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.

There are 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,