Tuesday, April 07, 2009

Don't worry about earnings we can keep changing the rules...

I won't spend much time on the uptick issue, but just know it's another tool of the SEC to eliminate a nature market and create an artificial market.

The SEC is planning to announce on Wednesday a reinstatement of the uptick rule or some modification that will curtail the way short sellers operate.

"One includes reinstating the "uptick rule," a Depression-era rule abolished by the SEC in 2007 that prevented traders from short selling unless the price of the stock from the most recent trade was higher than the previous price.

Short selling is the sale of borrowed shares by an investor hoping to profit by buying an equal number of shares later at a lower price to replace the borrowed stock. The rule was abolished after several studies showed it had little effect. "

Remember the ban on short-selling last summer? That also had no meaningful impact on the markets, but they tried it anyway. This is likely to goose the financial stocks and the market as a whole, until someone realizes it's just another meaningless PR move.

Consider the inverse of this uptick rule - what if you had to wait for a stock to move down before you could purchase it to prevent irrational spikes in share prices? Of course that would make no sense. Either way be aware that the market is looking for some kind of news and like the FASB "Alice in Wonderland - Mark to Market" rule it could spark a little buying interest today and tomorrow.

Back in the reality based world - Confidence among US CEOs fell to it's lowest level in 7 years in the first quarter. The latest reading showed confidence at -5 (confidence ranges from -50 to 150 - anything under 50 signals weakness).

"By margins of at least two-to-one, executives said sales, investment and employment would drop over the next six months." I'll note however that CEOs tend to lag the real-time results of their companies. They tend to stay bullish and bearish on their own businesses for far to long at inflection points.


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