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Business for Democracy and ASBC Lead Effort to Overturn Citizens United v. FEC

The Business for Democracy Campaign, which the American Sustainable Business Council is spearheading in partnership with Free Speech for People is tackling the compelling issue of corporate contributions to political campaigns.

The U.S. Supreme Court’s Citizens United v. FEC decision on January 21, 2010 allows corporations to spend unlimited funds to support or oppose candidates for political office, overturning campaign finance laws in place for decades. The Business for Democracy campaign is an initiative of business leaders and their companies who believe this ruling is in direct conflict with American democratic principles and a serious threat to good government. The campaign supports the four members of the Supreme Court and the 80 percent of Americans who disagree with the decision (Washington Post poll, Feb. 17, 2010).

If you'd like your business to join this effort, you can sign the statement of support here or here.

How Specialists Control the Market, Richard W. Wendling, August 2008


Hidden behind the facade of pompous jargon and noble affectations, there is more sheer larceny per square foot on the floor of the New York Stock Exchange than any place else in the world. Clearly the lunatic economics of this larceny appeal to the criminal. The story is told that after he had been deported to Italy, Lucky Luciano granted an interview in which he described a visit to the floor of the stock exchange. When the operations of the floor specialists had been explained to him, he said, “ A terrible thing happened. I realized I’d joined the wrong mob.”

Specialists are brokers who work at the market’s center and who act as its leaders. Who is a specialist? A specialist is the “brokers broker”; the specialist or a member of his team is always on the Stock Exchange floor near the signboard of the stocks in which he specializes. Orders for buying or selling his specialty stocks on the New York Stock Exchange go through him. Regular brokers bring him their customer’s orders to buy or sell shares in his stocks. Often the order is to sell at a price that is not current.

Instead of waiting at the specialists post until the price matches his customers sell order, the broker generally gives the order to the specialist and goes about his business. The specialist’s job is then to sell those customers shares when the price reaches his price. For this service he takes a small fraction of the brokers commission. The specialist is the man who according to stock exchange theory, is suppose to determine the price of his specialty stock within the perimeters of existing supply and demand.

If there are orders to by at $50 and sell at $51, he is suppose to set that market price somewhere in between. The specialist’s function is to maintain fairand orderly markets in the stocks, which he handles, in so far as it is reasonably practical for him to do so. He does this by buying or selling for his own account when there is a temporary disparity between supply and demand and when he has no competing public orders. In this way he contributes to price continuity and to the liquidity of the market and enables investors orders to be executed at more favorable prices.

The New York Stock Exchange, as one might expect, vehemently defends the specialist system. It fails to mention that the conflicts of interest operating in the exchanges have proven incapable of resolution under existing codes and practices. In theory, the exchanges are governed by a highly moral code of financial conduct; in fact, they pit the specialist’s financial interests against those of his customers.

The New York Stock Exchange and the regulatory bodies of the Federal Government have failed to face the basic fault in the specialist’s game, namely, that there is a conflict of interest built into the function. He is meant to be the representative in the key position on the Stock Exchange, of the public, but at the same time he gains his income by trading against the public.

The specialists who stated a book containing many buy orders indicates that the price will decline was pointing out that demand may tend to send the price of stocks down not up. A stocks price should not vary during the day, and should not vary from day to day and should move only occasionally and very gradually and only when the supply and demand caused by three things, earnings, dividends, and the future prospects of the company.

Nothing else matters to the stocks. price. Par value means nothing. Book value means nothing unless the company is going to liquidate. Past performance means very little except as a guide because there certainly is no guarantee that next year will be like last year. Most investors probably don’t even know what specialists are and certainly none of them ever know who the specialist is that handles the stocks that they deal in. This must breed indifference to the public among the specialists. If not, they would not be human.
Specialists Accounts
Specialists use two basic types of segregated accounts. One, called the segregated investment account, and sometimes called the long-term investment account, is used by the specialist in a number of ways, but was essentially established for tax purposes. In another segregated account called an omnibus account all orders for buying and selling stock are placed in the name of a bank or brokerage house. Specialist’s dealings may be motivated by considerations of tax planning rather than by needs of the market. The primary motive behind the creation of these accounts is to turn profits, which would otherwise be taxed as ordinary income into long-term capital gains. The specialist is permitted to trade for his own account only when such trades affirmatively contribute to the maintenance of a fair and orderly market.

