Timing & trends

The Greatest Episodes of Market Manipulation…Is $200 Silver Next?

From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors. 

And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934– it’s as American as apple pie. 

Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar. 

The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff. 

Jim Cramer, the host of CNBC’s “Mad Money,” said he regularly manipulated the market when he ran his hedge fund, calling it “a fun…and lucrative game.” 

Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers – are most likely to be the perpetrators. 

To give you an idea of how things work, here are three notorious examples of market manipulation.

Stock Market Manipulation Is 
as Old as the Hills

1) The Erie War: In 1867, American financier and railroad builder Jay Gould sat on the board of directors of the financially troubled Erie Railroad. 

In what is known as the ‘Erie War’ Gould fought to keep Cornelius Vanderbilt from acquiring Erie and consolidating the industry. 

To pull it off, Gould issued 100,000 shares of new Erie stock by illegally converting debentures. 

He then used the money to bribe New York legislators to make the conversion legal. Outfoxed, Vanderbilt settled, receiving $1 million as a sweetener. 

Afterwards, Gould vastly expanded Erie’s debt and launched it on an expansion campaign. Meanwhile, he sold its stock short, and made a killing before Erie went bankrupt in 1875. 

2) The Enron Scam: After merging two gas pipeline companies to form Enron Co. in 1985, Ken Lay helped establish the market for selling electricity. Later, he successfully lobbied the U.S. Congress to deregulate the sale of natural gas. 

Enron soon began trading these markets to drive up energy prices and significantly increase its revenue. Meanwhile, Lay and CEO Jeff Skilling used accounting loopholes and misappropriated investments to keep billions in debt off the books.

But perhaps their greatest feat was their ability to pressure Arthur Anderson & Co. staffers to cooperate in fooling the board of directors and audit committees.

Investors lost more than $70 billion when the Enron scandal ended in one of the biggest bankruptcies in history, driving its stock down from a high of $90 per share in mid-2000 to less than $1 by the end of November 2001. 

Andersen, one of the five largest accounting partnerships in the world, lost most of its customers and shut down. 

The scandal eventually led to the enactment of the Sarbanes-Oxley Act to expand the accuracy of financial reporting for public companies and punish those attempting to defraud shareholders.

3) The Internet Swindle: It used to take rooms full of stockbrokers feverishly working massive phone banks to manipulate a company’s shares. 

Now anyone can reach millions of potential traders instantly, all while remaining completely anonymous.

In 1999, two UCLA students drove the stock of a bankrupt printing company from 13 cents to more than $15 in twotrading days, dramatically demonstrating how the Internet had transformed the old game of stock market manipulation.

The students had spent two weeks acquiring 97% of the thinly traded stock of NEI Webworld Inc., The New York Times reported. After the market closed on Friday, they sent out hundreds of messages on Internet bulletin boards touting a takeover and the huge profits to come. 

On Monday, based on orders made by those who believed the fake postings over the weekend, the stock rocketed up 106,600% to $15.50a share–in a half- hour. 
The students sold their shares into the buying frenzy and eventually bagged over $350,000 in profits. NEI shares closed that day at 75 cents.

Is Silver Next?

The latest market manipulation could be ripped from the pages of a Hollywood thriller, according to Peter Krauth, a highly regarded expert in metals who runs the Global Resource Alert investment service. 
Only this story is not fiction… and it’s happening now, he says.

Krauth spent the last six months conducting an exhaustive investigation of a backroom deal to keep the price of silverartificially depressed. Now he’s ready to expose what’s been going on behind the scenes in the silver market and why the price is headed to $200 or more.

He reveals all the details – and how investors can profit – in a free report

You can access it HERE.


Where One of the Worlds Best Investors Would Put All His Money

Investor Jim Rogers, the chairman of Rogers Holdings who predicted a global commodities rally in 1999, said Myanmar is embracing reform as China did decades earlier and he’s optimistic about the resource-rich nation’s prospects.

If I could put all of my money into Myanmar, I would,’ Mr Rogers said at a conference in Singapore yesterday. ‘Myanmar is in the same place China was in early 1979, when Deng Xiaoping said we have to do something new. Myanmar is now opening up.’

