Well, I think the uptick rule and the whole thing about shorts was a tempest in a teapot and a diversionary tactic: those damn short sellers again! THEY are the ones to blame!!!
Like hell they were. They were just capitalizing on an opportunity, and why shouldn't people in markets be allowed to invest in opportunities? Isn't that what markets are all about?
Fact is, that had virtually nothing to do with the fundamental problems, and more likely stabilized the markets. Granted, the uptick rule does prevent shorts from "piling on." But how significant a problem is that, really? Maybe it occurs on a couple of days a year. And everybody remembers 1987 and 1929 of course. But the imagined problem----that shorts took the market down considerably faster than it might have otherwise fallen----is not the problem at all. The problem is that the bulls created the situation in the first place, and blew the markets out of proportion to the upside. Same thing in March 2000.
The majority of the market is long. Short sellers are the minority, and I think unfairly maligned (except naked shorts, but I am not talking about that here). One could argue, and more effectively I think, that the real solution would have been to install a DOWNTICK rule that limits "piling on" in the bull direction. After all, isn't that a much worse problem? The fact that markets have a tendency to become OVERVALUED and go crazy to the upside?
This is much more common, in my opinion, than instances where things get overdone to the downside. You don't see inverse bubbles that wreak havoc for a quarter century or more and cause tremendous increases in the national debt and plunder pensions and citizen's savings accounts all in the name of fraudulently enriching a cadre of already filthy-rich corporate leaders who will never be held accountable, who will never be penalized, and who instead will reap gigantic bonuses even as they decimate shareholder value.
But you DO see that again and again with upside bubbles that cause tremendous economic damage for generations. And people complain about short sellers?
And isn't the objective to keep enough of an adversarial relationship in a market so that the bulls become the check on the bears, and vice versa? Isn't that the ultimate of market checks and balances?
So I say establish a DOWNTICK rule !!!!
....and, leave the uptick rule in place too.
Terry |
