THE BLOG
04/30/2009 05:12 am ET Updated May 25, 2011

Stop the Short Sellers

There's probably a baseball analogy in here somewhere but I'm not sure where it is. Oh well, here goes. A shortstop's job is to stop players from getting to third base and if you can't get to third base, there's no way you can score a run. And while I'm at it, the image of Chris Dodd in an umpire suit standing on the third base line with his thumb in his ear, is sort of sweet, too. As is, the image of Tim Geithner in a catcher's mask looking the other direction while rogue players steal home (it's not his fault, it was in their contract from the previous season).

But, baseball analogies, aside, the truth is, we have to stop the short sellers. England outlawed short selling in the 1800's and you can track the beginning of the downturn in the stock market from July 6, 2007, the day the Bush Administration deregulated and got rid of the "uptick" rule. This SEC rule mandated that every short sale transaction be entered at a price that is higher than the price of the previous trade. Introduced in the Securities Exchange Act of 1934 as Rule 10a-1. It was implemented in 1938. The purpose of the uptick rule was to prevent short sellers from increasing the downward momentum when a stock is already experiencing sharp declines. It's gone. And, now, every time the market has an upswing, the short sellers, (or as a broker I know refers to them, "the vultures), just lay in wait to come in and drag everything down.

The stock market had a sharp spiral downward this morning. Some are blaming it on GM and uncertainty about the upcoming G20 conference. But, really, an analyst at Morgan Stanley named Jason Todd "determined that" investors should sell U.S. stocks following the steepest rally since the 1930s because earnings are likely to keep weakening. And the vultures came out swinging. Good job. It's easy in a market as volatile as the one we're in, now, to come out with a self-fulfilling prophecy.

And, not to sound like Pollyanna but it's time for some old-fashioned values and common sense. Invest in something you can believe in. Don't create a toxic environment where people can profit from failure and loss.

We ran into someone on the street over the weekend who is in the consulting division of Goldman Sachs. Their job is to assess business plans and make recommendations for investment or raising capital for same or taking a company public. Do you know how many companies they've recommended in his office in the last year. Zero. Cash-saving tip to Goldman Sachs, shut down the consulting department. If all you're going to say is, "no", you could do it on a pre-recorded message.

Shouldn't some of these companies who've taken bail-out money be required to sometimes place a bet? And not to bring up another baseball analogy, but you can't win if you don't play. And neither can any of us.