DIRTY ROTTEN SECRETS
Hot Stocks Confidential Essay:
DIRTY ROTTEN SECRETS
By George Chelekis
The Dirty Rotten Secrets of the Small Cap Markets were previouslyunwritten rules, passedalong verbally among stock
promoters, company insiders, stock brokerage firm principals andmanywho are close to theouter fringes of this very exclusive
club. Amazingly, many US and Canadian securities regulators havealsobeen members of thisvery closed group. It is always
interesting to discover how the head of a stock exchange'ssurveillancedepartment, uponretirement from "public service," ends
up as a senior vice president at the brokerage house with which heoncesquabbled or, viceversa, the favorite son of a
brokerage firm later becomes the head of a securities commission.Thefinancial marketsare truly a revolving door, whereby
this year's company insider was once a stockbroker; whereby ahighlyaggressive SECattorney pursuing a scandalous media
personality "suddenly" retires and becomes a senior executive attheSmithBarney brokerage firm. One thing is for certain, in
the apparently uncertain world of "the business," YOU are on theoutside lookingin.
The stock market is rigged against you and in ways you may neverdiscover. The rules,laws, secrets and axioms I've listed in
this essay should give you a much clearer understanding about theinnerworkings of thefinancial marketplace. No one has
previously codified the "omerta," or code of silence which isrampantthroughoutthe financial markets. One would become a
pariah, an undesirable or an outcast, by writing these down andbroadlydisseminatingthem. You are NOT supposed to know
these unwritten rules and God help the individual who passes themontoyou.
1. LAW OF THE PEZ. This is dedicated to Murray Pezim, once themostpowerful stockpromoter in all of Canada.
According to legend, Mr. Pezim, upon hearing that someone had madeakilling on his stockplay, immediately remarked,
"Shareholder profits are short-term loans." Ultimately, if youcontinueyoursmall-cap speculations, you will lose. Either the
markets will turn or you will drop your guard, but eventually, youwilllose. One shouldunderstand that the small cap stock
markets run pretty much like a casino.... the longer you stay at
the tables, the greater your chances of failure.
2. MOTTO OF THE STOCK PROMOTER. Sell when everyone is buying andbuywhen everyone else isselling. Actually,
more often it is, sell when everyone else is buying, completelyexitthe play, and go findsomething else for them to buy later. It
may even be: Start shorting your deal when you've sold out yourentireposition so you canscore even more profit on the way
down. There are corollaries to this motto, such as "never getmarriedto adeal," or "never believe in your own deal," or "have a
new deal ready to rock & roll as soon as the current oneflops."
3. LAW OF THE UPTICKS. Stocks that are running higher are said tobeupticking. Despiteevery effort I have made to
emphasize that the best time to buy a stock is when it is low andboasts a sorry-lookingflatline stock chart, speculators
inevitably chase stocks to new highs. Stock promoters and insidersbuy,or obtain aposition, at the low and sell during the
promotion or "discovery." Sadly, there will always be some type ofpromotionthat will create upticks and speculators will
chase that stock to a new level. Greed generates upticks. Whatstockpromoters know thatyou don't is this law: A herd of
speculators will only buy on the UPTICK.
4. AXIOM OF GREED. In an earlier essay, I isolated that greedoriginated from a"perceived" lack of speculative
opportunities. This false perception causes a speculator to getgreedyand chase a stockto a new level. If one has a hundred
speculative opportunities on their plate, one is less eager tochaseany specific stock.The lesser the number of opportunities
one reviews, the greedier one becomes to chase a heavily promotedstock. A stock promoterwill, thus, make "his stock"
appear to look like the only game in town worth playing. Greedessentially emanates fromdeprivation.
5. RULE OF CONFUSION. The only time one rushes into a quickdecision iswhen they areconfused or disoriented or
misled. The stock promoter's greatest weapon is CONFUSION: Catch aspeculator off guardand sucker him into a stock.
