundamentals" say it should do, because the masses have lost faith temporarily in the "fundamental."
 
[quote author="blackvault" date=1223552097]Everybody has our nitch.</blockquote>


Mine happens to be persuading people. Might I be bold enough to suggest honey over vinegar?
 
I'll give another example of market manipulation that from what I'm gathering many of you are completely oblivious to. Thats ok, maybe Ipoplaya, or acmpe can give more insight or even Muzie.



Many of you use limit orders. Which is a BIG NO, NO!



If you are going to use Limit orders ONLY, and I repeat ONLY use them when you physically can't follow the market or buy/sell because you are away on some vacation. With todays technology you can always be engaged, but lets just say you can't then go ahead use limits to protect your little nest.



Here is a reason as to why its not a good idea to use limits



Some of us investors like to look at existing orders on the market. Pesonally, i don't just go into the market and place an order and go with it. I will first spot to see how many outstanding orders there are and specifially check to see where people set their sell/buy limits. I scope out the demand and supply so I can position myself for the best price possible.



Here is a hypothetical example.

Stock A is at 52 a share and you just bought it at 52 and set your sell limit at 50. Do you have any idea what the big boys do here? They flood the market with a ton of sell orders of the company pushing the price down temporarily till it hits 50 a share. Do you know what happens next? All the limit orders set at 50 get triggered and are pushed into the market. It doesn't all have to be at 50 dollar limit. It could be a series, 50, 49.90, 49.75, 49.50 etc. simply a cluser of sell orders in close proximity.



Now let me walk you through a series of orders on how this actually happens.



Many people list their orders at market price. So they will scoop it up at whatever price the stock is at. So if the price is at 52, and the big boys throw out a small bait of 100 shares at 51.80, then the person buying at market will buy at 51.80 naturally. Sure the institution lost money but they don't care as its very insignificant. Their goal is to create a small or major panic and really load up on shares later on. Now they list another 100 shares at 51.60, the next market order buys it and so on. Follow?



Once the 50 price is reached through a series of these sell orders by the big boys or "manipulations" it will obviously trigger the first limit order "FUELING" the further decline of the stock price. In essence you are assisting the big boys. Your limit order is now placed in the market and sold to somebody for that 50 dollar price. Big boys push another order at 49.75 and the next market order scoops up that one and any triggers other limits in between...then another and another etc...All of a sudden the stock price starts to drop. If the "big boys" are lucky, they might even create a small panic and have regular investors start selling as well, fueling their cause further. Once these sale orders start growing to a big rolling ball, institutions or as they call em "big boys" will scoop up all the possible shares out there, anything people are dumping. What the big boys are hoping for is a trigger order of perhaps 10,000 shares to be dumped into the market. They will scoop it up (because really the demand is there "big boys" they just don't show it yet) and perhaps continue a seriess of 100 sell orders making sure prices continue to go down or stay at that level until they load up. You have to remember, the "last sale" is what determines the price of the stock. Doesn't matter how many shares are being bought. So as the ending result the price of stock eventually starts going back up back to where it was or even higher depending how much of the supply the "big boys" sucked up. They naturally profit.



Now you are the sucker here....because just like in poker, placing limits is like showing your opponent your hand or giving him a tell.

Perhaps you check your blackberry and see that your new beloved investment is at 55, you get excited naturally. You log into your account to see your gain for assurance and realize you don't gain anything as you don't have the shares. You just got played as the big boys took your shares. Sucka!!!



Now this really only works when there are a decent amount of people setting their limits in the same price range. Nobody is going to bother trying to move the price of a stock with one limit order sitting out there. Also as I said before it barely works with the CSCO's and MSFT's because they are just too big. You need crap load of money and shares available to constantly keep flooding the market with these small orders. Its virtually impossible. But small to mid caps? Oh yeah...happens on a daily basis.



So you see when I invest, I check to see if there are a cluster of limit orders set at a specific price. Instead of buying right away, I will simply anticipate that at some point of time somebody will push the prices down triggering the limits. Why buy at 52 when I can ride with the big boys and pick up shares at 48. How do I know this? I witnessed it over and over and over again. I experienced it happen to me.



