STREET SHENANIGANS "A penny less paid [to Wall Street] is a penny earned." -- T.K. Lin It is taboo to talk about what goes on behind the scenes on Wall Street and that's why you don't hear about it. However, we believe the public deserve to know at least a little. What we reveal here is just the tip of the iceberg, sufficient to pique your interest so that you will no longer be the innocent and naive investor/trader. It is not our intention to provide you an education on Wall Street chicanery, as time and space do not permit this. However, any motivated investor/trader will embark on the rewarding path of discovery once shown a glimpse of the machinations of Wall Street, and that's what we intend to do here -- show you a glimpse. We'll even give you some examples of profitable applications. But the rest is up to you. You can go as far as you want to as there is no limit to your discoveries and financial rewards. If you enjoy detective work and making money along the way; you may yet find your calling. First, be assured that it is extremely easy to manipulate the stock market, and there are many ways to do it. And because it is so extremely profitable and easy to do, it is done every day. For example, an influential Wall Street firm may "downgrade" a stock to flush out the sellers just before covering their short position in the firm's own trading account. Or the firm may "upgrade" its recommendation on a stock after covering short and going long. Such sure sources of "fast cash" routinely enable many Wall Streeters to rake in multi-millions in annual personal income. Not a bad living at all when one can leisurely pick up in a month what most hard- working American families cannot hope to accumulate in a life time. And it doesn't take brains or special ability, much less hard work or scruples. As always, Wall Street's game plan is much more effective and the profits much larger if it is carried out in a coordinated way, as it usually is. You, John Q Public, however, would not be the perpetrator, but the keen observer. Your goal is to try to ride on the coattails of these financial Goliaths to your own financial independence while avoiding being financially trampled like the rest of the public. Don't ever expect to be invited to Wall Street's feast. You simply go incognito and uninvited. Be content with inconspicuously nibbling away at the crumbs near the edge of their table. Stay invisible and make no noises, or you'll be bounced out from the Street party in a flash. With the right attitude, you'll be able to consistently squirrel away from Wall Street what is rightfully your due. To profit from such Street shenanigans, you do need to do some home work in order to buy (or cover) near price bottoms and sell (or short) near price tops. Most of the time, all it requires is daily analysis with MarketMaster(tm)(our price forecasting software), close observation, and patience. Let's first discuss the issue of when to buy. Ideally, you want a stock that has declined sharply and that has been touted by Wall Street (even as they unload it) on its way down. After it has dropped very substantially a red flag is flashed if this downtrodden stock is somehow suddenly and belatedly "downgraded" by Wall Street at what is already rock-bottom prices. The public's emotion at this point, having faithfully held on to the stock and ridden with the losses all the way down, is one of despair and fear, and their inclination is to either sell long (throw in the towel) or go short (in a vain hope to recoup) the stock when the media is full of planted "reasons" for why it must be sold "at once". To succeed in this business, you need to keep any "herd instinct" in check and control your natural and emotional reaction to news plants and disinformation, and be ready to go against the crowd. Follow MarketMaster(tm) (our price forecasting software) particularly closely, as almost invariably it will soon point to unusual bullishness and prevent you from becoming a perfect contrary indicator. In fact, while the crowd is selling long and selling short at rock bottom prices thanks to Wall Street's "advice", it is early warning to you that it is time to get ready, at least psychologically, to cover short and, somewhat later, go long. However, to determine if the nearby important price support level for this downtrodden stock will hold or if record lows will be made, you must analyze it closely with MarketMaster. Typically, when Wall Street vigorously "downgrade" a stock, it may be days to several weeks before all the public's long positions are flushed out. This is particularly true if such "downgrading" is coordinated and sustained. One firm's "downgrading" may be followed by another firm's "downgrading". The key here is to closely monitor the pronouncements of major investment firms on the subject stock by listening to their "news" dissemination while double-checking with MarketMaster. Be aware that such sustained "downgrading" may lead to prolonged price depression in the subject stock. Both the public and the institutional investors need time to digest and obligingly carry out the sell "recommendations" of Wall Street. Obligingly, Wall Street is surprisingly "patient" and "understanding" at this critical juncture with their repeat "warnings" so that the public may at last sell or go short at price bottoms with utmost confidence and courage. While this can be fascinating as you look ahead to the bullish opportunity that is unfolding, be sure to use the confirming indicator of MarketMaster to help keep you from buying too soon. Remember, "a penny less paid is a penny earned", and a lot of times you are making money simply because the stock you'll ultimately purchase is getting cheaper each day. Your goal is to pick up the depressed shares from the "clients" of Wall Street firms at the lowest possible price above $0. Your reward/risk ratio is much improved as the stock sinks to important price support levels, or even new lows. Our description here is necessarily limiting in that the whole process is a bit like bicycle riding. You learn and profit most by actively participating, experiencing and doing, initially with paper trades if necessary, but ultimately with real cash. When you finally place your order to buy, do it in steps and ease yourself in with multiple trades over multiple days. In general, the more belated, severe and