|
You may know of the title – by one Jordan Belfort - self confessed fraudster, drug addict, greed maniac. It is a book I have resisted reading as I did not in any way want to give credence to the man by buying the bawdy memoires of a man convicted for robbing millions from the unsuspecting.
But I have to confess it has been compelling reading – not so much because it reads like a bestselling piece of fiction but rather because it confirmed much of my suspicions of brokers when I first started investing in shares with some keen interest – some 20 years ago.
Belfort, built and lost a brokerage firm in the 90s that probably had a turnover of billions and where its often, heavily drugged ‘brokers’ lived by the daily mantra that clients ‘buy or they die’.
They literally coerced clients into buying stock in floats, many of which were going no-where but down. It reminded me of a phone call from a broker – I had never heard of until that very phone call, who had a deal that what was compelling, unmissable, headed for the skies. This guy was persuasive to say the least and I was unsuspecting. I used him, but only for my own picks as his firm was the first of the discount brokers – also in the 90s. They were heady times. We also saw some heady times in the years 2004-7. It was ‘come on – let’s take your company to market – this market is hot’. Of course a sound company should do well regardless of the market circumstances. So the implication was ‘your company may not be the most sound business around but I reckon I can square it away before it all goes pear shaped’.
The other point that I believe is relevant to our TTN readers is the stark accounts of moving the price of stock up and then hitting the unknowing with hordes of stock. That is why many retail buyers buy at the top – and of course sell at the bottom.
Does all of this happen today? You betcha. Recently it has not been so easy to get away with flogging large volumes of dodgy floats. But a few do list and the day will come again when big numbers of floats will again list with doubtful futures.
Can stock prices be manipulated? It is tough to manipulate the large caps but many stocks, even in the top 100 are susceptible. And once you get to the small caps, yes it is still possible.
We all know of the above – but it is good to be reminded when you read such a stark account from a self confessed fraudster.
Enjoy the ride
Tom Scollon
Chief Analyst |