Monday, October 13, 2008
A Rally Under Way
As I write this, I have read that the DOW has jumped 500 points. That's the good news. It seems that the markets are calming down and the panic has eased. The bad news? We really don't know if there is bad news in the offing, we'll have to see how the week goes. However, I hear rumbles of concern that we are going to be seeing hyperinflation within the year. That would be very bad news indeed. Stay tuned.
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It's a sucker rally, and would be a really great opp to short except that the S.E.C., in its infinite wisdom, is drafting ANOTHER rule further restricting short sales.
I got notice from our clearing firm today that the new rule will restrict short sales in any stock that dropped 20% or more the previous day. But there will be classes of traders EXEMPTED from the new rule: NYSE specialists, NASDAQ market makers, hedge funds, arbitragers, and block traders.
In other words, large traders will be able to short, but no one else will.
And since large traders pretty much control the market by virtue of out-weighing the rest of us, they will be able to short the bejesus out of stocks while everyone else gets hammered.
The sick joke is that trying to control the movement of the market by rules like this is symptomatic treatment that does not address the root cause of the sickening drop. The stock market rout came AFTER the credit markets started to unwind
And the credit markets are continuing to unwind despite our having shoveled more than $2 Trillion to date to prop them up, because this country is flat busted broke, no two ways about it. The stock market only reflects, it does not cause the problem, and idiotic rules and restrictions will not change the fact that we tried to live and drive the economy with phantom money for 10 solid years, and now owe more, jointly and severally, than we can ever hope to repay.
Bankrupt is bankrupt, and all the attempts to shift the debt, or brush it under the rug, or act like everything is OK as long as we keep the stupid stock market levitated, are only going to prolong the pain of transitioning back to something resembling an honest economy.
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