This is the scary part. I find Cramer's conclusion that the change in the uptick rule has caused market volatility and the downswing to be baseless and irresponsible. However, he seemingly has been successful (or lucky) at changing public perception about topics he discusses on his show. I am worried that he could actually sway people in to reinstating the uptick rule (I wish I were joking). That is why we must all pressure the SEC and our congressmen to not let this happen.
Cramer couldn't pick his nose without choking on the booger, let alone pick a stock. As someone else pointed out he's just looking for a scapegoat to cover all of his ridiculous "calls" recently.
Maybe I am being too philosophical here, but it is hard for me not to see the uptick rule as screwing with freedom of speech/opinion. Basically, the short seller is saying "I think this is a bad company, and it is going to get worse ..." or "I think this is a good but an overvalued company ..." Why should he or she not be able to have that opinion? Why should he or she have to wait and jump through an extra "hoop" to express this opinion? Waiting is an extreme disadvantage in an enterprise where timing is crucial. Imagine that you are a Supreme Court justice ... How do you reconcile that it is okay for someone to have a bearish outlook on corn or crude oil or wheat or soybeans or even the entire U.S. stock market (the S & P futures and minis), or a large segment of U.S. debt market (10 yr. note futures / 30 yr. bond futures, etc. ) ... and this person is allowed, legally, to immediately express that opinion financially with a short sell position ... but ... the very same person, if they have a negative opinion about Bear Stearns or Enron or Worldcom or AT&T (prior to being kicked out of the Dow) or Eastman Kodak (prior to being kicked out of the Dow) or Amgen or Merck earlier this year, ... this very same person must wait for this additional event to occur ... an event that must be the exact opposite to his or her opinion ... before he or she can express their bearish view financially ... How do you reconcile that? You can't. It would be like saying to newspapers and radio stations and TV networks and internet bloggers - "it is illegal to express a negative opinion about a politician who is in trouble until there is an uptick in his or her approval numbers. Until then, you must remain silent." That would be insane. Dove tailing the two issues, stocks and politicians in trouble, I saw a clip of Cramer on a morning talk show and the host asked, "how are you handling the jokes and nasty comments about your friend Eliot Spitzer?" He responded (basically) "Eliot messed up, so I just have to be quiet and take it." The same should go for a stock that is going down because the management messed up. Bearsish observers should get to vote (seamlessly) that the stock is bad and going to get worse. If bulls disagree, they can (seamlessly) take the other side or wait until a lower price or *** walk away completely and try to find another stock that may have better management and better prospects *** And unlike other aspects of free speech/opinion, if the short (or long) is wrong - they pay a penalty. Unlike the endless stream of so and so's who come on CNBC and "like this stock or like that stock" - if the short (or long) is wrong - they pay. The so and so's that come on CNBC and exercise their free speech/opinion simply collect another paycheck after being wrong. The uptick rule, from a free speech perspective, turns logic upside down. You can say whatever you want (regardless of upticks or downticks) about a stock, collect a salary or ad revenues or newsletter proceeds or whatever ... but you are not allowed to express s a bearish opinion on a stock in such a way where ***your skin is actually in the game*** without enduring the additional timing burden of the "uptick" rule ... The call to reinstate the uptick rule is absurd.
