Market manipulation

“ Another method of manipulation is the forming of pools to buy in the stock of a company and force it up. If the market price of a stock is far below its real value, we believe it is justifiable for a pool to force it up, but the ordinary pool is merely a scheme to rob the public. ”

“ The Stock Exchange itself is a necessary institution and will continue to be so for a very long time to come. It is an organisation for the exchange of capital, a market for investments. But instead of being one of the organs of the industrial system, it is manipulated and controlled by financiers who influence prices and exchanges to suit their own interests. The manipulation of capital exchange has become a business which is parasitic upon industry although the institution through which the operations are carried on is necessary for industry. ”

“ When there is no actual dearth, even famine-prices may be obtained for the necessaries of life by the skilful manipulation of the grain-market. So too, in the stock-market, bonds and shares, instead of being bought or sold for what they are worth, of actual owners and to real purchasers, may be merely gambled with,—bought in large amounts in order to create a demand that shall swell their price, or so thrown upon the market as to reduce their price below their real value, and all this with the sole purpose of mutual contravention and discomfiture. ”

“ If, therefore, an oil company or a coal company or any other enterprise whose ultimate success cannot fail to enrich the community seeks to market its wares—i. e., its securities—and thereby enable itself to do business, where else is it to turn save to the Stock Exchange, and how is it to fix an attractive market price at the outset save by what is termed manipulation? Nobody is compelled to buy; as for selling, any holder of 100 shares or any other number of shares can sell them at will, and no amount of manipulation can prevent him from a free exercise of this privilege. ”

“ Without it there would be a sort of chaos of confusion and abnormal prices, for it is the speculator who is often the most keen and discriminating in judging the true value of securities. The much maligned “bear” is the safety valve of the market. He often prevents the manipulation of the price of a stock to an unfairly high figure by exposing the weak points in the situation, which is a protection to a prospective buyer.
A great deal of shallow abuse is still being showered on the Stock Exchange from all parts of the country. This always follows a panic. ”

“ Its agents conducting the sale could not counteract the effect of such a combination as can the agents of a private corporation, who may look after their interest in all the markets of the world in their own time and in their own way, according to the exigencies of the season and the demand, and who are supplied with money which they can use, without public scandal, in the manipulation of the market. ”

“ The consensus of opinion among those who have studied the course of speculation on exchanges seems, however, to be that if manipulation of prices and monopoly can be kept out of the market, and if the laws of supply and demand are allowed to operate freely, the effect of speculation, particularly of dealing in futures, has a healthful balancing effect on the market. ”

“ No other means of restraining unwarranted marking up and down of prices has been suggested to us. ... "A subject to which we have devoted much time and thought is that of the manipulation of prices by large interests. This falls into two general classes: (1.) That which is resorted to for the purpose of making a market for issues of new securities. (2.) That which is designed to serve merely speculative purposes in the endeavor to make a profit as the result of fluctuations which have been planned in advance. ”

“ Victory is not guaranteed, losses loom constantly, investors are forever edgy, customers are fickle, bankers itchy, capital markets gloomy, suppliers beholden to the competition. Barriers to entry are almost always formidable and often insurmountable.
In the real world, tacit and implicit understandings regarding prices and competitive behavior prevail among competitors within oligopolies. Establishing a reputation for collusive predatory pricing deters potential entrants.
And a dominant position in one market can be leveraged into another, connected or derivative, market. ”

“ I might dwell upon the evil effects of speculation upon innocent parties whose property is juggled up or juggled down by the manipulations of the market, but I would appeal, not only to the innocent outsider, but to those who may be tempted by the profits promised to the inside ring. I would suggest, however, that those who by cornering the market suspend the law of supply and demand, add crime to vice and defraud those who are induced to invest in a “chance” which has no actual existence. ”

“ For several years the public, now restored to high prosperity, observed with interest, awe, even with pride the appearance of those vast anonymous shapes which capital by a headlong impulse had been raising up to control production and transportation. Mergers, combines, trusts,—they came in endless succession. Hardly a day passed without a new sensation in phantasmic millions. People were seized with a gambling mania. Each day promoters threw an enormous mass of new and unseasoned securities upon the market, and they were frantically bought, as if the supply were in imminent danger of failing. ”

“ How can we blame a business man (especially one who, as officer of a corporation, acts in the interests of others whose capital he is managing) for getting the best prices he can? We cannot expect him to sell below the market. In fact, if market conditions cause profits to fall into his lap, he would be recreant in duty to throw them away. ”

“ They are past masters in creating and influencing a demand for their stock among you, declaring and increasing interests and dividends, manipulating the stock markets to create an artificial boom, and spreading news of a bull market. They load you with the supposed gilt-edged investments at high prices from their portfolios, that they are gradually emptying. After they have sold their securities to you and have entirely emptied their strongboxes of them, these philanthropists sell you more on 'short' sales of shares [Pg 91] they don't possess. ”

“ The bottom dropping out of the market! It means millions at a single coup, for, in spite of diplomatic quibbles, the market is like a cork. The Paris bourse is soaring. Wall Street will make a new record to-morrow. ”

