What goes through the mind of a stock manipulator? Imagine how a would-be Wall Street wizard might discuss an idea...
Boy, I'm in trouble.
What's the problem?
Ever hear of a company called Emulex (Nasdaq: EMLX)?
Sounds vaguely familiar. What does it make?
Fibre channel host adapters, mainly.
I don't know, that's what it says in the press releases. Anyway, I shorted this pig.
Shorted? What, you cut its legs off?
Don't you know how to play the market? The stock market that is.
Sure. You buy a stock and hope it goes up.
You're so naive. Real pros also make money when a stock is going down.
Borrow someone's stock, sell it, then cover the loan by repurchasing shares at a lower price. You pocket the difference.
What if the stock price keeps going up?
Then you're in my shoes.
Let me guess. Emulex stock hasn't fallen and your short loan is coming due. How much would you lose right now?
Around $97,000 on 3,000 shares.
Ouch. Gonna have to put in a lot of overtime to make up that one.
Bah, I didn't start trading stocks so I could work more. Let's see ... I've got it: if Wall Street is too stupid to see this company is overvalued, I'll drive the price down myself.
Give me a break. What are you going to do? Convince all of Emulex's customers to stop buying these adapter things?
Shut up and listen. You remember that job I had for the press release company?
Those Internet Wire guys? Didn't you just quit that job?
Yeah, I was tired of it. But I know how their system works, so I'll slip them a note about some bad news, Emulex will tank, I cover my short, and maybe make a little profit while I'm at it.
Do you know something bad about Emulex that no one else knows?
No, but a little yellow journalism never hurt anyone. Just turn William Hearst's saying on its head: I'll provide the conflict, the market will provide the pictures. Of a straight downward slope on the EMLX chart.
You're going to make up something up? Isn't that fraud? Didn't people get busted for doing the same thing with PairGain Technologies and Lucent Technologies (NYSE: LU)?
That was different, they posted on message boards. I, on the other hand, know how to manipulate Internet Wire's system so it looks legitimate, at least in the beginning. I'll send the "news release" to Internet Wire at night, from a dummy e-mail account at the community college where I took some summer courses. By the time Internet Wire distributes it Friday morning, I'll be in a Las Vegas hotel. I can carry out my trades there as soon as the news hits.
Won't Internet Wire call Emulex to verify it first?
Verification? Hello? This is the Internet. Anyway, I can put it into the system so it looks like it's already been verified.
You know your e-mail can be traced, don't you?
Nah, the Feds are stupid, everyone on the Internet says so, so it must be true. They'll never find me, this will come from an account with a fake name.
It's not hard to correlate the sending of this hoax and your location. Track an IP address -- any message board script on the Internet can do it -- to the college, and see who was on the computers at the time.
Come on, no one notices people working in a computer lab at night.
And you don't think Internet Wire will come under suspicion? There can't be that many employees or ex-employees who are students at this college.
That's circumstantial. If I buy a gun and a murder is committed later by an unknown party using a similar weapon sold at the same store, would that make me a suspect?
They'd at least take a look at you.
Even in the unlikely event that the Feds don't trace your IP number, won't the timing of your trades raise a red flag immediately?
Puh-leeze. They only track the accounts of bigwigs like company insiders and major financiers. I'm below their radar.
I think a 3,000-share trade would show up on anyone's screen.
Nonsense. Even small funds usually trade in blocks of 5,000 minimum.
Uh huh, sure, you keep telling yourself that. How much do you think you can make from this scheme?
I'll cover my shorts, for sure. And if the stock keeps going, who knows? Once I take care of my debts, I should have a few minutes to buy the stock cheap before the Nasdaq halts trading. I can sell it a few days later at a profit, because the stock will rebound once people figure out my news release is a hoax.
How greedy and irresponsible can you be?
Come on, where's your sense of humor?
The people who lose thousands of dollars won't be laughing.
If they're rash enough to trade on headlines without doing research, they deserve what they get.
Normally I'd agree with you, but if you go through a known distribution service, this will look like it's coming from a legitimate news source.
Then they should sue the news agencies, not pick on me.
I'm sure they will file class action suits. That doesn't absolve you of responsibility.
Don't play moralist with me. This is Wall Street we're talking about, everyone manipulates the market. I say, just Let It Ride!
Most of them don't flat-out lie to do it. Frankly, this scheme sounds like the dumbest plan I've ever heard. It has holes big enough to fly a space shuttle through.
We'll see who's looking dumb at the end. By the way, you're not going to mention this to anyone, are you?
Don't worry, I won't have to. 22GO>