Market Manipulation: What the hell is going on?

Re: Market Manipulation. What the hell is going on ?

sinner said:

The title of this thread should be:

Dr Shortlove or: How I learned to stop worrying and love the manipulators

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haha gold!

Re: Market Manipulation. What the hell is going on ?

I'm puzzled with the reaction to this thread.

As far as my own position with LNC. I have been always interested in the company and a few years ago had a large shareholding. However I became disillusioned with unrealized promises and have sold most (but not all) of my holdings.

However I have followed its progress so I was aware of its share fluctuations.

While it is true that broadly speaking LNC has followed the ASX energy trend there have been some notable anomalies that didn't make sense. I opened this thread because the paper I found seemed to offer insights into what had happened to LNC and perhaps many other shares. It's not sour grapes - just overall concern with market integrity.

One of the suggestions is that we should embrace the manipulators. If you can't beat them join them ?

Maybe; but I think you would have to get up very early to stay on the winning side of these deals.

The big picture IMHO is that we all will lose money from these actions. our super funds will be hurt as will our personal share holdings.

Re: Market Manipulation. What the hell is going on ?

Gringotts Bank said:

More and more I'm sticking to the top 20 stocks, where the higher turnover and closer scrutiny is likely to ensure manipulation doesn't happen. Outside the top 20, I reckon anything goes. Wherever there's large amounts of money, there will be people cheating.

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Doesn't your last sentence imply that "cheating" is worse at the top of end of the ASX market than at the bottom where there is far less money? Shouldn't you therefore steer away from the ASX20 as being the most "manipulated", after all it deals with the largest amounts of money?

Fact of the matter is that there is an upper cap to "cheating" on either side of the auction, which is essentially market liquidity. Large instos cannot "cheat" in small stocks simply by virtue of the size required to turn a profit for the insto relative to the daily liquidity in the stock.

I'd also point out that "cheating" in small stocks is far more visible than "cheating" in large stocks, if one "cartel" was running a campaign, then other large instos and HFTs would be frontrunning any systematic strategy of manipulation in no time at all.

However absolutely none of this answers the question of why LNC insiders were not buying up shares with every penny available, while telling the ASX the shares were extremely undervalued.

Re: Market Manipulation. What the hell is going on ?

The big picture IMHO is that we all will lose money from these actions. our super funds will be hurt as will our personal share holdings.

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Please explain the logic in this statement.

Investors have a mandate for due diligence.

If you choose to forgo that due diligence by passive systematic investing (e.g. index fund) then any losses are entirely attributable to your lack of diligence! Certainly not attributable to manipulation in a stock which makes up 0.04% (less than half of one tenth of a percent) of the ASX300.

On the other hand, if you had completed your due diligence on LNC, invested in it because it seemed priced reasonably or for a trend, then wouldn't you purchase more if it became priced even more reasonably, or exit the position when the trend finished?

Maybe you could argue that LNCs ability to finance was reduced and cost of financing increased due to poor performance of the stock, fine, which still leaves me asking why LNC insiders were not buyers?

I have my own beef with HFT/algo trading which I've covered before on ASF, around microstructure of the market and also efficient capital allocation. Personally, I don't think "manipulation" in BBG, CDU or LNC really bothers me at all.

Sinner we may have some misunderstandings here.

When i was referring to the big picture losses around stock manipulation I wasn't just referring to LNC. I'm suggesting if this practice is more widespread then as a whole investors will lose money to sharp operators.

With regard to the investability of, say, LNC shares. As I mentioned I was very strong on them a few years ago and cooled off as company committments didn't happen. That was my analysis.

But accepting that, I was still very, very surprised at the capitulation of LNC shares to levels that just didn't seem reasonable given the current known facts. When that happens of course many investors do become nervous because they suspect there is some unknown bad news. In effect they jump and crystallise losses.

I go back to my initial point. The paper I quoted went into lengthy detail on the rise and fall of LNC shares and the connection with banking houses and brokers. I still believe this bears investigation.

Sprung....

Big Spoofer caught on camera....err not really a "camera"

Although i thought liquidity always dried up before data events...

CanOz said:

Although i thought liquidity always dried up before data events...

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Saw that this morning and the article soon lost credibility to me because of this...

skc said:

Saw that this morning and the article soon lost credibility to me because of this...

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Yeah, was just chatting with a well known bond trader over on the Jigsaw group and he was chuckling about it....

[12:10:45 PM] ... And they talk about liquidity drying up before a number as being "strange". Nothing strange about it. Happens during every number because no one wants to get hung. I wonder if they've ever watched an unemployment release

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Yep it was dumb but it will be picked up by someone and forever be true.