The more disoriented or confused the speculator, the greater hischances of being snared.Stock promotions include an
overwhelming amount of data, reports, corporate reviews and soforththat are packaged insuch a way as to confuse the
speculator. If, at any time, you are overwhelmed without-of-controlemotions or datawhich you don't understand, it is better
to stay out of the play.
6. SECRET OF EXCITEMENT. You've heard about the "forbidden fruit"or"unknown pleasures." As long as something
remains a mystery, it can create an "excitement." Excitement is asensationwhich one commonly associates with pleasure.
Therefore, when an exciting proposition is offered, you mayreadilyaccept it in order toexperience THAT sensation. When
someone heaps excitement after excitement, upon you, in either thewritten or spoken wordand/or with graphics (visuals,
photographs, charts, drawings, etc.) and especially in a loud oremphatic manner, youbecome disoriented and confused. One
overcomes this "sensation of the unknown or forbidden" throughexperience, oftenwith a rude and unpleasant awakening.
Stock promoters abuse your inexperience, and naiveté, to sell youstock. ALL miningspeculations are exciting until the assays
come back or a mine goes into development. Then reality sets in.
7. LAW OF WAITING. The longer you wait, the greater your chancesforfailure. This appliesto both holding a stock which
is declining and to a stock which is running. The odds are greaterthan90% against you...that you will fail in a speculation, if
you wait for it to recover or if you chase a stock which hasalreadybegun its run.Generally, a stock moves up in less than two
weeks, often in two to five days. The waiting period, for a stocktoallegedly recover, isthe slow, dragged out retreat you later
observe in the share price. As believers stop believing, the shareprice declines, oftennever recovering. Of course, if one wants
to wait forever, then eventually the stock may recover. The longeronewaits, during arunup, the smaller one's potential profits
and the greater one's exposure to losses. (One important caveat:Occasionally, there are afew good deals--about 20 or 30
annually--when one SHOULD wait for the company to mature. Almostalways, they come out ofleft field and, rarely, does
anyone know in advance which company will become tomorrow'ssuccessstory.)
8. AXIOM OF BELIEVING. The higher your expectations in a stock,thegreater your chancesof losing money in that
speculation. All of the promotion is geared to make you a"believer."Mostspeculators are betting on a tip or a rumor. They are
taking someone else's "word" for the outcome. Absolutely no oneshouldinvest orspeculate in a stock without understanding
the risks as well as the reward. Stock promoters create believersbyproviding ONLY thereward potential, without also
including the risk factors. Believers eventually discover therisks,long after the stockhas begun its decline.
9. LAW OF LOSERS. Oddly, those most attracted to speculativemarketsare failures in otheraspects of their lives. They
may be wealthy, but consider themselves, in some way, as having"failed."Medical doctors are prime targets of stock
promoters, as they are not only affluent may have "settled forless" intheirlives or feel they "are owed more" for the work they
do. Whoever has failed, in some key aspect of their life, oftentriesto make up for it bygambling....often speculating in these
markets. The loser is always trying to compensate for a failure inanother part of hislife and continues to heavily lose as a
speculator. (Note: I stay in touch with certain losers and usethem asa yardstick for mytrading -- when they buy, I sell; when
they sell, I buy. The loser has a knack for exiting his position,a dayor a week before amajor runup; or he/she simply always
buys at the top of the runup. The downside to communicating withlosersis that they areso darned indecisive and fretters; their
worrying can and does rub off and creates a confusion foroneself.)
10. LAW OF THE SUCKER. PT Barnum was right: A sucker is born everyminute. For everyspeculator that is wiped out, a
fresh one is champing at the bit to start betting. Stock promoterspropup their plays byfinding new blood to drain. The greener
the speculator, the redder the carpet laid out for him. If therewereno new suckerscoming into the game, it would all be over.
