Stock prices are influenced largely by manipulation. Years ago when the

volume of trading on the New York Stock Exchange was small compared with

what it is today, it was possible to influence the entire market by

manipulation, but it would be very difficult to do that today. It is

only certain stocks that are manipulated; but if conditions are

favorable, many other stocks may be influenced by them.

re different kinds of manipulation. One is for the insiders of a

company to give out unfavorable news about their company if they want

the price of the stock to go down, so that they can buy it in; or to

give out very favorable news if they want the price to go up, so that

they can sell out. This method is not practiced now to the extent that

it was years ago. Public opinion is strongly opposed to it, and we

believe business men are acquiring a higher standard of business ethics.

Methods of this kind are legal but they are morally reprehensible.

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.

There are four periods to the operation of such pools. First is the

period of accumulation. A number of large holders of stock in a certain

company will pool their stock, all agreeing not to sell except from the

pool, in which all benefit proportionately. Then they give out bad news

about the company. That is very easy to do, because financial writers

usually accept the news that is given to them without much

investigation, especially writers on daily papers, because they have not

the time to investigate. Their copy must be ready in a few hours after

they get the information. See Chapter XXV. on "Market Information" for

fuller explanation of the reason why financial news usually is

misleading. The manipulators of stock prices can have financial news

"made to order."

When the general public reads this news and sees the stock going down,

many of them get discouraged and sell. It is just the time they should

not sell, but it is a well known fact that the majority of people do in

the stock market just what they should not do. The more they sell the

more the price goes down, and the pool operators accumulate the stock.

Having secured all the stock they want, they give out good news and

continue to buy the stock until it starts to go up. The public reads

this favorable news, and seeing the stock go up, will go into the market

and buy, which puts it up higher. All the time financial writers are

supplying good news about the stock and the public buys it. After they

have sold all of it, the public may still be anxious for more, and the

pool operators may go short of the stock. Then they will begin giving

out bad news, so that they can buy in stock at a lower price to cover

their short interests.

After that they have very little interest in the market. If it is

declining too fast, they may support it occasionally by buying some

stock and giving out some favorable news. That will make the market

rally and they will sell out the newly acquired stock near the top of

the rally.

Manipulations of this kind appear to be going on nearly all the time,

and there does not seem to be any limit to the number of suckers who

fall for them. But then, one can't blame the public when you realize how

thoroughly unreliable is most of the market information given to them.

Still another kind of manipulation is "one-man" manipulation, where one

man controls companies, which are known as "one-man" companies. Usually

the directors of these companies are friends or employees of his, and in

many instances he has their resignations in his possession, so that they

must do whatever he wants them to do. Owing to the strict rules of the

New York Stock Exchange, it is rather difficult for such manipulations

to be carried on there. But there have been many of them on the New York

Curb. When the Curb was operating on the street and was not under very

much control, manipulations of this kind were very frequent.

As an example, suppose a man of this kind has a mining company. When he

wants the stock to go up, he sends the stockholders a great deal of

information about the work at the mine, and perhaps sends them a

telegram when a new vein of rich ore is found. The stockholders rush in

to buy more stock, and that puts the price up. Then he unloads stock on

them to the extent that they will buy it.

In a day or two, the stock may drop back to less than one half of what

it was selling at. If this "one-man" manipulator wants to buy any stock,

he will give out a little unfavorable news, and he can get stock at his

own price.

After that the news is good or bad according to whether the manipulator

wants to buy or sell, but as a rule he has an abundance of stock that he

wants to sell, and is continually giving out good news.

A few years ago there was a man operating in New York who promoted

several companies and manipulated them in a large way. He is out of

business now, but the same thing is still done in a smaller way.

It is our opinion that more money is lost by the public in manipulated

stocks than in promotion stocks, and we read a great deal about the

enormous losses in them. Promotions that are failures may be perfectly

legitimate and conducted in the utmost good faith, but manipulations are

nearly always for the purpose of swindling the public. However, the lure

of them is so great many people cannot withstand the temptations of them

even after they have been "trimmed" several times.