“ But by what stretch of the imagination can the Stock Exchange be credited with playing any part in this third cause of the panic? If temporary depression results from exposure of wrongdoing among railroad, industrial, or financial institutions, nowhere in the land is execration poured forth upon the evil-doers more vigorously than within its four walls. Far from complaining, the Stock Exchange and the whole investment community welcome such exposures, despite their effect on the market, for the precise reason that their own protection and benefit, if nothing else, is promoted by it. ”

“ They don't play little horses and other games in public for francs, like the French, for the law forbids it, but I don't believe that any one, except we bankers and brokers, realizes how widely exists the habit of playing the stock-market. Thousands of people, big and little, sanctimonious and highly respectable, put up their margins and reap their profits or their losses. ”

“ How long will you allow these insolent market-men to insult you? How long will you allow a mob of money-lending, bargain-driving, dividend-snatching parasites to live on you, to scorn you, and to treat you as "live stock"? ”

“ My brokers will purchase for cash all the stocks they offer, and, on deposit of sufficient margin, loan them the stocks back again, to be again sold to me. In brief, I will take all their ‘shorts,’ and all the stocks sold by others which their conspiracy will force upon the market. When they have forced prices down to a point where they are ready to cover their shorts and buy for an advance, I will suddenly jump prices to the level they occupied before the conspirators commenced their operations, and thus commend to their own lips the bitter draught they have prepared for others. ”

“ One sees it in the speculations of laboring men, in the ventures of merchants outside of their regular business, in the gift enterprise shops, in the church-fair raffle and grab-bag. As I have before stated, buying shares in the stock market in the hope of a rise not based on development is as pure gambling as putting money on a monte card, and its evil effects are seen by the hundreds of working men practically ruined thereby. ”

“ The bimetallists propose not to act on the supply, and so create a monopoly, but to act upon the demand. This is a new exercise of legislation, different from any yet tried, and not guaranteed by any experience. Now to act upon the demand is, in the phrase of the stock brokers,197 to make a corner, that is to buy all that is offered at a price. Stock gamblers do this so as to sell out again at an advance to those who are forced to buy. If there are none who are forced to buy, then those who bought above the market have lost their capital. ”

“ Use predatory [below-cost] pricing (also known as dumping) to eliminate competitors. - This tactic is mostly used by manufacturers in developing or emerging economies and in Japan. It consists of "pricing the competition out of the markets". The predator sells his products at a price which is lower even than the costs of production. The result is that he swamps the market, driving out all other competitors. Once he is left alone - he raises his prices back to normal and, often, above normal. ”

“ We hear or read from time to time about the public being fleeced. There is a good deal of smoke. Isn't there some fire?
Answer:
If people do get "fleeced," the fault lies mainly with outside promoters or unscrupulous financiers, over whom the Stock Exchange has no effective control. Some people imagine themselves "fleeced," when the real trouble was their own get-rich-quick greed in buying highly speculative or unsound securities, or having gone into the market beyond their depth, or having exercised poor judgment as to the time of buying and selling. ”

“ There, as here, over-expansion in all directions had over-taxed the money market and glutted the Bourse, the banks, and the speculative capitalists with new issues of securities that were either unsalable, or salable only at a ruinous sacrifice, owing to the heavy shrinkage in prices, and the absence of demand at the low prices. ”

“ While they prey upon the producer in operating their roads, they prey upon the unsuspecting public in their stock operations; and, by way of variety, occasionally devour each other. Controlling, as they do, the means of transporting the products of the country to market, as well as the coin of the country and the stock market in Wall street, they are prepared to get up a "corner" on any marketable commodity—upon the currency of the country, and upon gold. In fact, they may have all the coin of the country under their control, save the amount held in the treasury of the government. ”

“ The outside public had for a long time been holding aloof from the stock market, owing both to the railway and industrial prosecutions, and hostile State legislation, and the great activity in trade, and in land, mining, and other speculation calling for a great deal of money. ”

“ Tens of thousands of people who for years had been imbibing the daily financial chronicles of the newspapers, but whose incomes were not sufficient to permit them to indulge in stock-market speculation in rails and industrials, found in cheap mining stocks the thing they were looking for—an opportunity for those with limited capital to give full play to their gambling, or speculative, instinct. ”

“ So long as such sales can be effected the mania continues; when it ceases to be possible to effect them, ruin begins.
So long as the savings remain in possession of their owners, these hazardous gamblings in speculative undertakings are almost the whole effect of an excess of accumulation over tested investment. Little effect is produced on the general trade of the country. The owners of the savings are too scattered and far from the market to change the majority of mercantile transactions. But when these savings come to be lodged in the hands of bankers, a much wider result is produced. ”

“ They feed the public with good news, bait them with bull tips, and then when a sufficient number have loaded up at the top, they break the market and incidentally break the fools who have been caught. ”

“ But the great capitalists who, either singly or by means of what are called rings or combines, purchase such vast quantities of the special product as to create a scarcity in the market, leading to a large rise of price, are ingenious robbers rather than gamblers, because, by clever dealings with such a monopoly, often aided by false rumours widely circulated in newspapers owned or bribed by them, they are able to make enormous profits at the expense of those who are obliged to purchase for actual business purposes or for daily use. ”

“ All concealment of stock, every attempt to avoid bringing the necessaries of life to market, to be sold at the prices fixed by the government, every evasion of an offered purchase, however disadvantageous, was now made punishable by death. ”