Yes, We Can End Market Manipulation

Most traders religiously go about their business on the stock market. They do the research; scouring the news reports, the EDGAR filings, the financial statements. Analyzing charts. Looking for trends. Is the stock overbought? Is the stock oversold?

They faithfully keep CNBC or Bloomberg on in the foreground (or the background), waiting for "breaking news," the latest economic reports, commentary and analyst sentiment. They manage and re-manage their Java-based stock tickers to reflect their latest "plays" and holdings. They open up their Level 2 applets for stocks they already own, or are thinking of getting into - long or short.

They watch the futures and the DIA, QQQQ, SPY, XLF and XLE "ETFs."

Traders have it down to a routine. Almost a science.

But, I wonder if traders are even aware of one other critical component of trading - that is, the extent of the manipulative "goings-on" involving, pretty much, every stock in the stock hemisphere, and just how much manipulation affects the choices traders end up making each and every trading day.

No one likes to talk about market manipulation - whether in the stock market or in other financial trading markets. It's almost "taboo" to speak about it openly, although recently, more and more well-known traders and marketeers have been speaking out.

It's gotten to the point now, by early 2009, that savvy traders no longer trust the markets, not one thing about them. And for good reason. To date, no single regulatory body or enforcement agency has been able to effectively deal with market manipulation, mostly because of either a lack of manpower, a lack of understanding of actual trading, or even due to a complete lack of caring.

Shady traders, big and small, know this. And they go and go and go, with utter impunity, convinced they will never get caught. They take their profits and don't give one iota about who gets hurt because of their acts. Then, they move on to their next unsavory trades.

I don't believe there is a trade-able financial instrument out there that is "clean." Seems like there's always some shenanigans going on, or being attempted, by at least someone with the funds to do it.

So, I chuckle sadly when I hear that President Obama and his team of wizards say they are going to effect change in the economy. Change of what, exactly? Why keep throwing taxpayer money against the wall hoping to fix things, when the inherent ethical underpinnings of the financial and trading markets have gotten so horrendously out of control?

There's no uptick rule. We have unabated "bear raids" and "bull cranks." We have "short and distorts" and "pump and dumpers" everywhere. We have the FASB 157's mark-to-market fiasco. And we have swaps and derivatives being traded in the dark. And that's just the basics.

Given that environment, why would any trader even want to trade? You have to now spend more time trying to assess a stock's potential for manipulation than the company's actual fundamentals or performance. And traders are trying to assess a big black hole when it comes to manipulation. You finally decide to get into a stock long, for example, only to suddenly have the stock hammered down by an unscrupulous trader with sufficient funds available to him, working his shorting agenda.

And that's just the traders being relentlessly blind-sided, you know - the people out there every day in the Wall Street trenches slugging it out. What about the thousands of people out on Main Street - the taxpayers who invest in the markets, who don't trade, and simply give their money to "professionals" to manage? If traders are being bamboozled, then the passive investor-taxpayers are simply being swindled. Not by the money managers, but by the same market place that money managers have to deal with, once they are in charge of where to put their clients' hard-earned money.

If taxpayers only knew just how shady the markets have become, they would pull all their money out before you could say, "Let Me Know When It's All Cleaned Up- And Only Then Will I Even Think Of Ever Investing Again." Makes for a great T-shirt, don't it?

I mean, who wants to play craps with loaded dice? It's that simple. The only thing that separates Wall Street from gambling in Vegas in the first place, is that in Vegas, you are mostly at the mercy of luck. In the stock market, an investor armed with sufficient research and savvy is supposed to be able to have far more control over his "luck", in predicting a stock will go the right way. Else, he would go to Vegas, put his money down - 50/50 - and pray.

Now, manipulation issues place Wall Street investing further and further into the Vegas gambling camp. So, a smart investor would simply say, "Well, if that's the case, I'd rather go to Vegas - at least the food is better."

Obama, if you're listening, and I know you are - you need to deal with this. Immediately.

You can hire all the "dream team Summa Cum Laude" experts you want. But, unless you deal directly with what has happened to the very financial markets you are using taxpayer money to fix, nothing will change. You have to start with fixing the foundation. You've inherited a house whose walls are filled with hoards of termites, and if you don't deal with the infestation you eventually don't have a house.