11. SECRET OF THE AREA PLAY. Virtually all area plays fail. Rarelyisthere a long-termbeneficiary to that area play,
other than the initial company which made the discovery. Thesecret ofthe area playdepends upon #1 (Law of the Pez). Those
who profited from the share price runup of the company making thediscovery are thenoffered a "second chance" or a third or
a fourth with the rush of new companies into that area. Primarily,these companies aretrying to finance other explorations
elsewhere, but the fact that they staked some ground or boughtsomecheap claims doesn'tstop them from parlaying that into
an artificially inflated market capitalization. Inevitably, 99% ofthese companies fail todeliver, which is soon reflected in their
vaporized share prices. Stock promoters, knowing well theirchances ofsuccess were alwaysvery slim at best, long ago
dumped their shares. The last one into the area play tends to havetheworst chances ofsuccess.
12. THE GURU AXIOM. The least profitable time to follow any guru(stockpromoter,newsletter writer, company insider) is
immediately following his last successful play. The cliché that"he isonly as goodas his last play" is a promotional device
effectively utilized to attract new money into a new play. If onelooksat some ofCanada's recent success stories in the mining
business, the BEST time to follow the guru is immediately afterhis orher failure. Thosewho "had it," failed miserably and later
bounced back seem to offer the highest probability of success.Often,there is a rush ofmoney into the guru's "new play," which
quickly exits when they discover that "this ain't the same one asthelast one."It never is. Of course, every guru is keen on
pointing out all of his previously successful plays and forgetsabouthis failures.Self-fulfilling prophesies require substance in
order to survive. Catch the "gurus" when they are down and out andheedtheiradvice at that point in their careers. You may
increase your chances of success. Hint: Sheer desperation drivesthemto repeat theirsuccess or to completely leave the
business.
13. CANADA'S BEST KEPT SECRET. Many Canadian speculators don't payfortheir stock. TheseCanadian speculators
bet on stocks, against the equity in their account. We've heardaboutT-3, etc. That isbull. The truth is often, more like T-12 or
T-20 (as in 12 or 20 days to settle instead of the required threedays). Brokerage firmshave been known to extend, to their
best clients, the time they can hold "unpaid stock" for weeks.What isalso notvery well known is that brokerage firms can, and
frequently do, short sell any stock which remains unpaid (they doso toprotectthemselves). Thus, during an exciting runup, one
observes (or hears about) massive shortselling of a stock -- thestockwasn't paid for, sothe brokerage firm shorts it. A
brokerage firm's credit manager can quite excitedly extend your"creditterms"so that you have "more time to pay for your
stock." Essentially, you end up betting against yourself, underthesecircumstances,because the brokerage firm is shorting your
purchase. Later, you end up selling at a loss and the brokeragefirmcovers at a profit.The house nearly always wins. Your
stockbroker gets his commission whether you lose or not.
14. THE CANADIAN LAW OF SHORT SELLING. While it is very expensiveanddeadly for theunsophisticated
speculator to short a Canadian stock, brokerage firms can easilyshortstocks. They shortagainst their "inventory." Generally,
any rush of excitement into a stock is done under a short,speculativetime frame(whereupon the speculator doesn't actually
pay for his stock). Brokerage firms short sell against the unpaidspeculation and drivethe stock price down, down, down. As
very large Canadian brokerage firms also accept many US stockorders,they short sellvirtually every order which arrives.
While the US investor pays for his/her stock, the Canadian firmcanshort sell against it,because rarely is delivery ever taken on
that stock. As long as the certificates remain in the brokeragefirm,it can be shorted.
15. AXIOM OF MOTION. What emotionally upsets any speculator is aLACKof motion. It is theabsence of motion which
prevents a speculator from patiently accumulating shares in aflatlinestock (the shareprice remains constant at, or near, the
floor of its stock chart). Speculators are eager to make theirmoneywork for them. Thus,if a stock doesn't move, they panic.
Gradual downward motion rarely creates a panic. Imagine yourselfin awell-lit room with adimmer light. Stock promoters
gradually turn down the lights until you finally discover you aresitting in the dark.Conversely, when they want to create the
excitement, they abruptly turn on the lights. A stock forevertradingat the same pricecreates an emotional upset, thus the
gradual "up and down" motion manufactured by stock promoters andinsiders andbrokers. "Get it to move" is their motto if
they want you to hold your position. UP offers hope and a recoveryofyour initialinvestment or (finally!) a profit after having
waited so long. DOWN drives fear up your spine and you remainfixatedin the stock, like adeer in a car's headlights.
