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Market abuse #investments

Most investors suspect market abuse, but insider trading and the passing of insider information is hard to prove. Share prices often rise suddenly and the reason emerges sometime later. Even the delay in making market movements public which are usually 15 minutes is suspicious.

Many private investors wonder about the activities of market makers too, as they manipulate spreads and prices. The price is often shown as the same as the ask price, rather than the mid price, which raises suspicions.

We did see market manipulation on a grand scale with the manipulation of LIBOR scandal and there have been other scandals to hit financial markets. The PPI scandal has to be seen as an attempt by the greedy to profit from financial naivety. Private investors rely on the professionals and the institutions to be honest. We know that they aren’t, but is there now a movement that encourages values and honesty? I personally think the culture of ripping people off has gone on for so long that it’s ingrained into the financial system.

This morning I see the share price of Verona Pharma has dropped by over 11%. There is a 15-minute delay before I get the information, giving professional traders plenty of time to manipulate trades. There is no RNS and so no apparent reason for the drop. The broker ratings are all positive.  It could be ‘herd’ mentality, but it could also be a lack of regulation.

The ‘herd’ mentality could be to blame for the FTSE 100 dropping from over 7,000 to under 6,000 but are there other unknown forces at work? Most private investors are suspicious. There has been a rush for so-called ‘safe harbours’ and that appeared to create a bubble in stocks that were perceived as ‘safe’.

If you believed everything we see in the media about economic recovery we would expect the market to increase prices, not trash them. This week’s defeat for the government on tax credits produced some worried faces on the front bench. Are they really that desperate that they have to take from the poorest workers? Is the recovery just a fantasy of government ministers? The national debt doesn’t seem to be falling and predictions of wiping out the deficit seem hard to believe.

It could be time to go for the ultimate safe harbour – gold.

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