Because of this the specialist with a long-term position now has a stake in seeing that the security rises in price because he has now become an investor as well as a dealer. A further problem arises when the specialist who maintains such long-term accounts is required to sell stock to maintain a fair and orderly market and he has no stock in his specialist trading account. If the 12-month period of tax statue is almost over, the specialist may well be tempted to keep his stock in the long-term account and neglect the needs of the market. Specialists frequently establish these segregated accounts by taking advantage of their exemption from Federal margin regulations, a purpose contrary to the purpose of the exemption. Exercising his power to control prices, the specialist will keep the price of his stock up until he has sold his and his friends investment portfolios. At a time and price of his own choosing, and with the approval of the Exchange, the SEC, and the Fed, the specialist can press the markets panic button. It is in the chaos of selling that ensues that he acquires his stock. His purchases have two distinctive features: they are made without risk, and their profitability is guaranteed. It is like shooting fish in a barrel.
Stock Movement And Price Action
No one had told you that public demand could send a stock’s price down, that, in fact, demand is often the signal that sends the specialist to the barricades armed with his short sale. In the hands of the specialist, the short sale is a device that begins by ignoring and ends by violating the laws of supply and demand. Three actions are involved. First, the trader must arrange to borrow stock. Second, he must sell it. Third, he must go into the market, though it need not be immediately, and complete the transaction by buying the same stock in order to replace the borrowed shares. After the first two steps, he has no alternative; ultimately, whether the price goes down or up he must buy that amount of stock. This is called covering. The difference between the price when he covers and the price he received for his short sale is the short seller’s profit or loss. Those who aren’t specialists are more likely to end a short sale with a loss instead of a profit. The main difference between a specialist and a non-member short selling is timing: the specialist knows when to sell short; the public doesn’t. The converse is also true: the specialist knows when to cover his short sales; the public doesn’t.

There are three reasons for this:

(1) The prediction value of the book,

(2) The specialist’s immediate access to the market, and

(3) The specialists control over prices. The fact that the specialist is the one who sets his stocks prices is obviously beneficial to the specialist engaged in the short selling.
Another basic difference between the specialist and the public short selling is the specialist’s ready access to vast supplies of stock, enough to meet almost any demand, the result of his contacts with bankers and brokers. Brokers control a great deal of there customers stock, which they hold in street name, and according to the terms of their customers margin agreements can lend this stock out. In more than 99 out of 100 cases a specialist can supply all the stock needed to meet demand.

Non-members who sell short frequently do it at the market’s bottom and just before the market is about to rise. The public is tricked into covering their short sales at the top of an advance or rally, just as prices are about to decline. The specialist always knows when a short sale has been made: the customers order slip when handed to the specialist is marked “short sale”.

Once a nonmember has committed himself by selling short, the specialist can raise the price of his specialty stock one or more points on every 100 shares, if he chooses. Those who sold short watch the price climbing and are easily frightened into covering at a loss. No nonmember who sells short can’t have the vaguest idea when it is best to cover in a rising market. A specialist can raise his stocks price 7 points or more in one transaction, before dropping it.

For this the specialist must obtain the approval of a floor governor who himself is another specialist. Since the turn of the century major declines in the stock market have prompted public debates and arguments over the specialist’s short selling practices. Congressional Committees have responded to the uproar by conducting investigations for the benefit of the press. One of the reasons specialists still enjoy high esteem is that despite all the noise made by countless Congressional Committees that should have made specialists short selling practices known to the public, these practices and there consequences have remained unknown.

The specialists way of thinking and his customary ways of reacting to public demand are determined to some extent by the disciple imposed on him by the existence of short selling as a practice. An examination of the use made by the specialist of the short selling instrument, of the opportunities for financial gain and price control it affords him, and of the imposing myths employed by the regulatory bodies, by Congress and the Exchanges to rationalize short selling, will show not only that the myths of the specialist system are the servants of it’s short selling techniques but that these techniques are the servants of the myths. Short selling does indeed brake advances and short covering does cushion declines when they are done at the right times.