16. SECRET OF PANIC. If you hold a position in a stock and arepanicking, you should notbe holding that stock position.
You probably don't know enough about the company or have mentallyspentthat money forsome other purpose than
speculating in that stock. You are also very low on the food chainofinformation. A stockpromoter's investor relations
department primarily exists to minimize, reduce or eliminate thepanicyou feel inobtaining and holding your stock position.
Panic is manufactured in approximately the same way excitement iscreated. The secret toovercoming panic is this: When it all
looks like the end of the world, that may be the best time to buy;whenit all looks likethe world is made of cream cheese, run
for the exit doors. Please realize that, generally, if someone hascreated a panic withinyou, it is for some ulterior motive -- they
are aggressively trying to get you to do the opposite of what youshould be doing.
17. LAW OF STOCK OPTIONS. Insiders like to hold free stock, justlikeanyone. Stockoptions exist so that insiders and
promoters can cause runups, thus selling off their stock andsubsequently issuing newstock options. This law reads as follows:
The ONLY reason stocks are runup is because of incentive stockoptions.If stock optionsdidn't exist, we wouldn't see any
stock runups. Because most small cap companies are broke, they paypromoters with stockoptions. Thus, the promoter has a
vested interest to get a company's share price above a particularlevel.
18. AXIOM OF HISTORY. Leopards almost never change their spots.Thesame guy running ashoddy stock promotion, a
few years ago, is going to run a similar disaster again. Itbehoovesevery speculator todig deep and find out who are the
characters in this current play. Many times, the dishonest stockpromoter runs the playfrom a background cover using a front
man. You will find them, by looking for their associates. Crooksrun inthe same circles.Occasionally, you can be thrown off by
a new name. He has a history. Find out what it is beforespeculating.No matter the cost,it is a lot cheaper than the losses you
may incur in your speculation.
19. LAW OF PAPER. Share certificates are like corpses until astockpromoter gives themlife. All paper is intrinsically
worthless unless there is someone who wants to pay you, to takethestock off your hands.If there were no promoters in this
world, then you would never be able to exit your position.
20. RULE OF THE EQUIPMENT. The speculator who has the mostsophisticated quotationequipment, knows how to use
this equipment, understands the quotes and what they represent,effectively uses hisequipment, and also the fastest phone line
to the trader, gets in and out of his paper the fastest.
21. LAW OF THE INSIDER. The speculator who actually knows what theinsider is doing,whether it is accumulating or
dumping his position, will be the most successful speculator.Everyoneelse is guessingand will have a greater or lesser degree
of failure in his speculation.
22. THE SPOUSE FACTOR. This could also be a corollary to Murphy'sLawfor a deal. The wifewants a new house, a
new car, etc. And the promoter or insider sells, sells, sells toaffordthese new toys.Down goes the stock price.
23. AXIOM OF THE BID. A new wave of buying into any stock is amethodfor an insider,promoter or disgruntled
shareholder to exit the position. One should look at "the bid" asthekey whichunlocks the door and permits one to exit a stock
position. Conversely, one may wish to consider "the offer" as thetrapdoor whichcould send a speculator to the bowels of hell.
24. LAW OF THE HOLY ROLLER. Jesus threw the moneylenders out ofthetemple. Anyone runninghis play under the
guise of Jesus would anger the Almighty and bring ruin to hisshareholders. I guess theonly reason a promoter might turn to
religion is that no one except God will forgive him for what hehasdone to his fellowman.
25. THE LAW OF WASH TRADING. Insiders, stockbrokers andmarketmakers"fabricate"trading volume by trading
shares among each other, in order to deceive investors intothinkingthat the stock isliquid. In the hands of a madman, of which
there are many, wash trading becomes an artistic manufacturing ofmassive trading in thestock. A promoter or insider (market
manipulator) can set up three to twenty brokerage accounts andcleverlytrade the stock,up and down the charts. As soon as
"new blood" comes into the stock, suckered in by a quick runup,downcomes thestock as the market manipulator dumps and
shorts his own stock. In one recent case, the intricacy of onepromoter's trading got socomplex that he relied on computerized
buy/sell signals so he, himself, didn't lose his shirt.
