Wednesday, March 11, 2009
Rally Pigs : Up Tick-Tock
(Citizen King gives a good breakdown as to why reinstating the upstick rule will have no material effect other than adding to the FAS 157/uptick/overpay for toxic bullisht rallymonkey trifecta. As a humorous aside was up early with one of my wee bairns and noted that futures were flat with Bubblevision stating that the Geithner interview on Charlie Rose didn't cover any new ground. After putting the little one back to sleep(30 minutes later) the bubblelistas are running a crawl stating that Geithner is promising new capital injections to banks with a 5 point breakdown of the plan and futures are up 1.5%! The Wizard at work. -AM)
The King Report
March 11, 2009
The other main rationale for yesterday’s explosive rally is talk that the uptick rule will be reinstated. As we have mentioned in the past, and we related to reporter yesterday, any professional trader with a modicum of guile knows how to circumvent the uptick rule.
We have decades of experience is seeing this done. We used to accommodate hedge funds by buying from them on an uptick on a regional and then hitting the bid. The hedgie would provide a generous commission. You can get a counter-party to sell you a stock with a hedging derivative; so you can then pound the stock. You can do an EFP on baskets. You can sell another trader a deep in the money call spread, stamp an exercise notice and pound the stock in concert with the other trader. We witnessed this scheme regularly on the CBOE – about 30 years ago!
So when the financial media or traders appear to talk about how the uptick rule will halt abusive short selling, they really don’t understand the market or the major players. But the uptick rule will impede day traders and fantasy stock traders.