Done at the wrong times, they do not have this effect on the market, but in either right or wrong times, for the market, short sales are usually the source of profit for the specialist. If specialists didn’t take prices down so they could cover their short sales at a profit, they wouldn’t make any money on short selling.

Out of necessity, specialist short selling can take place only when there is public demand. There must be a public for specialists to sell to. Conversely, specialists can only cover when, for one reason or another, the public is selling. In plainer words, public demand (which we are told sends prices up) makes it possible for specialists and other exchange members to sell whatever stock they hold in inventory and borrow more and sell it short, then employ controls to force prices down. Thus, public demand, coupled with specialist short selling, sends prices down instead of up. The easiest way for management to profit from price fluctuations is by the exploitation of stockholders. By not revealing how price fluctuations are brought about, management is sparing the investors’ feelings at the expense of their purses, for the fact is that, in order to profit from such fluctuations, management must surrender its company control to the specialist and his system. And of this fact and its alarming implications, management finds it best to keep the public ignorant.
The Federal Reserve And Specialists
Most people have been conditioned to think of the Fed as a nonprofit governmental agency operating on behalf of the nations majority. Nothing could be further from the truth. The wishes of the financial establishment provide an implicit bias in the decisions of the Federal Reserve, because the policy makers in the Fed are members of the establishment. The Federal Reserve System has unprecedented control over the currency and credit of the nation.

In 1949 the New York Stock Exchange completed its control over the nations credit. With a mastering grip on credit, specialists and other members of the exchange could now acquire huge investment portfolios and the secret accumulations of stock for special numbered accounts in Swiss and other banks.

The NYSE asserted that the Federal Reserve Board should exempt specialists from its margin requirements. The Special Study group of the SEC had this to say, in 1963: it seems clear that the segregation of specialty securities into long term investment accounts is subject to strong possibilities of abuse without any corresponding public benefit or reason of effective regulation, and in addition represents an unfair use of the specialists exemption from margin requirements. On both grounds, the practice should be prohibited.

The Special Study Report also pointed out that although specialists are allowed to participate as dealers only when necessary to maintain a fair and orderly market, this practice proves that specialists dealings may be motivated by considerations of tax planning rather than by the needs of the market.

The primary motive behind the creation of these accounts is to turn profits, which would otherwise be taxed as ordinary income into long-term capital gains. However, purchases made on the Exchange for the purpose of segregation into long-term investment accounts raise problems, which go to the heart of the specialist system.

The specialist is permitted to trade for his own account only when such trades affirmatively contribute to the maintenance of a “fair and orderly market”. Where the specialist goes into the market with the intention of segregating the securities purchased and not with the purpose of creating a fair and orderly market, the trading is clearly contrary to the regulatory and statutory standards.

Beyond this, the specialist with a long-term position now has a stake in seeing that the security rises in price. The Federal Reserve loans to specialists and this money is exempt from margin regulation. Credit extended to the specialist supplements his own capital and makes it possible for him to take offsetting positions designed to moderate price fluctuations arising from the speculative activity of others.

By employing the Fed’s power on behalf of higher interest rates and taxes, specialists are able to curtail the power, profits, and production of the public, and the beneficiaries of this policy are only the Stock Exchange members. Not once does the Federal Reserve acknowledge the fact that with these exemptions they have enabled specialists and other members to employ billions of dollars of credit to finance their own investment portfolios and omnibus accounts. The economic prosperity of mankind depends on the proper use of credit, its availability, and its cost. More than oil or electricity, credit provides motive power to the world’s economic engine. Yet in the United States, credit has become the captive of special interests.
Specialists Big Block Trading
In the course of big block under writing’s, underwriters are allowed by law to stabilize, peg, or fix prices until the specialist or the underwriting firm has distributed their stock. This also means, in effect, that investors are obliged to pay higher prices for stock than would have been necessary had the big block customer been forced to use the facilities of the auction market in the same manner as other investors. The exchanges big block merchandising techniques are set forth in a brochure printed by the NYSE.

