Ruy Lopez

Yahoo's stock price reversed today from a high of about $35.50. I opined earlier that Yahoo should not go higher than $31 and that was wrong--my first wrong prediction on this board.

More important though is to share the experience and knowledge I happen to have on what happened to this stock and apparently many others. Was there any investigation conducted on the stock? And was anybody convicted?

Here's why.

http://www.wsrn.com/apps/charts/index.xpl?s=YHOO&data=G

The link shows that Yahoo started to rise from about $3. in 1997; topped out at $250 in Jan. 2000; and collapsed to $10 on Oct. 2002. The first time I saw Yahoo's chart was late May this year; thus I know almost nothing about it. BUT I'm quite familiar with the chart pattern in the link. Undoubtedly it was a huge swindle, a setup, highway robbery.

In the Philippines, a duly elected President served only two out of a six-year term. He was ousted extra-constitutionally on Jan. 2000 partly for being implicated in stock manipulation of this same magnitude.

From repeated experience, I can describe what happened to and make sense of the Yahoo chart. Please feel free to disagree if you know otherwise as this is your market, not mine.

A move of this magnitude cannot take place without a conspiracy of a few people, usually insiders. It is known among afficionados (intensely involved professional participants), that insiders would not miss the opportunity to play up their respective stocks whenever they sense a major bull market. The objective is maximum possible profit. Unfortunately, its unavoidable outcome consists of horrendous losses for the outsiders which can be 80 to 90 percent of all who touched the stock.

Economists and business sector apologists would try to explain this as a natural spontaneous phenomenon, a mania. Partly true but this kind of manic stampede needs guidance, the same way cowboys steer a herd in a direction. If needed, I would be glad to describe in detail the "guidance" that manipulators provide. It will just make the post too long.

Note what just happened since Oct.2002 up to today. The insiders are still at work, though at a much smaller scale. This time the stock was moved from $10 to $35. It's the same modus operandum. We have just seen the highest price of Yahoo, at $35.50, for this year and the next 3.5 years or even much longer. Have you noticed how the media seems to cooperate in firing up the anxiety and greed of the public?

Arken

I'm sorry... this post was so extremely muddled that I have no idea what it is you're talking about. Could you explain this all more clearly please?

NialScorva

Yahoo is an internet stock. Look up any number of other internet sites and they follow the same pattern through 2001, when most of them went out of business. Yahoo managed to survive. Check out Redhat (RHAT), for example. They're another company that was overinflated, but managed to survive and are now crawling back.

Ruy Lopez

Will try to help Arken. It's a time like this that I wish I were an American familiar with succint colloquial or slang expressions. Con game comes to mind but does not express properly the idea.

There is a product called Yahoo Inc. Some people want to make money on it. These people know beforehand what is its low as well as its high price. They buy it when low and sell at the high level. The only problem is these people must convince others to part with the stock at the low price and make many buy at the high price. How did they do this?

The link below is a smaller segment of the previous yahoo chart. It shows the time Sept 2001 to the present.

http://www.wsrn.com/apps/charts/index.xpl?s=YHOO&data=D

When the price crashed from $250, the insiders were already preparing to halt the plunge between $10 to 15. They would provide "support" by posting at $10 as buyers absorbing all those who were panicking to get out. That's the best way to make people part with their shares--when they are fearful.

This buying phase continues up to about Oct. 2002, more than a year of patiently waiting for more sellers to unload. (The insiders by the way have plenty of cash--they unloaded say from100 to 250 dollars per share.) This is called "accumulation". Now how to sell to as many people as possible at the highest possible price.

Insiders know that there is some improvement in company profits, not much but enough. They also confidently analyzed that for every massive plunge, there should be a rebound. They need one more thing, a bullish atmosphere to induce buying. At this stage the losers do not yet feel beaten; certainly they do not want to be left behind by a new recovery or bull market. The media, the analyst and economists provide the rah-rah cheers. " We couldn't be wrong. All the smart people in the world, including the gov't say the market will go up and the economy will expand"

The trap is set. The public buys Yahoo at $25, $30 and even $35 after they sold it a year ago at $10 or 15!!!

Is this clearer?

pug846

And wasn't there Black Helicopters flying around Yahoo's headquarter's for a while?

Nial, clearly you are in denial. You really expect us to believe that there is a perfectly rational explanation for what happened? Like something called "internet stocks" all went up and down at the same time and there wasn't some conspiracy behind it all? Come on man...what's wrong with you? Let me guess, next you're going to say that something called the "Dow Jones"--and who knows what the hell that might be--went up and down during the same time period too. Grow up. :banghead:

Happy Wonderer

A partial explanation for the rapid rise in the small cap internet stocks was a phenonoma known as a "shorts rally." This was especially true for Netscape.

The issue is that a large number of people did not believe that the price of Netscape or Yahoo could be sustained. In the long term they were right, but they lost their underwear by short selling the stock. The problem with shorting those stocks (well, one problem) is that they were fairly thin, ie not a lot of shares and (initally) not a broad base of trading.

Gains in the stock price were magnified as the short sellers had to buy stock to cover their contracts. (One problem with short selling is that you have unlimited potential loss, especially if you don't know what you are doing.) Of course the law of supply and demand kicked in; because there was a lot of competition for these shares the price went up.

At some point mass stupidity kicked in as people got desentitized to reality. It was a fact that the stock had gone up several thousand percent in the past, so expecting it go go up say %50 in the next year seemed reasonable. Thus the bubble.

There is more to it than that, but the role of the shorts is a part of the history that is frequently neglected, I think.

HW

Not speaking from a lofty high ground, look at the stock chart for a company called PMC Sierra (PMCS) and ask if I should have believed the analysists when they said it would hit $300...

Kinross

Buy low sell high. When did this become a crime???

Ruy Lopez, Yahoo is an internet portal, http://www.yahoo.com one of the first during the internet bubble. People thought that a popular internet portal could make a lot of money selling advertisements. Hence the large increase in price. When the bubble burst so did yahoo's stock price. It made a slight rebound as most of the internet companies that have survived the burst have.

There is no criminal activity involved. Just irrational buying.

The company I use to work for sells cable and dsl testing equipment. In 1999 and 2000 it was thought that broadband was going to be huge. The stock went from $7 a share to $170 a share in a very similar fashion that yahoo did. The bubble burst and it dropped to $6 a share. It now trades at $20 a share. Once again no criminal activity.

MortalWombat

Here is a chart comparing Yahoo to Amazon for the previous 5 years up to 7/9/2003. Nearly identical results.

MortalWombat

Here is another comparing Yahoo to Cisco for the same time period. Very similar results again.

MortalWombat

No conspiracy necessary, just a big tech bubble, followed by a crash. The ones that survived are going up again along with the rest of the stock market over the past few months.