March 5, 2009
I presented this on FOX Business News Live, Wednesday 03/05/09.
"Mary Shapiro, Madame Chairwoman of the SEC, enact a new rule to PROHIBIT SHORT SELLING OF STOCKS UNDER $5."
Because once a stock drops below 5$:
The damage is done Providing liquidity is no longer relevant The short sellers have made enough money. Allowing the continued shorting of stocks which have pierced the $5 threshold simply: Facilitates Bear Raids by emboldening fast money traders Encourages greed over responsibility Undermines public confidence in companies struggling to survive Weakens the market as a whole.v Consider GE. Bears argue that as-yet undisclosed real estate issues and a looming credit downgrade will negatively impact the company's ability to fund itself and maintain current earnings guidance of $1.26 for 2009. Point well taken, that's why the stock has traded down to $5.45, a decline of over 80% since September alone. These fears are priced in.
In fact, if GE actually did go to zero, its reduced weighting in the DJIA would push the index down a mere 50 points. THE DAMAGE HAS BEEN DONE. SHOTS HAVE MADE ENOUGH. Pushing the stock down another few points serves no greater good. In fact, it's un-American.
Some argue for the restoration of the up-tick rule, but with the decentralization of the marketplace, where on some days more than half the volume of NYSE listed stocks occurs off exchange, identifying the last trade and/or an uptick is simply not possible. What is possible however, is the creation of a no-short threshold. Long sellers could continue to sell, enabling price discovery without the undue pressure of unrestricted short selling.
Our companies, our markets, and even we ourselves are fighting for survival.
Madame Chairwoman, light the torch announcing the gates of a safe harbour. Help save our great American companies. We want them to be great for years to come.