Specialists, The True Owners of the Stock Exchange

Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

Specialists, The True Owners Of The Stock Exchange:

There are more than 125 million investors inthe United States today. Most of them arelosers. Not only do they loose their money,they loose their self-confidence, their security,and the chance they had at one time to usetheir money to make a killing in the market.Yet the fact is that to get the money neededto invest in the market, most of theseinvestors had to be fairly successful in their chosen professions. Many of them haddemonstrated an ability to think clearly, tomake plans for the future, and to carry themout. Why then, using the same intelligence dothey go so very wrong when they try to makemoney in the stock market?The majority of investors do research thestocks that they are considering purchasing inorder to acquire the information that they thinkthey need to make an intelligent investmentdecision. Unfortunately, although theinformation they researched might be usefulin the business world, it will be of little or nouse in the stock market. The acquiredinformation lacks predictability. However smart the individual may be, if he or sheattaches predictive potentials to theinformation that has no predictability, he isusing the wrong set of data to forecast marketevents and is bound to foul himself up.It is understandable why an executive of abusiness might assume that the decisionmaking process which provided him withresults in his business has a specificrelationship to the conclusions upon which hecan base his predictions in the stock market.In each instance he uses what he thinks is theraw material from which he can make a validprediction about the future.The conditions with a business differ fromthose with the stock market in two ways: (

1

)The owner of a business can lay claim to partof the assets of that business; an investor inthe stock of a corporation listed on the StockExchange has no claim to any of the assets of that corporation. (

2

) The value of ownership inthe business is totally dependant on the salesand earnings of the business; the value of shares in the stock market has only atheoretical connection with the sales andearnings of the company’s stock. Becausegood earnings can reinforce an investment ina business, the assumption is often made thatearnings of a corporation listed on the

NYSE

tell the whole story about the conditions under which an investment can safely be made in acorporation’s stock. To think this way is a verylarge mistake, though it is a common one.Investors confuse words with conditions, notrealizing that only identical initial conditionscan lead to identical results. The critical pointhere is that words that are perfectlysatisfactory for use in one environment maycarry implications that are factually wrong inanother. For example, the usage of suchwords as “

good earnings

” with theassumption implied that they are an aspect of rising stock prices, tends to warp judgment.Consequently, it is impossible for mostinvestors to identify a contradiction between“

right

” thinking and “

their

” thinking when theybuy stock. Because they equate words withconditions, investors come to be ruled bywords.The average investor’s errors in judgment area product of a distorted understanding of situations caused by inadequate andmisleading verbal maps. His failures are aconsequence of trying to use the same verbalmaps that carried him successfully throughone territory to carry him through another,altogether different territory.For practical purposes, therefore, if theinvestor wishes to change his emotionalreactions to market situations so that he canprofit instead of lose in the market, he mustbe able to discard his old verbal maps andacquire the skills and intuitions that allow himto make new maps. In order for him to do this,

the investor must learn to break with tradition.This will be difficult, since individuals tend tobe ruled by tradition. What most investorshave done is collect an inventory of routinesand procedures that they associate withmaking money in the market.For instance, it is customary for the averageinvestor to accept information secondhandfrom his stockbroker, a newspaper’s financialpage, or textbooks. He “

assumes

” they areall well qualified to provide him with reliableinformation. Hence he fails to use his ownsenses to survey and research theenvironment in order to corroborate or discount the value of observations passed onto him by others. Customs such as this causethe investor to move through the market alonga well-trodden path. It can be said, in fact,that virtually all the investor’s actions conformto the formulas of custom. This condition is of course marvelous for

Stock Exchange

insiders, since the more investors can bedepended on to conform to the establishedroutines, the easier it is for insiders toanticipate and exploit them. It is hardlysurprising, therefore, that as investors chargeinto the market at a rally high, a StockExchange’s specialist is always there ready toambush them.One of the investors’ main problems is that hehas been trained to believe that he isinvesting in an “auction market”. For thewhole of the twentieth century there has beena fundamental conflict between the theory of an auction market and the whole scheme of the NYSE. Playing according to the rules of agame that has been rigged against them,investors have failed to recognize that theyare the victims of the Stock exchange insiderswho, unknown to them, completely control themarket. As the market is configured now,investors are involved in a system of financialrelationships that are not mediated by thelaws of supply and demand, but are insteadcontrolled by forces beyond the investors’control. Instead of being in an auction market,investors are confined within the framework of an internal operation manipulated by StockExchange insiders purely for their own profits.Its functions and limitations established it asan institution whose processes are actuallythe opposite to those of an auction market.Thus, when the public buys stock, their demand is turned into a self-defeatingfinancial weapon that beats down stockprices. Public buying has enabled Exchangeinsiders not only to divest themselves of their inventories of stock but also then to employpractices that enable them to drop stockprices profitably in order to re-accumulate aninventory of stock at lower prices. Conversely,when the public sells, they sell to insiderswho, firmly anchored in their own self interest,will once they have “

filled their accounts

”with an inventory of stock, raise stock pricesin order to set the process in motion that willallow them to divest themselves of their stockinventories profitably. Obviously, such aninstitutional process such as this in no wayremotely reflects the structure of an auctionmarket.Once specialists have established their stock’s trend, their control over stock prices issuch that “neither” the government, thecorporations whose stock they supervise, nor their customers have the economic muscle toalter the internally controlled direction of thetrend. Indeed, the specialist system is like agiant cartel whose members have dividedamong themselves the proprietary ownershipof the American corporate complex along withthe exclusive rights to determine the upwardand downward movements of these stocks inthe interests of their own merchandisingobjectives.Most investors will probably never makemoney in the market over the long run unlessthey learn to look at the market as a giantmerchandising operation in which specialistsmanipulate stock prices in order to sell atretail what they had purchased at wholesaleprice levels. If investors wish to preserve their savings and see them grow, they must scrap

of 00

Leave a Comment