(Tea Party 247) – As the coronavirus crisis rages towards a crescendo (hopefully, at least), it is nearly unanimously agreed that the crashing stock market could leave a much more longer-lasting impact than the virus itself.
But could there be more afoot than simply fear over the virus?
In a guest post for The Gateway Pundit Frederic Sauer speculates that this could be the case.
Main Street investors have increased their buying of stocks during the current market downdraft.
Where is all the selling pressure coming from?
Wall Street short sellers are attacking the market to make a killing, tank the economy, and get Trump out of office.
So, what is to be done? He is quite clear: “Trump must reinstate the uptick rule to stop this now!”
Recent data shows that main street investors have increased their buying of stocks during the current dramatic downturn. And yet the market is tanking—the Dow closed down 9.99% today. Where is all the selling pressure coming from? It is from short sellers who are using the coronavirus panic to attack the market in an attempt to steal a fortune from Main Street investors. Short sellers do not have to own stock to sell it. They borrow the stock, sell it, and hope to make money by buying back at a lower price. The short sellers are attacking the market by relentlessly borrowing more and more stock and selling it, overwhelming the Main Street buyers.
This is how George Soros made a fortune by short selling the British pound.
As the market goes relentless lower and lower, Main Street buyers are pressured to sell as they see the value of their retirement assets tanking. This further feeds the downdraft to the advantage of the short sellers.
He goes on to explain that just a few more days like those we have seen this week, and Main Street investors, particularly those nearing retirement, could pull their money out of the stock market, taking significant losses for themselves and giving profits to short-sale traders.
The solution is simple, Sauer explains.
“Trump must reinstate the uptick rule.”
The uptick rule worked great from 1938 to 2007. The current modified uptick rule in place since 2010 doesn’t work. Reinstate the uptick rule and stop the short seller attack.
The Uptick Rule in place from 1938 to 2007 prevented a short sale of a stock unless the previous trade caused an increase in price (an “uptick”). It was put in place by the Securities and Exchange Act of 1934 in response to the stock market crash in the Great Depression to prevent future attacks on the market by short sellers.
The rule was eliminated by the SEC in 2007, and the market crash of 2008-09, which was in part a short seller attack, followed almost immediately. The resulting crash absolutely helped Democrats win in a landslide in 2008.
In response, the SEC introduced the “Alternative Uptick Rule” (Rule 201) in 2010, “which imposes restrictions on short selling only when a stock has triggered a circuit breaker by experiencing a price decline of at least 10 percent in one day.”
Individual stocks are falling less than 10% each day during the current market decline, so they are not yet triggering a short selling uptick restriction.
Stocks are declining 5%, 7% or 9% each day for several days in a row, but not yet 10% in one day, so the short-seller attack on the market can continue.
To reinstate the uptick rule would put an end to the short sale attack, and the market downdraft would stop, Sauer concludes.