Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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There was a major manipulation in Feb/Mar but I am referring to the latest fall in the SP. I believe that that is mainly due to manipulation and MM activity.The pattern of the selling alone tells a story.
INFA is at a crucial and very delicate stage and remember that it is a tiny company proposing to raise £.5B in investment. A staggering ask for an AIM minnow. Your investment here will either collapse or make you multiples of what you have invested.
I’ve never fully bought into the “market makers playing games” trope. The MM function is to create a market, they make their profit on the spread; the difference between the ‘bid’ and ‘ask’ price. It’s a pretty sweet deal and you can make a tidy profit by operating conservatively. Why take the risk of pushing the price somewhere if the ‘market’ doesn’t agree?
Greed! I hear you say.
Well OK, but with greed comes risk. The MM can try to work the share price down to an artificially low level but they are taking a huge punt. They effectively become a speculator. Drop the price and you risk having to sell your shares at a low price to investors who recognise the true value of the share. Suddenly the MM finds itself low on shares but still with the obligation to create a market. It has no choice but to buy back the shares it sold cheaply but at a higher price. Why take the risk?
It makes sense to me that the MM would prefer zero risk while also taking a nice tidy profit on the spread. The big money comes when millions of transactions are executed per second. It is more lucrative for the MM to create a high volume of transactions. Price distortion will only reduce the number of transactions while taking on unnecessary risk.
In fact the MM isn’t completely immune from risk. Every time it changes the bid and ask price it has to push its luck a little. You could call it price discovery. The art is to keep that risk to a minimum while still making your profit on the spread.
OK, I’m not completely naive. I realise that come 4:30pm everyone clocks off and meets up in the boozer after work. MMs have a few drinks with the traders while rubbing shoulders with journalists. A few nods and winks are exchanged and I agree; it is possible for market insiders to act in concert to manipulate a share price and the MM is a very important actor in such a band of thieves.
But I stand by my assertion that any price manipulation is to swim against the tide of where the ‘market’ determines the price should be. This is my two cents or as BlairPeach said much more succinctly… “An 85% fall in 2019 purely due to manipulation?”
Fairy Nuff, Loot. But , in hindsight, those that knew, knew. And made a speedy exit.
Whilst saying the opposite on the boards.
Islandmagee is a great project, I fear JW has been over ambitious and it will prove to be an expensive lesson learnt. H&W present an opportunity but ar what cost.
I'm not a MM, I don't know any MMs and I don't work in the financial industry. So I cannot claim to be an expert. As I admitted in my post, I'm sure such fun and games do occur. It may have come across that I am a believer in the 'efficient market theory'. This is not the case, I know that human nature and human greed play a role.
We all have our way of understanding the world, perhaps it’s because of my background in physical science (Chemistry) that I see the world as rules based.
In fact a better analogy would be as a game of football. Each player will try to cheat/dive/gain an unfair advantage and may sometimes succeed. However, each player is also constrained within the rules of the game. If it were a ‘free for all’ the game would very quickly descend into chaos.
I cannot believe any system (whether it is a chemical reaction, a game of football or the financial markets) can remain stable without rules or constraints acting upon its participants. Abuses may occur in isolation or over short periods but for a MM to walk down a share price to a fraction of its true value over an extended period of time?
Si_Derman, yes, I’ve seen it many times. The most enthusiastic rampers are often the first to bail out.