The brochure describes the bargaining power that may be obtained by allowing specialists and other members of the system to retail these big blocks. Were big block customers not permitted to dispose of their big blocks in privileged ways, they would be less anxious to swing in and out of the market. Consequently, they would be obliged to conduct themselves more like investors, instead of boardroom traders. The implications for constructive reform of the auction market are obvious. None of these specialist techniques and privileges would be necessary if the big blocks to be sold were of great and urgent interest to investors.

In that case investors themselves would create enough demand to maintain or increase existing price levels without having to submit to the subterfuge of the exchanges special brokerage efforts. The fund manager and the Exchange have a common enemy, the investor, and for a fee, the fund manager can have one free shot at you via the big block offering. On the other hand, the block transaction would not affect the price structure of the auction market adversely.

This is true in the sense that prices do not drop immediately. The specialist sees to it that the price remains at peak levels until he has distributed his stock from inventory. Then, having exhausted demand (and perhaps having sold out his own inventory at slightly higher prices and going short), he lets the stock drop in price.

Whether you are being persuaded to buy a block offering at retail price levels or to sell your stock at wholesale price levels, your main link with the Exchange and its specialist is, of necessity, your broker. By accident or design, he is more the specialist’s ally than he is yours.

If he is to become a successful commission man, he must align himself with the Exchange. Since he is your link with the Exchange, it’s imperative you understand these “special brokerage efforts” and your brokers relation to them. New York Stock Exchange rules 107 (a) and (b) state that: a specialist may . . . purchase (or sell) off the floor of the Exchange, for an account in which he is directly or indirectly interested a block of stock in which he is registered without executing the purchasing orders on his book at prices at or above (or below) the per share prices paid by the specialist for such a block.

In other words, in an advancing market for his stock the specialist can completely bypass the orders of customers enters in his book in order to sell, at the same price, a block of stock for his investment account or for an omnibus account in which he is directly or indirectly interested. In which case, of course, his public customers orders remain unexecuted. All the rules insist upon is that these transactions are executed “off the floor” and no record of them be printed on the ticker tape; in this way, the non member investor can be kept ignorant of what has taken place.

How The Specialist Works The Market In Time Of Disaster On Friday, November 22, 1963 President Kennedy was assassinated. For a few hours, the nation was virtually paralyzed. But this paralysis did not affect the Exchanges. The moment the news of the assassination was confirmed; there were specialists who set about milking investors, to such an extent that the investors all across the nation began telephoning and telegraphing their Congressmen.

An investigation of the Stock Exchanges was demanded, and one was finally conducted, but behind closed doors. Specialists have been known to drop prices on news or rumor that might enable them to rationalize a swing in their stocks, but a rumor is one thing, a fact is another. Investors who had entered buy and sell orders a few minutes before the news of the assassination found that their sell orders were executed at the bottom, while their buy orders were not executed. At the opening on Tuesday morning almost all the stocks that had declined in price on Friday past were matched by an equal gain in prices at the opening.

The stocks themselves may have recovered their previous price levels, but the investors who had been frightened into selling on that Friday had not had their losses wiped out. The SEC’s sole sources of information for this investigation of specialists and floor traders were the reports filed by the specialists and the floor traders.

This is like supposing that the killer caught with the smoking gun in his hand is the man most likely to tell the police who fired it, or that the asylum is best run by the inmates. A profit and loss statement from the Internal Revenue Department for 1963 and 1964 would have been interesting evidence of specialist activity on the day’s in question.

The question was never raised why the body in charge of the regulation of the Exchanges did not halt trading immediately when word of the assassination hit the floor. It is well known, after all, that specialists use such occasions to their advantage. Great waves of panic selling are by and large a myth. After he has found and used the opportunity to unload his own friends investment accounts, a specialist then takes his stock down as fast as possible and then executes all other sell orders. Having to halt trading immediately would have prevented all this.
The SEC And The Specialist System
Private monopolies seldom last long unless they can get government assistance in preserving their monopolistic position. In the stock market, the SEC both provides that assistance and shelters the industry from antitrust action. Remove this assistance and, while private monopoly will not disappear, it will be greatly reduced in scope and importance. It is the social relationship existing between the SEC commissioners and the Exchange hierarchy that provides the Exchange with this assistance and shelter. If one is open minded enough to admit this, it is not difficult to see how the Exchange has employed this more or less social relationship as a technique of maintaining power.