Mr Rogers’ comments highlight increased investor interest in the economy that may be Asia’s ‘next economic frontier’, according to the International Monetary Fund (IMF).

The IMF is pushing for an overhaul of Myanmar’s finances as President Thein Sein releases dissidents and engages with opposition leader Aung San Suu Kyi in moves that have prompted the US and Europe to reassess sanctions against the former military dictatorship.

‘It’s right between China and India, 60 million people, massive natural resources, agriculture,’ Singapore-based Mr Rogers said at the gathering organised by New York-based INTL FCStone Inc. ‘You could feed much of Asia, they have metals, they have energy, they have everything.’

China’s Deng introduced capitalist reforms in the late 1970s, lifting more than 200 million people out of poverty and transforming the nation into the world’s second-largest economy and its biggest consumer of steel, copper and coal.

‘In 1962 Myanmar was the single richest country in Asia,’ said Mr Rogers, referring to the year that marked the start of military rule. ‘Now it’s the poorest because it’s been so badly managed in the past 50 years. But they are changing that now.’

Myanmar may grow 5.5 per cent in 2011-2012 and 6 per cent in 2012-2013 on commodity exports and higher investment, the IMF said last month. The country ‘could become the next economic frontier in Asia’ if it takes advantage of its natural resources and proximity to China and India, according to Meral Karasulu, who led an IMF mission to the country in January.

George Soros, the billionaire investor, said last month he had visited Myanmar recently and the president and his ministers ‘genuinely want an opening’.

Rice exports from Myanmar, formerly the world’s largest shipper, may more than double to 1.5 million tonnes this year, the Myanmar Rice Industry Association forecast last month. Sales totalled 700,000 tonnes in 2011.

China and India share more than 3,600km of border with Myanmar, whose 64 million people earn an average of just US$2.25 per day, according to IMF estimates. Both nations have sought increased access to the nation’s reserves of natural gas. — Bloomberg


Key Turning Points in The US Dollar & Gold

The U.S. Dollar is positioned between points 3 and 4 on the monthly chart and around point F on the daily charts. Assuming that support holds close to this month’s lows, the upside target is 93 within the next two years (33 months from the May 2011 low).

Screen shot 2012-02-22 at 3.13.55 AM

The recent four-week correction fit the parameters of 1981 and 1996 well:

  • Tested 89-day exponential moving average
  • Tested 34-day Bollinger Band
  • Generated RSI(14) of 36
  • Retraced 49% of the rally from October

First resistance is at 80.50. A failure to close through there could result in another test of support around 78.25. Next target is the upper channel line at 84.

Gold, HUI and the Dollar also continue to track the 2004 model. Therefore, we now recommend that traders view last week’s lows as the critical support in gold and the miners. Independently, timing models point towards a late February to early March high in gold.



The correlation of Gold’s decade long bull market with the 1976-80 run from $100 to $850 continues to center around the action of the U.S. Dollar. The current price patterns relate to November 8, 1979. A close above 81 in the Dollar and a close below $1640 in gold would be outside the model. However, a close below 78 would be a catalyst for upside action in virtually all asset classes (except T-Bonds).

Gold Plus

CHARTWORKS – 2/19/2012   

EMAIL bobhoye@institutionaladvisors.com” data-mce-href=”mailto:bobhoye@institutionaladvisors.com“>bobhoye@institutionaladvisors.com

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.
Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.

A Market Roadmap Reveals Unusual Drawdown Risk

In order to estimate likely returns and risks in the financial markets, our general approach is to identify a set of historical instances that match current conditions on a broad range of important dimensions. In reviewing market conditions this week, what strikes me most is the pattern that emerges when we look across various horizons, from 2 weeks out to 18 months.

The chart below identifies periods in recent years where we reported market conditions as being at least “overvalued” and “overbought” in these weekly commentaries. Those two conditions alone aren’t enough, by themselves, to put the market in a “hard-negative” situation, but even those two tend to be enough to invite drawdown risk. The overvalued, overbought periods are shaded in blue on the chart below. The red lines indicate the deepest drawdown experienced by the market over the following 18 months (right scale), while the blue line charts the S&P 500 (left scale). Notably, even with weakly negative conditions – overvalued and overbought – the market has typically moved lower at some point in the next 18 months, wiping out all intervening gains. That surrender of intervening gains usually begins with a very hard and unexpected initial loss that takes out the bulk of upside progress within a period of a few days or weeks. This is a general pattern that we also see throughout market history.


