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The Wall Street Jungle by Richard Ney

Playing With A Top


Not the kids toy that you spin across the floor, the stock market specialist's toy that they spin across the media. The spin is getting faster.

It is at times like this that I most miss Richard Ney; actor, financier, creator of The Ney Report, and author of best selling investment books such as The Wall Street Jungle.

Mr Ney had both a sharp wit and an insightful view of what he called stock "merchandising operations" by individual stock specialists on the floor of the New York Stock Exchange, (NYSE).

 

As we play around with new highs and round numbers, Richard Ney would have been watching the volume moves in a few key stocks of the Dow Jones Industrials.

His primary argument was that while exchange spokesmen will say "it takes someone selling their stock and someone buying stock to make a market," in reality the selling may well be someone selling stocks short.

A stock short sale is made by borrowing stock and then selling it in anticipation of a drop in price. When the speculator, or a NYSE specialist, wants to exit the position they buy stock to return to the lender. If the price has dropped they make money, if the price increased - they lose money.

Richard Ney pointed out that frequently the person selling short at market tops was a market making specialist on the floor of the NYSE.

 

Mr Ney was not against short selling - he knew its value to markets. He was against the hidden actions and agendas of market specialists that have unilateral power to set price on NYSE issues they trade. The "smoking gun" is found in details of a day's transactions, Ney used these indicators of manipulation to piggy back his investor's actions on medium and long term positions taken by specialists.

His contention was that market specialists on the floor of the NYSE used the emotional greed and fear generated by price action to move their merchandise in a profitable fashion. Again and again he pointed out where large market moves created volume - not the other way around.

Regarding price and volume, he analyzed it far differently then you will see in the financial press. The NYSE will provide press releases during and after the day highlighting how new highs were accompanied by huge volume. The financial media will repeat this "news" with the implication that volume drove stock prices higher.

Observation will show what Mr. Ney continually pointed out, prices are normally moved on low volume - they reach extremes on high volume. He presented his evidence that at lows the NYSE specialists and market insiders were buying strongly while the public sells in panics. He then would follow the progression as the prices were moved up on lower volume to an emotional big move trigger point where high volume was once again used for those insiders to first sell the stock they had purchased, and then sell much more stock short into that topping volume. The prices would then be dropped again on low volume to where the short sales could be profitably covered and long positions re-established.

Richard Ney's books give far more depth and insight than I can apply to his well substantiated theories. His market calls are but one of the reason's I miss him today.

I also miss his elegant presentations of reality, his obvious concern for truth, his genteel manners and appearance, and a host of other factors.

You should miss him because he would have written this page with a great deal more finesse than I have managed.

 

Find one of Richard Ney's books in a used book store - and read it.

 

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