Thursday, September 17, 2009

It's all relative

Recent events show that Wall Street still doesn't get it. And, I'm not sure that continuing to throw money at the problem is the answer. You want one reason/solution/answer to our current predicament? Google "uptick law" or "uptick rule." The rule was introduced in the Securities Exchange Act of 1934. It prevents short sellers from adding to the downward momentum when the price of an asset is already experiencing sharp declines. It requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. And, you can thank Dubya for eliminating it in 2007.
I can't believe that more hasn't been reported on this tiny, but significant change.

1 comment:

cam said...

i love it... from my consulting days - management had this idea of throwing more people at a project would get it done quicker. this analogy surfaced in response - "if it takes one woman nine months to make a baby, why can't nine women make a baby in one month?"