26. AXIOM OF FREE STOCK. Everyone would love to get free stock.Cleverspeculators,insiders and stock promoters
are generally those that actually DO get free stock. Insiderssimplyblow out all of theirpaper into the strength of any liquidity
and then re-load with stock options and/or warrants, maintainingtheirstranglehold on thecompany while lining their pockets.
Stock promoters secretly demand under-the-table sharecertificates,channeled usuallythrough an "independent" third party into
a hidden account. Successful speculators monitor stock charts,buyinglow and selling most(or half or all) of their position, wait
for the stock to retreat, and then re-load. There's no free lunchinthis business. All ofthe above takes work. IF all
speculators/investors knew this, there would probably be lessmarketmanipulation, or atthe very least, market manipulators
would have to come up with a new bag of tricks.
27. LAW OF NAME-DROPPING. In an effort to strengthen bidding in astock, promoters andinsiders may claim a BIG
name is getting behind the company, i.e. a famous (wealthy)individualis buying the stock(lots of it), a big-time promoter is
getting behind the stock, a highly regarded analyst will recommendthestock, or awell-known newsletter writer will bring his
subscribers into the stock. It's all just "noise," generated bythepromoters sothey can prop up their share price and offload
their on paper. This law is a variation of the next law.
28. LAW OF THE TAKEOVER. If you hear there is going to be atakeover,someone isoffloading their position in that
company and anticipates doing so at a higher price. Takeovers aredonequietly andcarefully so that the conquering company
doesn't have to overpay for their shares.
29. AXIOM OF THE LEAK (RUMOR). Any rumor is manufactured by aninsideror stock promoterin order to dump
their position onto the gullible. Unless one is a prankster.
30. LAW OF THE MEDIA. The Media are the last to know aboutanything. Noone in their rightmind trusts or likes the
media. The media, in order to appease the regulators, only reportbadnews and routinelychallenge or distrust good news and
put a "bad news spin" on good news. Further, the media distrustanyonewho makesmore money than they do, especially the
guy who owns the newspaper.
31. SECRET OF INVESTMENT CONFERENCES. These occur at a hotel orconvention center whereinsiders and
promoters exhibit their wares and praise their company's future inorder to dump part orall of their stock position onto
investors, stockbrokers and money managers who don't know anybetter.
32. AXIOM OF MOTIVATION. When properly motivated, stock promoterscancreate"miracles", if only temporary in the
share price appreciation. Generally, the greater the payoff, themoreliquid the tradingvolume. Signs to look for include lucrative
investor relations contracts and/or plenty of stock promoters alltouting the stock totheir groups. Nothing replaces the best
motivation of all, for the insider, like private placement paperbecoming free trading.
33. SECRET TO QUICK MONEY. The quicker you try to make your money,thefaster you lose it.Quick money is usually
made dishonestly (drug dealing, racketeering, insider trading,etc.) orin a lottery.Nothing replaces burning the midnight oil, long
hours of toiling, effective data gathering and data analysis andbrightideas. Many tryusing short-cuts, which ultimately become
dead ends.
34. THE TRUTH ABOUT MOTHERS. Everything your mother ever told youaboutlife, applies tothe stock markets.
Everything parents told their daughters about boys also applies tostock promoters.
35. LAW OF ORPHANS. No one is willing to own up or takeresponsibilityfor a disastrouscrash in a stock or a failed stock
promotion. Whenever there is a major success story, everyone takescredit for thatcompany's success. The further you are out
of the loop, the harder it will be for you to determine who wasresponsible for acompany's success or failure.
36. FLAVOR-OF-THE-MONTH AXIOM. No individual ever survives as aFlavorof the Month. Onecan have an enviable
string of successes, but eventually the insiders, shortsellers orstockpromoters willdestroy him. Failing that, the media will ruin
him. Failing that, the regulators will handcuff and gag him, orevenjail him. No one hasever survived past all of those
roadblocks. Each roadblock wears the superstar down to the point,wherehe can no longerthink straight and wonders if "all of
this is worth doing anyway." Flavors-of-the month, like ice cream,eventually meltdown to a dribble.