Congress must decide if the Exchanges are to be run like a vast roulette wheel and if speculation on the exchanges best expresses the needs of investors. In that event, it would be accepted by everyone that economic roulette is a good thing for investors and the country, that it is part of our way of like. If Congress should decide that investor gambling is of value, then the function of the laws and regulations would be to see that the wheel is not rigged in favor of the house and that the whole operation of the Securities Exchanges is looked on as being no more than fun and games on a national scale.

On the other hand, it is possible that Congress might decide to accept the theory of a true auction market, in which securities are bought and sold for legitimate investment purposes by men willing to accept the obligations as well as the rights of ownership in our industrial economy. By this theory, the gambling approach to the securities markets would be seen not only as without purpose but as inimical to our way of like.

It would be recognized that the purpose of the rules and regulations governing the Exchanges is not to provide codes of ethical practices for gamblers but to provide laws to protect investors and the economy of 300 million people from the consequences of speculation. The truth is that there is no need for the specialist. He does not perform one useful function that could not be carry out by another broker.

As for the service he provides that allows brokers to leave limit orders on his books, the use he makes of his book proves that the service costs the investor far more than it is worth. The original proposal included in the first Stock Exchange control bill sought to limit the specialist’s functions. The most important part of this proposal was that he was allowed to act only as a broker and was forbidden to trade for his account; this of course, was eliminated from the act.

The other important part was that he was not allowed, under any circumstances, to disclose the contents of his book to any other person. This rule was adopted but is being evaded. Another provision was that the function of a specialist, at the order of the Commission, could be taken over by the Exchange. The Exchange saw to it that this was eliminated from the act.

Short selling by corporate insiders was forbidden in the Act. Short selling by specialists and others was left to the discretion of the Commission. Its decisions served only to make it possible for the specialist, when he had decided to distribute stock, to do it via the short sale or to so utilize investor demand that it could be turned against the investor.

According to the act, the rules central to margin were removed from the jurisdiction of the SEC and were handed over to the Federal Reserve Board. This, in the opinion of the Exchange’s intellectuals, was too important a matter to be left to the non banking fraternity, would could quite conceivably upset the whole apple cart one day by eliminating margin. Margin is one of the Exchanges major instruments for sabotage, second only to short selling and the almighty big block fee. The overly ambitious investor, too involved in his work-a-day world to do any hard thinking about the matter and offered no coherent objection to it’s premises, is only too happy to buy on margin.
The Specialist
Neither the New York Stock Exchange nor its specialist system is equal to the difficult task of performing its obligations within the framework of self-regulation. There is only one stick by which we need test the specialist system. That yardstick is whether its continued existence is good for the nation. Specialists provide one useful function (which they have proceeded to abuse): they make it possible for brokers to leave orders with them at prices above or below the existing market price of a stock, which of course, are subsequently executed when and if the stock touches these price levels. A computer could now more effectively perform this function. It is recognized in the original act that the specialist should only act as a broker and be prohibited from trading for his own account. The Exchange was, of course, powerful enough to eliminate this provision.
The Payment Of Commissions By Brokers
Everyone participating in the investment experience must be treated equally. Member should be accorded no privileges, in terms of commissions or otherwise, that are not available to the public. Big block trades should not be granted lower commissions, thereby making it more attractive to swing in and out of the market. The Exchange is aware that by paying lower commissions for big block accumulations and distributions it makes its big block customers more willing to pay the exchanges its special big block fees.

The Exchange is operating a facility that is in the nature of a public utility. It should be regulated as such. The Exchanges are as much a public necessity within the framework of our economic and political structure as are gas, water, and electricity.
Broker Trading
It must be stipulated by Congress that the function of the Stock Exchanges shall be to offer their services and facilities to the public. All members of the Exchanges therefore must be prohibited from trading or investing for themselves if they wish to act as brokers for others.
Day Trading
Whenever those in any way associated with members participate as investors in the market or are powerful enough to control the fluctuations in the price of stocks, they must not be allowed to day trade in the market in competition with the public. If members sell stock for this group, it must be at the stock’s low price for that day or at the following day’s low price, which ever is lower. They cannot be allowed to get out before the public. No announcement of any kind that might affect the price of an individual stock or the price of stocks as a whole can be used as a cause of entering or leaving the market before the public.

