Hackers Do The Work That Used to Be Done By Wall Street

Today hackers took control of the AP Twitter account.  They said there were a couple explosions at the White House.  Twitter is the new tape, and the breaking news happens on the Stocktwits feed before anywhere else.

When the market saw the news, it took a dump.  Lost 1%.

If the SEC is smart, they will start connecting the dots between the hackers and seeing who was loaded up short.  Check the put volume on exchanges too. Check the ETFs.  There are plenty of ways to leverage that type of information to make money.

For these things to work, the timing has to be just right.

Remember what CNBC’s Jim Cramer said.

-On manipulating the market: “A lot of times when I was short at my hedge fund, and I was positioned short, meaning I needed it down, I would create a level of activity before hand that could drive the futures,”

-On falsely creating the impression a stock is down (what he calls “fomenting”): “You can’t foment. That’s a violation… But you do it anyway because the SEC doesn’t understand it.” He adds, “When you have six days and your company may be in doubt because you are down, I think it is really important to foment.”

I remember once I was burned by this tactic.  In October of 2001, I bought some Eurodollar ($GE_F) futures from Merrill Lynch.  The market started to get bought up.  All of a sudden the broker offered to sell me 1000 more at a slightly lower price.  I bought them.

Seconds later a message scrolled across the Reuters news wire on the floor:  “Osama Bin Laden Captured”.

Guess where Eurodollars went?  Boom I was out a bunch of money in seconds.  As soon as I began covering, the news was reversed.  “Osama Bin Laden Not Captured.”  The market rallied back higher than it was before.

On the whole deal I lost money.  But it wouldn’t have surprised me if some one initiated a short position, and was able to plant the rumor.  The timing was right.

Here we are, a week after the tragic Boston Marathon explosion, and a rumor on a similar type bombing gets planted. Here is what the crash looked like in graphical form. 

I don’t think it’s random or arbitrary.  This stuff happens for a reason.

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