37. THE SECRET OF THE NEWSLETTER WRITER. Any newsletter writerproviding ongoing reportageon Canadian
mining or small cap stocks has a vested interest, whetherdisclosed ornot. Someone ispaying the freight and rarely is it the
subscriber. (The writer either has a position or is being paid orhopesto become"famous" by covering a specific stock.)
Publishing a newsletter is a very expensive proposition, with ahighcasualty rate. Lookat which "popular" newsletters were
published during the late 1960s or the early 1980s and see if anyarestill beingpublished today.
38. AXIOM OF SECRETS. If there really is going to be a bigdiscovery ora big contract ora big deal, the stock promoter
or insider will never tell you first, if at all, until the news ismadepublic. He knowsit would be illegal to give you inside
information so he won't. Whatever he does tell you may have nobearingin reality.The moredesperate the promoter, the more
outrageous the promises; the more incredible the deal.
39. THE SECRET TO HOWE STREET. All any of these stock promoterswant tobuy with theprofits they make off you is
this: Respectability. Instead, they buy drugs and booze. Theyutterlylack anyself-respect, from the best to the worst. They are
criminals who have whistled past the graveyard, more times than acatwith nine lives,praying that they can avoid being caught.
At the very best, they hope to parlay their worthless sharecertificates, through asomewhat credible promotion, into bigger real
estate and cash. At their worst, they merely wish to cover theirannualbar tab. Theaverage person, whom they routinely fleece,
has far more self-respect than any of these promoters will everachieve. None of them willever become respectable, especially
not in their own minds. This absence of self-respect may helpexplainthe rampantalcoholism and drug abuse among stock
promoters in Vancouver.
40. THE LAW OF MONEY. History shows us that Money is attracted totheindividual who caneffectively and articulately
communicate. Stock promoters routinely can repeat a good story.Themost successfulspeculators are those whose
communications skills match or surpass the best promoters. Thebest CEOis the mosteffective communicator.
41. AXIOM OF TECHNICAL ANALYSIS . Technical analysis does notdeceivethe speculator. Astock promoter's worst
enemy is the stock chart. Correctly interpreted stock charts neverlie,although manyspeculators have no clue as to how to
read a stock chart. Analysis may also vary from chartist tochartist.
42. THE HYPE FACTOR . Hyperbolic statements can artificiallyinflate astock's price,temporarily. Long enough for a
shortselling syndicate or a group of professional traders andinsidersto reap hugerewards. Often, a combination of a
speculator's naiveté and his enthusiasm about a company can leadto"over thetop" statements. Eventually, he learns his lesson.
Stock promoters favor newsletter writers who are inexperienced inthebusiness, as theycan be told what to write and are
eager to be offered that opportunity.
43. THE LAW OF SEASONS. When it comes to mining plays, buy inDecemberand sell in May.Buy when the promoters
are out of town; sell when they are in full swing.
44. AXIOM OF DRILL RESULTS. Buy when the drill goes down; sellwhen theshaft comes up. Inother words, the heady
promotional statements and expectations are issued during thedrillcampaign and whileawaiting assays. That is when a
speculator most likely benefits from a stock's runup. Because mostdrill results aredisappointing, the smart speculator is
completely out of his position before the assays are announced.
45. THE LAW OF NEWS RELEASES. Buy on mystery, sell on history. Buyonrumor, sell on thenews. These are
well-worn clichés that rarely disappoint. Occasionally, acompany'sstock will runstrongly after a news release. In the small cap
stock sector, most news releases are a promotional device, used byinsiders, to generatefantastic trading volume so they can
exit a portion of their position.
