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Wednesday, March 11, 2009

We are saved! The return of the uptick rule...

It looks like the uptick rule will be re-instated next month. I am not an advocate of it as I don't think it will solve the problems we have. It seems - in my humble opinion - that lawmakers, business leaders, and everyone else should be more concerned about the fundamentals of the economy and how to run their company than the stock price and my ability to short it (when the economy is booming, do we put an obstacle in the path of people wanting to buy stocks...you can only buy on a downtick?). Common sense dictates that if a company is run well, it will consistently generate profits and the stock will rise. But it has become obvious over the past 12-months that most companies are NOT well run, and most business leaders are out for themselves; they have no qualms about destroying a company to increase their short-term payout.

So it is time to deflect the issue! Instead of focusing on business fundamentals, our blame everyone and everything else society focuses on - for lack of a better word - bullshit.

Having said that, it will not fundamentally change trading for me. I traded with the uptick rule longer than I traded without it. And before it was abolished, I did not know any different so I will just return back to that mentality.

I will say this - I hope it sparks a rally, no matter how illogical it is. I don't see them repealing it again once they re-instate it, so I hope the market starts a leg up based on the news. I read somewhere (though I did not confirm it) that the market rallied 50% in four months when the rule was originally established in 1938. So bring it on..I am ready for some long entries!

Here is the story, and here is my favorite quote...yes, the elimination of the uptick rule caused the economy to collapse!

Critics of short sellers, including Charles Schwab and the head of the New York Stock Exchange, Duncan Niederauer, have argued that the rule's elimination has contributed to the economic downturn or is harmful to issuers.

...on a side note - I want to give a shout out to Dinosaur Trader and thank him for aiding me in my continued success.



Thomas said...

Pure stupidity.

john said...

I too traded under the rule and I can remember more than a few times when exchange-traded stocks would run lower without me - - and snap-back to a penny away from where my order was waiting before continuing to tank. It cost me a lot of lost opportunities, especially around the mkt open.

IMO, this bs is more than a distraction by pols to show the masses that they are taking action, it does actual harm to the market and to the little guy.

All US residents should write the SEC chair and their reps, and CNBC:

"I am a small investor (don't call yourself a trader, traders have been vilified and congressmen are clueless). The restoration of the uptick rule is designed by big institutions to harm the small investor and to harm price discovery. Those larger players will still be able to short at will should the uptick rule be brought back; the restoration of this undemocratic restriction will simply cause more trades to move from individual stocks to derivatives such as etfs, options, futures and swap contracts - instruments that most individual investors cannot trade.

Please, stop the witch hunt and focus on the true causes of the financial meltdown."

Dinosaur Trader said...

I agree with everything you wrote here.

In fact, the only thing that could have possibly improved this post would be if you had mentioned me and thanked me for aiding you in your successes.


Todd-O said...


I was wondering why the shout out to Dinosaur Trader. Since you granted his request, how about throwing a few hundred grand my way. All I have to do is ask?

Tom (not C.) said...

I agree with you. Deflect, refuse to take responsibility, blame all others.

Dinosaur Trader said...

Nice... maybe this "positive thinking" thing does work!

You and AT have been right all along!


Chad said...

I wasn't trading back when the uptick rule was around. Did stocks move very differently back then? Do you think it will have much influence on traders going long as well as those who short? Or is it mainly a pain for shorters?