….read the entire article (its well worth reading in ful)l:

  Unusual Drawdown Risk: Hussman Weekly Market Commentary

The Bottom Line: Seasonal Opportunities Coming Right Up

Downside risk in equity markets and most sectors exceeds short term upside potential. Short term weakness will provide an opportunity to enter into seasonal plays this spring including Energy, Mines & Metals, Chemicals and Auto sectors. Energy already is showing early signs of seasonal strength.

Equity Trends

The S&P 500 Index added 18.59 points (1.38%) last week. Intermediate trend is up. The Index remains well above its 50 and 200 day moving averages. Short term momentum indicators are overbought and showing early signs of peaking.


The TSX Composite Index added 68.88 points (0.56%) last week. Intermediate trend is up. Support is at 11,420.78. Resistance has formed at 12,623.98. The Index trades above its 50 day moving average, but recently has found resistance near its 200 day moving average currently at 12,509.63. Short term momentum indicators are trending down. Stochastics already are oversold and showing early signs of trying to bottom. Strength relative to the S&P 500 Index remains negative.


Gold fell $4.20 per ounce (0.24%) last week. Support is at $1,765.90 and resistance is at $1765.90. Gold is close to completing a so called “Death Cross” when its 50 day moving average moves below its 200 day moving average (Tech Talk is not a believer in “Death Crosses, but the media will talk about it). Short term momentum indicators have rolled over from overbought levels and are trending down. Strength relative to the S&P 500 Index remains mildly positive. Seasonal influences tend to peak near the end of February.


Silver slipped $0.41 per ounce (1.22%) last week. Support is at $26.15 and resistance is forming at $34.52 and near its 200 day moving average at $34.96. Short term momentum indicators have rolled over from an overbought level and are trending down. Strength relative to gold remains positive. Seasonal influences are positive until May.


The U.S. Dollar added 0.22 last week. Intermediate trend is up. Support is forming at 78.36 and resistance is at 81.78. The Dollar remains above its 200 day moving average and below its 50 day moving average. Short term momentum indicators are recovering from oversold levels.


The Canadian Dollar added 0.46 cents U.S. last week. Intermediate trend is down. Support is at 95.03 cents and resistance is at 101.10 cents. The Canuck Buck trades above its 50 day moving average, but has found resistance near its 200 day moving average at 100.39. Short term momentum indicators have rolled over from an overbought level and are trending down.


The CRB Index added 3.17 points (1.01%) last week thanks mainly to strength in the energy complex. Intermediate trend is down. Support is at 292.39 and resistance is at 324.99. Short term momentum indicators are trending higher.


Crude Oil gained $6.51 per barrel (6.66%) last week. Intermediate trend is up. Crude broke above resistance at $103.74 on Friday implying intermediate upside potential to $112.75. Short term momentum indicators are overbought, but have yet to show signs of peaking. News over the weekend that Iran has halted exports of oil by French and United Kingdom companies adds to a bullish stance. Seasonal influences remain positive.

crude oil


Don Vialoux has another 30+ charts, analysis and guest contributors HERE



Canadian Farmland: The Best Investment of them All?

Screen shot 2012-02-17 at 2.38.52 PM

A Primer for Investing in Canadian Farmland.

“Put your money in land, because they aren’t making any more of it!” – Will Rogers.  When I think about burying some serious money for the long run, I think of farmland.  I’m very bullish on Canadian farmland. My reasons: 1) Canadian farmland is very productive; 2) low cost on a global basis; 3) Canada is a stable country with a very adequate supply of water, energy and fertilizer; and 4) even the weather is cooperative as its growing season gets a little longer each year.

Some of Rick’s readers ask for more details. When ever you invest in land as a non-resident, you need to check the local laws.  For example, when I was a farm realtor I had a group of Italians interested in buying a 2000-acre farm in Illinois.  Now Illinois has a law prohibiting non-resident aliens from owning farmland.  But it doesn’t prohibit corporations from buying farmland.  So, we created a corporation and bought the farm.

How does this apply to buying a Canadian farm? 


…..read more HERE