46. THE SUCCESS FACTOR. Most mining success stories are completeaccidents. On the orderof a "Jed Clampett"
finding oil in the TV series, "The Beverly Hillbillies." With manyimportantdiscoveries, throughout the history of mining plays,
one or many insiders had virtually blown out of their entirepositionand/or were shortingtheir own stock, in anticipation the
company's drill results would be a disappointment. Part of thestock'srunup might alsohave included covering their shortselling
and obtaining a fresh, new position.
47. AXIOM OF NOISE . The more noise you hear during a stockpromotion,the harder thestock will fall when the
promotion is completed. Stock promoters are only interested intradingvolume, forshare-dumping purposes, which can only
be created with a series of loud bangs in the media world.Generally,by the time you hearabout the stock, the runup is over
and the distribution phase has already started, followed by a sloworabrupt decline inthe share price.
48. THE LAW OF LIARS. They repeat their lies and falsehoods againandagain and again.They don't just tell one white lie
and feel guilty. They lie in every aspect of their life. One canusethis against the liarby doing the exact opposite of what he tells
you to do. Liars are suckers for other liars.
49. AXIOM OF TRADING VOLUME. Trading volume is increased solely todistribute a largeposition from a single
shareholder, or a few shareholders, to the masses. All an insidereverwants is tradingvolume so he has enough liquidity into
which to dump his position. This is the only reason stockpromoters arehired.
50. THE ULTIMATE RULE. Paper is paper and cash is cash. The onlyreasonyou are holdingpaper instead of cash is you
honestly believe your paper will eventually be worth more than thecash. Amateurs buypaper. Professionals convert their paper
to cash. Cash is King. Paper is essentially worthless if there arenobuyers.
Conclusion...
This essay was not intended, but may serve, as a sociologicalstudy ofthe criminal mindsat work within the financial
marketplace. Speculators also have to agree to be criminals, to adegree, in that theyexpect something for nothing. The essence
of the criminal is to get something for nothing. While theft,larceny,insurance fraud andburglary are broadly condemned within
this society, it appears perfectly "all right" for the speculatortoswoop intoand out of a stock, for a quick profit. That is
pickpocketing, plain and simple, and should be branded as such.Thus,it is no greatsurprise, to me, that an increasing number
of the Internet "gurus" have told me they'd like to launch theirowndeal, i.e.to become an insider or stock promoter,
themselves. It is a quick slide into the loony bin for anyoneaggressively speculating inthese markets.
The entire problem of the small cap stock market is the illegaltransfer of wealth fromthe naive investor to the sophisticated
trader. Institutional fraud runs uncontrolled throughout thefabric ofthese markets.Bribing stockbrokers appears to be the "only
way to do business" in many circles. Bribing fund managers isnearlymandatory if amining company wants European financing.
What amazes me is that October's FBI sting of insiders and stockpromoters wasn't even thetip of the tip of the iceberg -- they
didn't even scratch the surface, nor did they nab the key figures.Forall the hoopla andthe celebration of the regulators over the
recent successes in "stopping fraud," they all know, too well,thathardly adent occurred. The actual depth of the amount of
stock fraud, outright deception, bribery and dishonesty in thefinancial markets is fargreater than any securities regulatory body
is willing to admit. They know about the fraud -- but then, theyhave"theirfuture" to look out for, as well. There's a job at
Merrill Lynch, Charles Schwab, Canaccord or Smith Barney waitingforthem. It's OK to"get the little guy," but they know
better than to tangle with the powers that be, which run thefinancialmarkets from NewYork to Tokyo, from London to
Vancouver, and everywhere in between.
Essentially, the securities regulators hold their esteemedpositions,and are backed bytheir respective state/provincial/federal
governments, for no other reason than to ensure that the smallinvestorCONTINUES to getscrewed every which way but
Sunday. For if all the small investors always made a profit intheirinvestments orspeculations, the poor professionals wouldn't
be able to steal as handsomely as they do now. This may alsoexplainwhy marketmakerscontinue to FREELY rape small
companies, while the regulators focus their attention on the stockpromoters and insiders.
It is a dirty business, one which is filled with rotten tricks.Theintricacies of thescams, which are run on the innocent investor, is
the subject for a future essay.
Copyright 1996 by George Chelekis. All rights reserved.
_________________
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