I think SEC did a 5 years study on the uptick rule and they think that the uptick rule can be abolished and now this idiot Cramer is calling for a reversal just because the market got slammed? Puh-Lee-ze
Every bear market brings short selling under scrutiny, Just wait until the indexes have fallen another 20% and it won't just be the uptick rule but shorting under any circumstances that these guys will be calling for an end to. Steve
It is highly unlikely he would be complaining, in my opinion. And with his law school background and his background in journalism, he'd probably make the same arguement I made to preserve his right to short seamlessly. Anyway, for those who are interested, there is an academic study done on this short sale restriction ----- Efficiency and the Bear: Short Sales and Markets around the World Arturo Bris Yale School of Management William N. Goetzmann Yale School of Management and NBER Ning Zhu Yale School of Management January 2003 Abstract: " We analyze cross-sectional and time series information from ***forty-seven equity markets around the world,*** to consider whether shortâsales restrictions affect the efficiency of the market, and the distributional characteristics of returns to individual stocks and market indices. A common conjecture by ***regulators*** is that shortâsales restrictions can reduce the relative severity of a ***market panic***. We test this conjecture by examining the skewness of market returns. We find that in markets where short selling is either prohibited or not practiced, ***individual stock returns*** display significantly less negative skewness. However, at the ***market level***, where regulators might expect shortâsales restrictions to reduce the severity of broad declines, short sales restrictions appear to make ***no difference.*** " ----- I would add that the "negative skewness" observed at the individual stock level probably diminished as the the stock's market cap / float increased. This is my opinion, not part of the study. Simply put, it is easier to "bear raid" some bio-tech stock with a float of 40 million shares while it is almost impossible to do that with a stock like Intel, with a float of 5.7 billion shares. By extension, and I would say this is the conclusion of the study, it is nearly impossible to "bear raid" ***an entire market*** - even markets less liquid than the U.S. market (and especially the U.S. market, the most liquid market in the world). So Jim Cramer, Harvard trained lawyer, former journalist, 14 year hedge fund professional - has decided to toss all of this knowledge away to join the ranks of the knee-jerk amateurs. All this, apparently, because he has become addicted to the "validation" of TV ratings ... Sad.
On the show he mentions that the "academics" will disagree with his thesis that the ut rule shoud be reinstated because they have never traded a day in their life and therefore they don't know anything. Your post is dismissed before it is even entered as evidence. Then once he makes that argument to disallow academic studies as evidence because the authors don't trade, he shifts to these same traders that are used to discredit academics, and attacks them. The traders (he calls them "hedge funds") will disagree with abolishing the ut rule because, well, they trade!!! They only have their self interest in mind. LMAO. Checkmark: eliminate traders as credible sources of price discovery, but not before we use them to discredit the academics first. Nice. As to the show, look, when you have a show where all you do is give opinions and no one is on the other side to disagree with you except amateurs, there is no other side. It is preaching. This is why the show fails in the age of the internet and sites like this one. All knowledge comes through reasoned debate. All reasonable people form hypotheses, and then test them against other smart people, enriching both sides. Some people can't stand Kudlow, but at least the guy has people that disagree with him on the show regularly, giving the show a complexity that rewards it's viewers. nitro
If I can be allowed to edit your post a bit, I think the following would be more accurate ... My reason for editing is because my post cited one of the studies the SEC used in determining no need for the uptick rule. It was part of the evidence that sealed the move back in July, 2007. So to your point, Cramer wants a "retrial" with the empirical evidence thrown out. Instead, we should just go with his opinion - "Jim Jones" style. Ignore the academics because they are academics. Ignore the traders because they are traders. But listen to Cramer, who is not really a true investor. Much more closer to a hedge fund type trader. In his own words, comparing himself to John Bogle - a standard for the "conventional" investor. "Cramer himself has described how hard it is to beat index funds. "After a lifetime of picking stocks, I have to admit that (Vanguard Group founder John) Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him," Cramer said on the dust jacket of Common Sense on Mutual Funds, Bogle's 1999 book. " Cramer's methods also run counter to Warren Buffet's - another investor vs. being a trader. So, by his rules, we get to discard Cramer's (weak and insincere) cry for the uptick rule in a so-called "defense" of the "investor" since he has "never really been a conventional investor in his life." It would be interesting to compare the turnover ratio of Cramer's "Cramer Berkowitz" hedge fund to the turnover ratio of Buffet's Berkshire Hathaway over the same time period. I would guess that the tax ramifications are far from trivial. We traders factor the high turnover into our business models. Not sure if "investors" who follow Cramer's hedge fund trading approach do the same. I'm sure Cramer is familiar with the study. Instead of citing issues with the study - he simply dismisses the