It's enough already. Get a panel together. Make sure all it does is address market manipulation - including those policies that feed it. If the SEC needs better regulation as ammunition and vastly more manpower - give it to them. You can spend a trillion dollars trying to repair the house. But the termites will still be in those walls. Or, you can spend $10 billion and get rid of the termites once and for all - and make sure they don't come back.

And, if the markets are cleaned up, traders can trade better, money managers can manage money better- and everyone makes profits, including average taxpaying-investors (who can also begin to replenish their retirement nest eggs that have gotten tanked). All this, in turn, will help re-stimulate consumer spending. As stock prices go up, the fear and lack of faith in the current market will be replaced with stability and confidence. Companies will be far less anxious about their earnings, their debt, attracting investors, and their overall bottom-lines. And this will lead to hiring-back employees.

And when ultimately the markets recover, as the economy gets back on its feet, and stability and confidence are eventually replaced by greed and arrogance, then you keep the vigilance coming. Never let up.

Yes, there is supposed to be some "risk" to investing. Stocks shouldn't just go straight-up. But, at least, level the playing field. Institute fair play. Less Vegas. More chess playing.

The time is now, President Obama. Your time has come.

Repeat after me:

I, Barack Obama, do solemnly swear, to faithfully end all market-manipulation wherever it may be found. Yes I can!

Yes I can!

Yes we can...

Disclosure: None.

Comments

[john s. gordon:]

yes restore the uptick rule, for starters.
> jack

Jan 20 08:13 AM

[alphadominance:]

Absolutely a must. Well put article. Where is one expected to invest for their future when all markets are subject to being pushed ahead of a tidal wave of hedge fund leverage. Nobody but nobody should get to play be rules that aren't available to mom and pop. That means if we have margin requirements of 50% they should. None of this 50x leverage bull. Uptick rule and investigating complaints like they so resoundingly failed to do with Bernie Madoff are other critical first steps. We went through a fit of regulation after the excesses that led to the Great Depression. Finance has evolved far enough that we are again due for such wide reaching legislation. Otherwise we stand the risk of a repeat of the Great Depression in which everyone loses all faith in the markets, banks and currency. It's not a distant prospect if we don't act soon.

Jan 20 11:32 AM

[PainfullyAware:]

Nothing better than being uncomfortable to pique re-evaluation of situation.

When you can create money out of thin air you can buy governments.

The fate of good people for apathy in public affairs is to be ruled by the evil.

Many have not been paying attention for a long time. The Rude Awakening Continues.

Jan 20 12:00 PM

[Richard Col...:]

A better title for this article would be to ask the question:
"Are We WILLING To End Market Manipulation?"

Some answers must be provided by those of us who care:

1.) No stock should be given away __ NO NOT ONE SHARE, no stock dividends, no gifts of stock to management for performance. Don't give me that incentive crap. The managers incentive should be simple __ he only gets to keep his job, if he doesn't screw-up.

I'm tired of the "

Jan 20 01:47 PM

[Richard Col...:]

GRAND THEFT" by manangers and directors of
publicly owned corporations. These people do not own all of these corporations, they only work there.

2.) Increase the manpower of the SEC by four fold, and give them the power to enforce new rules for trading. Create a 48 hour wait period before a trade is final; during which time the trader may with draw the proposal.

Of course, the crooks and nitwits will dig-up every excuse for not taking these extreme actions; but unwillingness to solve problems is our real enemy.

Richard Collins

Jan 20 02:06 PM

[carey_jim:]

I think your use of the word 'taboo' is appropriate because what you talk about is the 'elephant in the room' phenomenon of the American economic scene, and I'm NOT talking about the Republican Party, either the far right or the center. Democrats are up to their necks in the same muck spread by lobbyists and shoveled by special interests.

We need to open a national discussion about the nature of government regulation and it's place in curbing the abuses of monopolies such as Microsoft (how about just breaking it up the way AT&T was broken up?) and oligopolies (which are the normal form of doing big business in America.)

We need a long, informed discussion about market regulations and regulators, but we need to face the fact, from the beginning, that it will never be possible to make ALL trading fair and ALL traders honest, short of instituting a totalitarian fascist (or socialist) government.

Reforming the 'revolving door' system we now have where regulators spend a few years in government simply to learn how to beat the regulations, will not be easy and might be impossible.

At least the Obama administration has a good chance of starting the battle, but finishing it will be another question.