sustained the "downgrading" of a stock by Wall Street, the greater the need for patience and the greater the percentage of subsequent price recovery from price bottoms. After getting in at price bottoms, follow the stock closely with MarketMaster and be prepared to take some quick and early profits. Just remember that while you were nibbling to build your very modest long position, Wall Street was hauling in public shares by the truckloads to "maintain an orderly market". Used to "fast cash" and instant gratification, Wall Street will always lighten up a bit on its massive inventory as the prices rise from their rock bottoms. Likewise, you should reward yourself with some profit. As often happens, Wall Street Goliaths loathe successful bottom fishers who cling to their coattails and will engineer a "retest of the low" to shake you out. Having taken some profits, you now have extra profits and cash and therefore stand ready to replenish at the artificial price dip for another fast and profitable trade. To gain insight into Wall Street's game plan, pay particularly close attention to what MarketMaster has to say. Conversely, when a stock is "upgraded", there is often a waiting period during which buyers are exhausted of their cash by Wall Street's short sales before the stock price will decline. The more firms there are "upgrading" a stock at price highs, the more sustained will be public buying and the more patience is called for before going short. Ideally, you want a situation where a stock had a meteoric rise to a lofty peak as a result of heavy "upgrading" by Wall Street, then declined, and now once again being pumped up by Wall Street hype to re-approach its earlier lofty perch. Ideally, you want the maximum number of investment firms touting the stock in this second wave of induced public buying prior to establishing your short position. This ensures that all potential buyers will have been hyped out of their reluctance and ignorance into buying. Once this heavy public buying is exhausted by Wall Street's corresponding heavy short sale, a decline is inevitable, with a severity proportional to the earlier-manufactured public euphoria (or compulsion). As stated earlier, gradually build up your short position and protect all short positions with calls, straddles, warrants and like instruments as you open them. Again, be prepared to take some profits after a significant decline has occurred. Follow the situation closely with MarketMaster. There are times when a stock is at or near its highs, and suddenly, it drops as a result of "downgrading" by some Wall Street firms. This is an indication that the firms are net short the stock. Of course, if you are not yet short the stock, it may mean that you missed the top. Nonetheless, Wall Street firms are extremely trading-oriented, because that's the way to optimize rate of return, and their transaction costs are virtually zero. Therefore, there is some chance that upon short-covering, the stock price may rebound (although usually not to the level of the recent top). At this rebound, you may want to set up your bearish position(s). Again, it is important to ease yourself into the position(s) in steps rather than in one single trade. Again, always protect your short position(s) with calls, LEAPS, warrants, convertibles and other appropriate strategies. MORE STREET SHENANIGANS There are certain times during the day when one may gain a glimpse of the intentions and agendas of Wall Street. Lunch hour is a good time for the Street to try to make prices "look good" or "look bad". The only disadvantage to the Street is that such cosmetics may not last if the "bait" is not taken, since there are two to three hours to go before the market closes. Therefore, the last half hour of the trading day can be important. It is much easier to drive up or down prices during the last half-hour or so to create the required cosmetic "look" during prime time news. To drive prices up and to help generate public bullishness, Wall Street will tend to concentrate its buying in the last half hour of trading, particularly if earlier lunch-hour makeup did not quite do the job. Likewise, to generate public bearishness, Wall Street may concentrate selling during the last half hour of the trading day. Such "bullishness" or "bearishness" tend to carry over to the next day's opening. If you are a keen observer, you'll usually figure out what Wall Street's short-term agenda is likely to be and profit from this insight. Of course, you will gain further insight by checking your assessments against the forecasts provided by ProfitMaster(tm) (our telephone forecasting service) or MarketMaster. For analysis of very short-term activity, you will need the magnifying power of the intra-day version of MarketMaster, which will permit hourly or half-hourly studies, in addition to end-of- day analyses. Other than IPOs, there are times when Wall Street firms will offer to sell you stock without commission. Beware. There is no free lunch on Wall Street. Check with ProfitMaster or MarketMaster and you'll often find that the stock is ripe for short sale. Years ago, before the existence of ProfitMaster or MarketMaster, we were able to compile very profitable short-sale lists from the stocks regularly offered "net" (i.e. without commission charges) to the public by a leading brokerage firm. The firm routinely used this method to unload its "slow-moving" inventory to the public, who typically keep the stock (i.e. remove from circulation) after purchase rather than trade them (i.e. return to circulation). Were the leading brokerage firm to dump its stale inventory on the floor of the exchange, it would have lead to sharp price breaks and cost many times the waived commission charges. Typically, the account executive who sells the stock will be given extra commission and/or payout by the brokerage firm directly but the public buyer is not supposed to know this. There are times when the stock is so bearish that the account executive is offered double commission by the brokerage firm while the public is charged none. This is a potent indication that the stock is extraordinarily bearish. In all cases that we studied, the stocks involved tumbled badly within a few weeks, resulting in severe losses to the unwary and trusting public customers of the firm. 8 Copyright a 1994 by R.M.C. Ver.1.01 All rights reserved worldwide.