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Trump Pump and Dump

A “pump and dump” scam is a method used by unscrupulous investors to take money from “get rich quick” investors. It was common in penny tech stocks during the ’90s, and is openly advocated by virtual currency (“E-coin”) investors today.

Pump and dump starts by sending the victims a notice that an asset is “ready to move.” A large purchase is placed to drive up market valuation. When the victims pile on to take advantage of the “opportunity,” the price continues to rise. The scammer sells back into the market, reaping profits. When the victims run out of money, the asset valuation returns to its original value, leaving the victims with nothing.

Now we might not be terribly sympathetic to the get-rich quick investors, but it is worth noting that Trump has a history of association with Mafia pump-and-dump operators. With him as president, they have a bold opportunity.

This one relies on the futures markets using a technique called a short-sell. Organizations wishing to secure the price of an asset will place an order today, taking the risk that the price will fall in the future. A virtual seller can reap a profit by taking the risk, hoping that the price will indeed fall so that they can buy the asset for less than the buyer paid for it.

As the futures markets have evolved, they have come to include almost every financial asset, include stock market exchanges.

Now imagine that you have a president that likes to make threats of trade wars. You notice that the market drops like a bomb on the day of the announcement, recovers for a couple of days, then tanks again when a new announcement is made. Investors that know the timing of the announcements can short the index, reaping profits each time the market falls.

Of course, we don’t need such imagination. We have such a president, who excels at saying alarming things that destabilize markets. Now add his association with mafia market manipulators, and you have to wonder…how much money is his family making (including the Kushners) each time an announcement is made? How much money is Carl Icahn making?

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