the Rise of False Contrarian Gurus
By Dr. Jeffrey Lewis
The typical technical analysis based
stock-slinging newsletter is written by a contrarian who denies market
manipulation and often ridicules those who attempt to discuss it seriously and
Furthermore, the degree of denial and
hostility faced by proponents of market manipulation theories is usually
directly proportional to the amount of evidence actually underpinning the issue.
Proving a Negative is Always a Difficult
Of course, proving that manipulation does not
actually exist in the financial markets — and especially in the precious metals
markets where even the regulators like the CFTC have found sufficient cause to
investigate such allegations — is very difficult.
In addition, the fact remains that most
newsletter writers are merely traders talking their own book, although
admittedly the most prominent among them can maintain a powerful influence over
the market’s mental space. In recent years, this mental space has suffered from
an excess of horrible sentiment.
Controversy Sparks Interest in Market Gurus
The average smart money investor who comes to
the market guru for advice or guidance is sophisticated, wealthy and typically
allocates only a small percentage of their money and attention to the markets.
Such people usually do not like being bothered
with conspiracy theories and emotional pleas, and therefore they would rather
not hear about market manipulation.
Market gurus often specialize in offering
penny stocks and junior miners to their newsletter readers. They need to conform
to laws and regulations regarding the information they disseminate.
While a fair number of people still consider
the Internet to be relatively free and unregulated, Internet publicity does not
come cheap. In fact, web writers and publishers often spend lots of money and
make great efforts to produce and advertise their content.
Ignore for a moment the fact that assets like
precious metals are generally mispriced and that this results in the
misallocation of capital. Remember that mining companies are usually guided
financially by the very same entities that collude to control the prices of
their key products.
This leads to false company valuations, and
ultimately the false contrarian gurus are no different from the mainstream
advisor who holds the CPI or Official Labor Statistics as sacred cows. These
writers can afford to mislead their readers given the small capital allocation
they usually commit since most people speculate "safely" with only what funds
they can afford to lose.
Also, their newsletter-reading investors often
need to have confirmation from someone like them. The typical contrarian market
guru tends to fit the bill, especially if they have a proven track record of
successful calls and an outspoken nature.
Status Speaks Loudly
Whether it is
GATA, Ted Butler, or the army of disciples who have learned to accept the
same facts, they are often accused of using the market manipulation argument to
sell their positions, newsletters, etc.
The big market gurus and many mainstream
investment advisers have effectively taken the opposite tactic. They use the
anti-conspiracy approach to bolster their status with conspiracy-wary investors.
Status salutes status. The smart money tends
to warm to those who confirm their attachment to their basic understanding of
the world and all that they have invested in it. A respectable investor
conscious of their status will usually have the desire to work with someone of
equal or higher status.
Basically, by vocally and consistently denying
the existence of price suppression, the big market gurus are merely leveraging
the uncertainty associated with such theories to bolster their own success and
sell their newsletters.
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