Then, on July 6th of 2007, the SEC decided, in its some sort of bizarre and infinite wisdom, to pass a little-noticed Rule 201.   That got rid of this whole protection for you.  That got rid of the uptick rule, which was meant to make it so that you would have a level playing field...  and it gave the short sellers the upper hand to rip your lungs out...

The academics who supported the rule change - who said you had to get rid of the uptick (rule) - they knew exactly what they were talking about too right?...  even though they've never traded for a day in their life...  and my worst instincts tell me that these people were utterly clueless to the damage this would cause to you and your investments.   They went along with it anyway...

They tested it out during a totally positive period, where it made no sense to raid down stocks at all...  They didn't test it in a 1930s-like period... when the market was a heck of a lot like this one...

You don't change a rule... you don't test a rule... in a bull market, that enables people to short.  You test it in a bear market, like this one.  And now we've had the big test, and it's failed miserably.

Believe me, if they hadn't suspended the uptick rule... had they done the study this year... the SEC would never had made this choice.

Now, in its commentary, the SEC told us, "sharp declines, such as those induced by bear raids, are highly unlikely to occur in today's markets, which are characterized by much smaller spreads, higher liquidity, and greater transparency, than when the rule was adopted, almost 70 years ago."

I'm sorry...  I've got to suspend any statesman-like demeanor at this point...

These guys are total morons about the stock market... they just don't know.  This is exactly what happened when they suspended the uptick rule.  And, if they couldn't see it coming, then we do need some new people at the SEC...

The smaller spreads didn't matter at all...  The higher liquidity?  Well that was because the brokers used to have a lot of money to lend to make orderly markets...  Not anymore... that's vanished.  The SEC thought it would last forever... that's gone.

The SEC went on to say, "High levels of regulatory surveillance will reduce the risk of undetected manipulation."   Again, that was outrageously wrong.  The regulators are working in total retrospect.  The rates do the damage...  they destroy the confidence...  the stock gets destroyed... the self-fulfilling nature of the declines gets reinforced as investors say, it must be going out of business... really terrible... and they cause a run on the bank... they take their deposits away... 

That's what happened in the Bear Stearns (BSC) raid, as people took their deposits away.  That's what happened in the Lehman (LEH) raid, on Friday...  people took their deposits away...  That's what happened in the Merrill (MER) raid...

All these were allowed to happen, because of this change in the law by the SEC.  They never would have happened...

By the time the regulators get involved, it's too late for you.  And, because people are more fearful than greedy on a decline, nobody wants to get in front of the train...

A $10 billion hedge fund selling short 500,000 shares simultaneously can take down any of your stocks...  and you, and the companies themselves, are helpless in the face of this ridiculous rule change...

I bet you have lost tens of billions of dollars because of what the SEC did...

The SEC - the guys who are supposed to regulate and stabilize this market - had no idea what they were spawning when they got rid of this rule... a rule that turns short sellers into bad guys of the most nefarious sort...  They're not just betting against stocks anymore...  Now they're raiding those stocks, driving them lower and lower, and hurting you, and sometimes great companies, in order to make themselves a quick buck...

The uptick rule was a brilliant creation... it eliminated savagery...  Its elimination makes no sense...  and we will not have peace in the markets until it's restored.