To understand the specialists’ practices, the investor must learn to think of specialists as merchants who want to sell an inventory of stock at retail price levels. When they clear their shelves of their inventory they will seek to employ their profits to buy more merchandise at wholesale price levels. Once we grasp this concept we are ready to posit eight laws:
1. As merchants, specialists will expect to sell at retail what they have bought at wholesale.
2. The longer the specialists remain in business, the more money they will accumulate to buy stock at wholesale, which they will then want to sell at retail.
3. The expansion of communications media will bring more people into the market, tending to increase volatility of stock prices as they increase elements of demand-supply.
4. In order to buy and sell huge quantities of stock, Exchange members will seek new ways to enhance their sales techniques through use of the mass media.
5. In order to employ ever increasing financial resources, specialists will have to effect price declines of ever increasing dimensions in order to shake out enough stock.
6. Advances will have to be more dramatic on the upside to attract public interest in order to distribute the ever increasing accumulated inventories.
7. The most active stocks will require longer periods of time for their distribution.
8. The economy will be subjected to increasingly dramatic breakdowns causing inflation, unemployment, high interest rates and shortages of rawmaterials.
Richard Ney – The Wall Street Gang.