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Tech Check
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Who'd have thought that Massachusetts representative Barney Frank could become the patron saint of the downtrodden, manipulated Apple Inc. investor?
A little while ago, the Congressman hinted that the so-called "Uptick Rule" was back under consideration by the Securities and Exchange Commission, and that it could be restored soon. The SEC moments later told our own Mary Thompson that before any rule changes would be implemented, there would be a healthy amount of public comment. So "soon" remains a nebulous concept, but it appears that there may be some movement on this front.
Still, I have one word about all this: Bravo!
Back in December, I addressed the need for the Uptick Rule, a way the SEC can protect investors by reigning in short-sellers. (See a very good definition here.) The website MacDailyNews.com had taken the lead in trying to bolster support for the idea back then, especially as rumors about Apple [AAPL
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] and Steve Jobs and his health were reaching fever pitch, and Apple stock continued to get crushed by every rumor, no matter how silly and stupid. And grassroots websites are cropping up as well, trying to goad legislators into bringing back Uptick. And it's about time. In fact, it's so ridiculously late that I hope the SEC's idea of a public comment period ends up happening on a lunch hour in the very near future.
Fact is, rules and laws simply have not kept up with the Wall Street of the 21st Century. Day-traders equipped with massive computing power backed by enormous wealth at major firms, or individuals with a penchant for rumor-mongering on internet message boards that connect with blogs, who connect with mainstream media and can therefore manipulate stock in a way never possible before, means individual investors playing by the rules simply don't have a chance when it comes to legitimate investing. We live in a world where investors and news consumers simply don't know whom to believe anymore. Should a blog written in somebody's parent's basement, with no grounding in fact, carry the same weight as a front page missive in the Wall Street Journal? The obvious answer is no, but some days it does. And other days it doesn't. With no rhyme or reason, and no consistency, and the investment world changing so quickly, and information being so instant — accurate or not — the time for government protection is at hand.
That's what a government ought to do anyway. Not restrict. But protect. And enforce. This isn't just about Apple and massive manipulation that hangs around the neck of the company's stock; it's about Bernie Madoff, Allan Stanford, and scandal after scandal after scandal. It's about putting some teeth back into the SEC so it can do its job for a change.
I have written extensively about the huge number of shorts out there having their way with Apple stock. The Uptick Rule could dramatically turn that around. I know the broader Nasdaq is soaring today. It's a huge rally. And Apple shares are contributing to it. As well they should. Removing short-selling as an overhang on Apple shares could do a lot toward letting this stock finally breathe, giving investors a real shot at focusing on the fundamentals rather than the crud clouding the opportunity.
I wrote before that the arguments against an Uptick Rule are compelling on their face; that a free market should be exactly that. Free. And that we're all entitled to free speech, even if some use that right for personal gain. But that right needs to be curtailed when its abused, and manipulators bend or break the rules at the expense of other investors. I love the free market. I'm a free-market guy. Which makes the call for any increase in government intervention a difficult one to make. But the field has to be level, and we all have to play by the same rules. Long or short. We gotta play fair.
Apple is a great example of a prime beneficiary of bringing back the Uptick Rule. But the real beneficiaries are any investors with money in the market.
Questions? Comments?
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