Jan 20 07:58 PM

[PacificGate...:]

FOR WALL STREET CLEAN-UP, LEARN FROM BERNIE MADOFF

What if a letter written by Bernie Madoff explaining himself was discovered?
--
pacificgatepost.blogsp...
-
….in his own words?

Jan 20 09:37 PM

[wdhalgren:]

It's interesting that folks get concerned about manipulation when the market goes down (or when oil goes up). Fact is that most of the manipulation takes place on the upside, simply because there's no stigma associated with driving a stock price to unsustainable heights. Who cares, everyone's making money, right? The SEC's not gonna swoop in and say "Hey, you're playing to rough with those short sellers.

So, we get bubbles, massive overpriced bubbles. They go on for so long that people forget that they are a bubble. Investors come to embrace $150 billion market cap companies selling for 40 times forward earnings. CNBC doesn't bother to point out investors' folly, they're part of the game. And all the home players are, of course, completely oblvious to valuation.

We certainly do get manipulation in the equity markets, but if you think "bear raids" are the main problem, you haven't quite figured it out yet.

Jan 21 09:25 AM

[jt:]

Exactly right. Unfortunately the author is apparently blind to the WAY bigger manipulations. They're not by "traders" or even hedgefunds*...THEY'RE BY OUR OWN GOVERNMENT!!!! That's why nothing is ever done, b/c it would expose those with the power within our govt who have abused and broken every market and trading law/rule written...starting with Treasury and its GoldmanSach's CEO bred Secy's of the Treasury and their collusion with the Fed...to the PPT (the acronym for the President's Working Group on Financial Markets)--how many hundreds of "hail-Mary" sudden takeoffs at the end of the trading day have you seen the DOW do, out of seeminly nowhere, after a major breakdown, to keep it from breaking below a critical support line, etc, or just as the Prez was going to speak, or after some new horrendous economic news hits the market...in a completely counterintuitive manner?

And then there's the Fed's Bank...JPMorgain4Elite... ultimate "too big to fail" b/c it basically represents the Fed and the Illuminati world banksters behind them, along with TPTB in the adminstration of "our" govt that use them to rig the markets for their own political purpose of the moment. How many here know that JPM all by its lonesome has a derivative risk (read: DEBT) as we speak of over $100 Trillion!!!!...contras... that with the GDP of the world estimated at around $50Trillion!! And what are all those derivatives aimed at?...mainly commodities...ESPECIAL... GOLD AND SILVER. Why?...b/c commodities...ESPECIAL... GOLD AND SILVER...are the REAL deal in contrast to the toilet paper scam of fiat currency that they, the Fed et al, were given the RIGHT to create out of nothing and loan to We The People at pure profit interest (a right given to them by scumbag paid-off Congressmen and other dirtbag plutocrats in 1913, signed into law by a blackmailed Woodrow Wilson [caught in an affair] who knew he had just unleashed a horrendous financial cancer on his country and lamented the fact).

And then move on to the SEC who refused to investigate Madoff or naked shorting after promising for more than a decade to deal with the latter...to the CFTC who will slap a few $million fines on small-time supposed manipulators while they let JPM carry 95+% of the entire short position on silver (equivalent to more than 20% of all silver produced in a year despite the fact that JPM is not IN the silver mining business...ie, it's not a hedge against market losses) and nearly that great a %age on gold on the CRIMEX!!!!!...and those are supposedly NOT MANIPULATIVE SIZED SHORT POSITIONS??!!!!!!! They'd be the see-no-evil, hear-no-evil, speak-no-evil CFTC commissioners if the facts had not been presented to them so many times for so long...FACTS THAT COME FROM THEIR OWN AGENCY!!!

Bottom line is who gives a crap whether or not the manipulation at lower levels is dealt with when our own govt and TPTB at the top are not held to any rules but allowed to manipulate FAR beyond anything remotely allowed to the "normal" traders. But it INDEED MUST BE STOPPED!!! jt

Jan 21 06:27 PM

[stocks2051:]

Thank you for the article. It is non specific though. It would be great to have someone "in the know" who had the courage to reveal specific stocks that were manipulated, by who and the dates.

If someone "in the know" wanted to supply such information on the web, it could be done and with a little creativity it could be done anonymously. If such information were revealed and it was obviously true, every trader would know where to look.

This is the usual route for true reform----- one individual who knows: and reveals the scam, the truth, ---often times because they can no longer live with themselves.

Jan 21 07:40 PM