Is this where the 64M GDS shares came from Pt 5 The End Game
Pointing the finger is a pointless act. However, we do need to address the issues of what new rules are doing to our investments in this market.
Is the mood that somber in the commodities market, or are the new regulations adding too much fuel to a fire that should have been much smaller?
As I always say, I am not here to accuse or point fingers, but rather show you some facts and let you make the decision yourself.
This downturn has forced both investors and smaller institutions out of the market, leaving room only for the big boys to play.
The Canadian investment market is being changed to reflect large institutional firms that are only looking for yield products. Independent brokerage firms are drying up because funding for junior projects are drying up as investors have lost too much money to want to play again.
Much of the money remaining is now being filtered to bigger banks and bigger companies.
Juniors on the TSX Venture really don't stand a chance.
For the average junior, it costs on average around $200,000 just to maintain their listing and legal fees to keep up with regulators. That means a small junior who just raised a million dollars, will need to take 20 cents out of every dollar to comply with security regulations.
It's no wonder why analysts are predicting that at least 500 companies on the Venture will run out of money before the year is over. Many of these companies have less than $250,000 in the bank. Considering that it takes around $200,000 a year just to comply with regulations, there is a great chance that the analysts are right.
All of this is leading to the demise of the TSX Venture if things don't change. All over the country, there are town hall meetings to address the issues. But who's listening?
I believe the market needs strong regulation to prevent scumbags from operating and stealing investor money. But over regulation, and creating regulations that stops the market from moving forward, only loses money for investors and prevents companies from moving forward, innovating, and creating jobs.
Regulators need to be prosecuting those who are clearly ripping people off, and those who are clearly involved in manipulation. The biggest problem is that the biggest manipulators are likely to be the biggest banks with the biggest resources.
Manipulation on the Canadian Market
I have witnessed trades for many stocks where you can clearly see the manipulative efforts of small block sell orders coming through, that appear to be intentionally forcing share price down. Those with real-time Level II will be able to see this activity all day long. Much of this activity runs through the houses of Canada's biggest banks, and it almost always forces the price of stocks down to a point where liquidity and buy orders have completely dried up and there is no more stock floating around in the system to short.
With the removal of the uptick rule, firms are now shorting at will and destroying companies for small profits. Institutions have many advantages that we don't. They can short stock and have a fairly lengthy period before they have to replace that stock, should their shorts need to be covered. Even if their shorts need to be covered in a short time frame, they can extend that time frame by borrowing stock owned by their clients.
Too big too fail is sadly a very real scenario. As smaller institutions dry up, investors will transfer over to the bigger guys who will then control more money.
Considering that more than 50% of the world's financing for resource projects stems from Canada, with a third coming form the TSX and the Venture, the resource sector is not looking very bright.
But don't think its over. Not for one second.
Foreign Equity Opportunity
Companies are having extreme troubles funding through public vehicles because that money has dried up due to over manipulation and regulation (for now.) But that doesn't mean capital isn't available.
As a matter of fact, capital is abundant - especially in foreign countries.
Private equity is growing and foreign capital is looking for a place to call home. Foreign investors not only have an abundant wealth of capital, but they're looking to deploy it.
I know this because I work with a few very smart individuals to help fund good projects through strategic, private equity, sovereign wealth fund and state-owned enterprise buyers.
Please don't hesitate to send me information if you're a company that needs help.
Companies who are smart and have great assets should start looking elsewhere for money.