Specific Disclosure Of Member Holdings And Profits
There is an enormous margin of privilege accorded members not granted other corporation executives. We take it for granted that corporation executives must disclose the nature and extent of their stock holdings, they are also obliged to submit financial statements to government agencies. In this crucial area it is imperative that the responsibility and mission of those associated in any way with the Exchanges be clarified.
Directorships And Proxies
Congress must recognize the conflicts of interest inherent in brokers acting as directors. The Stock Exchange must be taken out of the corporations, and the corporations must be taken out of the Stock Exchange. Customers in street name must also prohibit members of the Stock Exchange from voting or otherwise controlling the proxies of stock left with them. Proxies should be sent to customers, using the same methods employed in sending dividends. The prerogative to vote must be reserved exclusively for the shareholder. No recommendation should be given or solicitation allowed by the brokerage firm.
Broker Credit
Brokers must not be allowed to use credit or to extend it to customers. Law does not allow bankers to lend money that will be used in violation of Section T (that is, for the purchase of stock). This is a law that should be, but is not, enforced. Obviously, brokers should not be granted the privilege by the Federal Reserve Board to do what banks are not allowed to do but the intent of this law is constantly evaded.
Member Credit Exemptions
The special credits exemptions granted members and specialists must be eliminated, along with the privilege to use investor capital and stock as part of their net capital. Margin loans to customers should also be prohibited.
Omnibus Accounts And Options
Further precautions must be taken concerning pooling operations by specialists and other members in order to accumulate stock for themselves, their friends, and their big block customers. A member must no longer be allowed to segregate stock for himself, his partners, associates, or others. Omnibus accounts must also be outlawed. Brokers must be prohibited from trading against options that are held either by the broker or by someone else.
Short Selling
Many of the markets evils stem from the members’ ability to borrow stock in order to sell short. The elimination of short selling can do away with one of the markets worst evils the manner in which big blocks are suddenly dumped into the market. Eliminate the short selling and you eliminate the specialists and other member’s ability to quietly and inconspicuously lay the groundwork for chaos by establishing omnibus or other accounts from which they then sell short. Eliminate short selling and you also eliminate one of the principal tools used by brokers to help them stabilize prices when they are intent on dumping big blocks into the auction market. As a major instrument of manipulation, it has no place in an investment-oriented environment.
Brokers Market Letters And Related Matters
The broker’s function should be limited to that of acting exclusively and solely as a broker. Brokerage firms should not be allowed to operate investment advisory services, since many brokers tend to stimulate speculation in order to stimulate commissions. Inevitably, they tend to become tipping services. Every effort must be employed in using the ticker tape and the broad tape to provide investors with the latest information concerning stocks that are being actively traded. Its curious how often even the most intelligent investor makes an investment decision based on fundamentals such as earnings ratios and the announcement of a merger a new product, or split. A stock is worth what the public is willing to pay for it.

On the strength of this, he commits himself to situations that may well bankrupt him. Unless the investor understands that it is the specialist who determines the price of stock, that a stock is only worth what its specialist is willing to pay for it, he doesn’t understand the difference between fact and fiction in the stock market. Specialists weave a web of relationships within their stocks price structure as they buy and sell. There is a pattern to the web that, seen through the medium of chart analysis, tells the investor what is going on in the stock. Major accumulations or distributions that are in progress can show up or even be anticipated. Why do most investors loose money in the stock market? The answer points to the specialist system and a regulatory bureaucracy that knows what it ought to do but doesn’t want to do it. We must now approach the question, “what must investors do to survive in the market?”
What is required of the investor is a personal effort beyond the ordinary, beyond what others are doing to achieve their investment goals. Most investors are unsuccessful because they refuse to do anything unpleasant. They set themselves tasks and then attempt to solve them in the easiest possible way. Afraid to do anything on their own, they follow the crowd.