So yes in the overall picture does it matter? Maybe not to you. If you don't care whether you buy the stock at 60, 50, or 45 because you anticipate in the long run the price will be 90 then so be it. In the long run you will profit.



I personally want to get the best price possible and this is how its achieved. That is why some of you will average 11% like the market, and the rest of us will average a higher rate.



SO DO NOT tell me that market manipulation doesn't happen.



If one soul here can sit here and tell me that what I just explained doesn't occur then you are a sucker and a clueless investor.
 
[quote author="lendingmaestro" date=1223554670]Here's my 2 cents. Technical analysis, future value of dividend payments, discounted cashflow, forward earnings, etc...are all just "fundamentals" of an investors psychology. If you get enough people to follow one pricing theory then it becomes relevant. There isn't any concrete scientific way to quantify or qualify equities. It comes down to perceived value, which is a derivative of psychology.



In addition to this concept, we don't really have a "free market" that operates in a vacuum absent of manipulation. Government and Regulator intervention are additional variables that are out of the average investors control. Sometimes a stock does the exact opposite of what the "fundamentals" say it should do, <strong>because the masses have lost faith temporarily in the "fundamental</strong>."</blockquote>


Amen. 100% agreed. Every component plays a role into the price of a security. My argument is that hedge funds, institutions who ever will take advantage of the highlighted you just mentioned and cause further panic or excitement that normally wouldn't exist if the markets remained untampered with.
 
[quote author="lendingmaestro" date=1223555299]I can see the huge "fake" orders piling up on my level 2 streamer to entice buy orders only to quickly vanish, never to be executed.</blockquote>


That is another form of market manipulation.
 
[quote author="blackvault" date=1223555414][quote author="lendingmaestro" date=1223555299]I can see the huge "fake" orders piling up on my level 2 streamer to entice buy orders only to quickly vanish, never to be executed.</blockquote>


That is another form of market manipulation.</blockquote>


probably,



if I'm thinking about it, you bet thousands of others are as well. There is no system on earth, private or government, that is free from manipulation or at least attempts at manipulation. That IS the human element.
 
Suppose I could compile enough data so that I could write a book which explained why the market always went up during a full moon. If enough people read it and BELIEVED it, then the market WOULD go up during a full moon. Cup-n-handle, head-n-shoulders, double bottom, double top, all 100% fabricated cult followings that command legions. No basis in reality.



it's like trying to predict the lottery or the outcome of a slot machine. The mere concept is absurd, but not if you can get enough people to play the same way. How many times have we seen GS take the exact opposite position of what one of their analysts are predicting? How can their not be manipulation when you have Rating Agencies, Investment Banks, and Regulators in collusion together? How can there not be manipulation when lobbyists are allowed to exist???



IMO, the only way to maintain your wealth/status is through luck or control, and control is expressed through manipulation. Our freaking treasury secretary was previously the CEO of Goldman Sachs. In 1999 GS could have been wiped out by being on the wrong side of gold, so Gordon Browne of England flooded the market with gold. He's now the Prime Minister of the UK. Loyd Blankfein was the ONLY CEO present during the Federal discussions of the AIG bailout. Was this because only GS was counterparty to AIG's swaps, or because Paulson still has hundreds of millions in GS stock and stock options???
 
[quote author="blackvault" date=1223552097][quote author="ipoplaya" date=1223534415][quote author="blackvault" date=1223531377][quote author="ipoplaya" date=1223530957]blackvault, do you have any idea what acpme does for a living?! I'm thinking probably no...</blockquote>


What does that have to do with anything? When he actually doesn't know how manipulation works in the market, or for the fact that he even believes that stocks are manipulated, or for the fact that he doesn't understand the psychology of the stock market which is correlated to money flow.



