Germany is going nuclear with their insistence on issuing a ban on short selling. Do they not pay attention to history? What did that ban in 2008 do to our stock market after it was widely implemented? Lower and lower prices. Because you cannot short sell a stock (for only a limited time) does NOT mean you cannot sell your holdings. Such rules have NEVER been beneficial to markets as the government tries to 'game it' and gain the upper hand. However, that hand swings and misses each time. Once in Pakistan this was implemented and the next several months saw the Karachi market decline more than 50%!
Even though Germany is far from a democratic society, perhaps they could learn some lessons from the past and let markets do what they do. Government intervention and rules are not always the answer.
From the Wall St. Journal online:
"Last-minute maneuvering in the Senate allowed the Federal Reserve to sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors.
Pressure from the Obama administration led Senate lawmakers to alter a provision pushed by Sen. Bernie Sanders (I., Vt.) that was gaining momentum despite opposition from the Treasury and the Fed. It would have largely repealed a 32-year-old law that shields Fed monetary policy from congressional auditors.
The compromise, endorsed by Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and the Treasury, would require the Fed to disclose more details about its lending during the financial crisis. It would also require a one-time audit of those loans and a one-time review of Fed governance."
What do you think about the Fed's right to remain somewhat secretive to avoid political manipulation vs. the right of the taxpayers to know how money is being printed and spent?
If any of you had seen Animal House some 30 years ago, you may remember a fraternity of non-conformists who were just having a good time in college. Well, take a look a this video clip, but let's substitute players with some of those who took center stage in the financial crisis. Perchance to dream a bit, but maybe this is the attitude taken at the time? Maybe this modern day fraternity is also something to pay attention to! Perhaps they were saying this to any naysayers who did not agree with their plan.
Animal House Player as Financial Crisis Player
Otter Hank Paulson
Flounder Larry Summers
Hoover Alan Greenspan
Bluto Tim Geithner
Niedermaier Chris Cox
Boon Robert Rubin
Stork Ben Bernanke
Dean Wormer Anyone From Congress
This is a classic case of bad news taking a stock down, but the company being likely strong enough to survive and rebound. It reminds a bit of the Audi problems in the 1980s, which of course were on a smaller scale -- but they blew over fairly quickly. Toyota has built up a long-standing goodwill with customers around the world -- while this may have been mildly damaged, it can be regained by maintaining high quality standards and vigilance.
For all the talk of "Buy American", let's not forget that Toyota manufactures cars and trucks in states like Kentucky, Alabama, Texas, Indiana and West Virginia. Many other foreign car makers also build a great many vehicles and parts in the USA, providing good jobs for Americans. And these states are grateful for this employment ... as are their politicians.
While there certainly is risk in TM shares due to the overall market, the world economy, as well as the Auto Industry itself, I maintain that the "bad news" drop in the shares is just about over starting with today.
TM Daily Chart
This is just TOO MUCH. Obama wants to slap the banks silly once again, this time taking away their ability to trade prop desks and invest/own hedge funds. Are you kidding me? Take away the lifeblood (yes, more than transactions) of these traditional iBanks, and what do u have left? Let me get this straight...these are public companies, right? And they 'normally' use private money to create capital? Now they cannot use private capital (TARP money was paid back, remember?) for trading purposes? This smacks of a social terror we should all fear, nevermind the cap on compensation issue, which is also something out of socialist playbook. Right before our eyes the very freedoms our country were born with are being stripped away, one by one. Without regard for the common good. Are the banks the cause of the recent problems, or just the effect? I think more of the latter than the former, but regardless of my view this is just plain wrong.
What do we have, three years left on this term? Perhaps the outrage of the American people will signal a revolt that may turn his views 180 degrees. As an optimist, I'm hopeful....as a realist, I'm doubtful.
So, Washington wants to punish Wall Street for the 'evils' of the past few year. Sound familiar? Sure it does. It seems everytime someone loses and it appears Wall Street is the big winner it's time to dole out the punishment. Remember the tech bubble? Who was to blame and who bore all the consequences afterward. You got it. Now, the winds are blowing about a trader's tax, which has the propensity to really drive stake through the heart of the markets. Nevermind the volatility, how about wider spreads, higher trading costs (passed on by the brokers, of course) and less turnover. It's going to be your Grandfather's market once again!
I encourage everyone to vote their conscious and take a stance on this bill. In my opinion, it's just not right and will be the START of higher fees and taxes...not the end. The petition link is below. If you're a trader, think of the impact on your business. An active trader stands no chance of surviving in such an environment. The bogey is even higher. This tax is an easy way to strip the little guy of any freedom of trading. It's that important!
http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/
Last night, James McClung from Stock Shotz interviewed me about markets, politics and other issues. It was a much fun, so here is part one of the session.
One longer-term indicator I've watched with interest is the Uptick Rule (in which stocks cannot be sold short without first having an uptick). This rule was put in place in 1938 after the sharp drop in 1937, as a means to slow down the crash-like drops that can cascade very quickly without such a barrier in place.
Isn't it interesting that the uptick rule was eliminated on July 6, 2007? Note the sell arrow on the chart of the Dow "Diamonds" ETF (DIA) which trades about 1/100th the value of the Dow Jones Industrial Average on that date. The uptick rule was eliminated as it was claimed to be a relic that modern technology no longer required.