But if investment is to be coherent and confident there must be an understanding of what properly constitutes a framework of principles that can motivate and safely guide the investor through the markets crises, so that, in the words of Confucius, “one can follow what the heart desires without transgressing what is right”. To a considerable extent, the function of the following principles and indeed of all security analysis is to assist the investor in recognizing undervalued stocks and to provide the intellectual instruments that will tell him when these stocks should be sold. The specialist’s insights are subtle and, what is even more important, they are outside the scope of the ordinary chartists awareness and therefore engage the attention of relatively few people.
Rules To Help Beat The Specialist System
1) Buy only the common stock of companies that are second or third in their respective fields. There further growth will provide specialists with a built in alibi for the bull raids they will conduct in the shares of these companies. Most of these bull raids will occur before the companies potential is publicized in terms of earnings or sales announcements. For this reason they are important candidates for the specialists segregated tax accounts. Look for signs of big block accumulations, therefore, in such stocks. There are several ways to pinpoint the best time to purchase these shares.

A) Look for them among companies that have had a spate of bad earnings or earnings that have been employed by specialists to rationalize a major drop in the stocks price. Concentrate on these bargains as they go through a period of unpopularity and indifference. They are patently worth considerably more than they are selling for.

(B) A declining Dow Jones has a special charm for specialists. It allows them to take down prices of stocks. In the course of an overall market decline, therefore, look for the shares of good secondary companies that have also been taken down, and as specialists acquire them for their segregated accounts, acquire them for yourself.

2) Buy low priced stocks. Its percentages that you are after and you’ll get them in these stocks in a bull market.

3) Unless you are highly skilled in the use of the analyst’s evaluative tools, invest only in stocks listed on the New York Stock Exchange. The absence of significant institutional participation on other Exchanges makes it possible for specialists to conduct bull raids that can peak out in an hour’s time.

4) Hold your broker responsible for telling you when big block secondary offerings are about to take place in your stocks and then, as soon as possible, sell. You are better off in stocks for which the public still has some appetite. Once demand for a stock peters out, its ready to go down. For this reason secondary issues and stock splits tend to occur most frequently at or near a stocks high.

5) Restrict purchases to stocks that have declined at least 35 to 50 per cent from their highs. In other words don’t wait to buy until stocks are making new highs and attracting public attention. As a general rule, these highs tend to make their appearance after the half way mark in a bull market, just when you should begin thinking of initiating your sales. On the other hand, buying a good secondary stock that has declined 50 percent or more from its highs can cover a multitude of blunders.

6) A good rule is to set an objective of 50 percent on your investment. After that point has been reached you may have very little more to gain and much to lose. Too, much of the value you insisted on initially has evaporated. Find another situation that meets your initial requirements for purchase.

7) Own your stock. Worry is the extra interest you pay when you buy stock on margin.

8) Do not sell short.

9) Do not allow your stock to be borrowed.

10) Credit balances should be immediately transferred to your bank.

11) Do not leave your stock with your broker in street name. It is in his power to vote this stock as the owner of record that gives the NYSE its power over the nations political industrial military complex.

12) Invest only in growth oriented rather than income stocks. If income is your objective, you belong in a bank. In a bank you can receive higher yields with no risk.

13) Four to five stocks are enough for a portfolio. If you know what you are doing you need no more. If you don’t you shouldn’t be in the stock market.

14) Heed the appearance of big blocks on the ticker tape after an important run up in prices. The specialists trading account can sell stock short for a week, and subsequently his trading account can then purchase one of his segregated accounts.

If so they signal an imminent decline in that stock. It is not unusual for the specialist to have two or more such segregated accounts maturing at different periods, this is one of the reasons behind double or triple tops in a stock. Often such tops will reflect double or triple bottoms. In this connection, there is nothing so well adapted to the specialist’s purposes as to have the financial press publish the statement, “Brokers say it appears the market will test the bottom.” The inevitable drop then takes place and specialists acquire their second batch of stocks for their segregated accounts, with the approval of the entire investment community.

15) Look for bull raids in May. Specialists often want to unload stock during this month that they acquired from investors who had to sell at April lows for tax purposes.
16) Do not enter stop or limit orders on the specialist book.

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