But please humor me. AIG exec on a retreat? Ex Lehman CEO? go ahead pull the "I do X for a living, so you should agree" card.</blockquote>


In your book, it probably doesn't have anything to do with anything... I was curious if you knew or even cared. Pay it no mind.</blockquote>


No. In my book I don't evaluate peoples opinions based on what they do. Maybe you do, but I don't. Perhaps he's a CFO like you, but when he clearly doesn't understand how market operates then doesn't matter who he is. Experience is different then reading a book.



You play poker? I do casually, but happen to be pretty good at it. You see it's just like the market. It's psychological. You need to anticipate your opponents moves and know what he is holding at all times. You can't "learn" that or "educate" yourself on that matter. You need to experience it, and many times for me it actually happend by losing money.



But based on your comment, I'm going to assume you agree with acmpe and don't understand how manipulation feeds right into the psychology of people which translates to money movement, then I understand why you just made your first trade in over 5 years. You're just not good at it, but maybe happen to be a great CFO. Everybody has our nitch.



Here is the way I see it, and feel free to call it out if it isn't true. You are very intelligent when it comes to finances, I've read plenty of your posts and took value in many. At the same time reading a book or studying about something is completely different from experience. I breathe the market on a daily basis. I watch it every day fromt he morning it opens to the moment it closes the past 11 years. (call it an addiction, but I enjoy my job). When you follow every heart beat of the stock market for years you get to know it. You get to know it real well. You get to know your opponent (other inevstors) and anticipate their moves. You spot certain behaviors and know what behavior will lead next because of "experience".</blockquote>


I really have no opinion or thought with regards to the prevalence of market manipulation. I don't get paid to follow the market that closely... Maybe you do? That hasn't been made clear in your posts. You might have extreme cred on the topic. I have no idea... I breathed the market everyday for years too but that wasn't how I made my living. It was purely a hobby, one that sucked up a lot of my time, but a hobby nonetheless. If you want to talk about FASBs or FMLA or even FSMO role holders, I'll definitely have an educated, informed and experienced opinion. Market dynamics and psychology, not in my wheel house.



I typically do evaluate people's opinions based on how they make their living. When I want competent legal advice, I call up a guy who gets paid to do that everyday, i.e. a lawyer. If my plumber has some suggestions on proper language for the purchase agreement key to my M&A activities, well, I'd take that advice with a grain of salt. If he wants to talk to me about hard water and pvc pipes, then I'm all ears for sure. When I sold my condo, I consulted a realtor, our esteemed blogger Deuce, because his activities in that area is how he feeds his kids. Everyone has an opinion on real estate, myself included, but as I think is natural, I weighted my realtor's opinion my heavily.



Or to put this rambling more succintly, my advice, which is probably worth all of $.02, is to pause and consider the experience and knowledge behind someone's opinion before you completely dismiss it... You may find that your learn something new that way or at least further develop your own opinion with new information/perspective.
 
[quote author="blackvault" date=1223555090]Here is a hypothetical example.

Stock A is at 52 a share and you just bought it at 52 and set your sell limit at 50. Do you have any idea what the big boys do here? They flood the market with a ton of sell orders of the company pushing the price down temporarily till it hits 50 a share. Do you know what happens next? All the limit orders set at 50 get triggered and are pushed into the market. It doesn't all have to be at 50 dollar limit. It could be a series, 50, 49.90, 49.75, 49.50 etc. simply a cluser of sell orders in close proximity.

</blockquote>
Are you talking about limit orders or stop orders?
 
[quote author="EvaLSeraphim" date=1223554823][quote author="blackvault" date=1223552097]Everybody has our nitch.</blockquote>


Mine happens to be persuading people. Might I be bold enough to suggest honey over vinegar?</blockquote>


Was just counseling someone on my staff today about "killing them with kindness"...
 
<blockquote>Are you talking about limit orders or stop orders?</blockquote>


Both really. Limit and stop orders are the same in the fact that you pre-determine at what point you will buy/sell. Therefore, anytime there are pending sell/buy orders sitting in the queue then others can see it and use them to their advantage.
 
