Scams and Stock Markets?

Whenever a bull market is over, a scam would emerge at that time. The person who is so bullish on that Market or a sector would be jailed because of scam. In 1992, Harshad Mehta a leading Stock Broker at that time was arrested for frauding some leading Banks and Financial Institutions.

In 2000, Ketan Parkeh, a leading Investor and operator of the Stock Market was arrested for swindling some Bank’s Money. In 2009, Ramalinga Raju of Satyam Computers was for cooking up his company’s accounts.

In US, Bernard Madoff, who was running a ponzi scheme based on Stock Market, was arrested for defrauding the Investors. In Germany also a major scam was known at that time. And also in all countries minor scams were unearthed.

Why scams are are being unearthed only during the start of the bear market or in middle of the bear markets. Let me explain the mechanism. During Bull Markets, price of stocks are moving steadily up. So, a confidence has been built over these years about the market that the price will go forever. Once the trend changes as no trend will continue forever, the scamsters failing to foresee the change in trend get trapped in their own landmines only to be blown away.

Don’t think any trend will be there forever.