"After safely protecting investors for over six decades, a little known SEC rule was quietly removed on July 6, 2007. With the removal of this rule all the rules of trading and investing in the market went out the window. One of the reasons for the market’s current volatility is a direct result of this rule change. This major SEC rule was designed to protect investors. With the removal of this rule, professional traders and hedge funds will be able to suck money out of the market and your portfolio in no time flat. Why this rule that has stood the test of time since 1938 and was put in place to protect investors was removed is a big mystery. Why now? Here’s what I suspect happened… some large hedge funds got together and lobbied to have this major trading rule removed. It’s just that simple. Why else would the SEC act out of the blue and remove this very important investor safe guard? I suspect with this rule change the hedge funds have just been given the keys to Fort Knox." - Adam Hewison
Cramer on his show had pleaded the SEC to reinstate the Uptick Rule, the very trading rule (put into effect in 1934) that was designed to protect investors in the era after the Great Depression. Incidentally, with the suspicious removal of the Uptick Rule last July, the market started "reacting" to the subprime issue and everything imploded since then. The SEC has essentially ushered in A Trojan Horse filled with malicious Bears. The Uptick Rule was designed to prevent a horrifically quick plunging of stock prices even in good companies (like what we're seeing right now, in a matter of 2-3 months). Bear Stearns, for example, collapsed so fast, causing hysteria and a "run on the bank". Any bank, no matter how big, will become insolvent when there is a "run on the bank", where account holders and investors all go pull out their money all at once. The bank won't be able to pay all the account holders all at once because it normally doesn't hold that much cash in reserve. The bank then would likely declare bankruptcy. The people who owe the bank money will also be in trouble because the bank would want back its loans it gave out to borrowers.
This is what the market bulls are up against. This is VERY bad. The removal of the Uptick Rule thus has an indirect effect of causing a domino banking panic. Remember, the Uptick Rule was in place since 1934. Without it, we have no freakin idea what danger we're up against. Bernanke has very difficult work ahead of him because he is facing something no other fed chairman has ever faced since the Great Depression. It is well known that no one understands the Crash of 1929 more so than Bernanke, as he is the best historian on that era. Even so, he may not be ready for what is about to come. He has very little time left.
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