[quote author="blackvault" date=1223525317]<blockquote>It's not the hedge funds silly, it's the companies that are crap are crap, and those that are solid are solid.</blockquote>


I'm sorry but not an inch of my body can agree with your statement. Market manipulation happens all the time. Perhaps not "just" a hedge fund, but rather I should say anybody with a large pool of money that can move stock significantly. Plenty of solid companies are played around with and manipulated. If you don't think hedge funds or other institutions with alot of money move stock prices either up or down to benefit their pocket while fundamentals are screeming the opposite, then you are missing part of the picture. There have been plenty of stocks that I bought based on strong fundamentals, yet the price of it went down or stayed stagnant as high as 3 years. Then all of a sudden when the big boys are done loading up, you experience mass appreciation.



WAKE UP! This isn't 1950 wall street.



I really hope graphrx that your statement is a joke or meant something else that I'm not seeing. If its not, I understand why you wanted to meet for lunch for advice.</blockquote>


Yes, you misinterpreted my statement, especially when you took it out of context like you did.



My point was that just because a hedge fund has a position in a company doesn't mean that it is manipulation. My point, in which I cited TPG (a huge hedge fund) taking a $2bil plus position in WaMu, which we all know how that turned out for them. On that day that SEC doc was released the shares of WM went up, but if they sold any of those shares there would be another SEC doc showing they did, and the whole trade imploded on them. They were wrong, plain and simple.



My second point was how Lehman was bitching that short sellers, like David Einhorn, pushed their shares down in value. It wasn't the short sellers, it was the fact they had a bunch of crap loans on the books that weren't worth what they said they were and they had too much debt/leverage to survive. Einhorn shorting them wasn't manipulation, it was just a smart trade because he saw what was on the books of Lehman and what he saw was a bunch of garbage. He was right, plain and simple.



What you are citing as manipulation may be that, but I have just always seen that as how the market moves. I really don't give too much thought into a $2 swing on a $50 dollar stock. It is just what it is, and whether it is manipulation or not doesn't concern me as long as I understand the same theory you do, but just under a different name.



It's cool that you have experience and that you are willing to share, but that is no reason to be condescending to anyone here. I know acmpe and what he does for a living, and lets just put it this way he is color blind now from all the staring at the red and green numbers. You should see all the red light running tickets he has. You have 11 years of trading experience, which is about double mine, but I have made more money than I have lost. I'm not a dummy when it comes to trading, and that can be seen from my lackadaisical effort in the Pandaless game. I have one loser right now, GS, and all my sells have been a nice profit even with the ass crap execution of how their trades go. I wanted to go to lunch with you to pick your brain and get some ideas, and I would hope I could return the favor by doing the same for you. I am open minded to learning from other people, even if I don't think they are right or wrong. If someone else is doing it that way, then I want to know about it.



So I am asking nicely to take a step back and reread what you have posted, and while you may disagree, you don't need to be condescending. I try my best to not be that way, and every once in a while I slip, but I do my best to take a step back when I do and try to realign myself to have a healthy discussion. I actually had to do that for this thread and this post, as I was ready to throw in the towel and just go back to picking on Panda (like how I sold my puts on FXI the other day for nice profit), but instead I wanted to make this thread the fun and informative thread that it could be. You have great points, and your points need to be made, but the way you are going about is just pushing buttons. I have learned a lot from acmpe, Ipo, awgee, and you, but we aren't learning if all we do is spend all day ranting about how someone is wrong, especially when it was taking out of context. I mean, that is what the politics threads are for, out of context bitter whining and bitching. But not the econ threads, please, I love the econ threads and awgee and I are the ones who requested the divorce from the politics thread. Irreconcilable differences ya know.
 
Ipoplaya,

As far as your comments earlier...it will simply be taken as something you didn't really mean so I'm forgeting about it.



BTW...I don't need to study for the CFA its more of personal interest. Most of the crap I read in there is common sense, but I like to read/learn/listen to anything, as you never know when you will stummble upon information that can give you an edge in the area you are passionate about and mine is the market.



Either way, I will continue reading your posts, as I find them valuable.
 
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