Yes, it’s all finance all the time, here at the Pontiff. Where else can you go to get your daily dose of extralusionary intelligence?
Once again it’s a New York Times article Maybe Short-Selling Isn’t So Bad, After All. Now I don’t know much about how the changes in shorting stock (the removal of the uptick rule, where one could only short the stock on an up move in the stock, and the banning of shorting of a large group of stocks) effect trading, but I think I’ve plaid enough games in my life to know that the following argument is a good way to spot a sucker:
Has the rule’s removal been an important contributor to the bear market of the last year? Professor Reed doubts it. Before scrapping the uptick rule, the S.E.C. ran a pilot program to test the possible consequences. In the test, the rule was lifted from hundreds of stocks that were part of the Russell 3000 index. The trading patterns of these stocks were exhaustively analyzed in a number of academic studies, all of which concluded that the rule had no significant impact on those stocks’ price movements, Professor Reed said.
Let me get this straight, you site as evidence that the removal of the uptake rule didn’t have any effect during a pilot program in which announced securities which were exempted from the uptick rule as evidence that the uptick rule once unleashed on the entire market doesn’t have an effect? Suppose that you are a player in such a game, and it is true that you could use the removal of the uptick rule to your advantage. What would you do during the pilot program? Nothing at all, of course! Why spoil the upcoming fun? Maybe I’m missing something, but pilot changes in rules of a game don’t necessarily reveal how the players will act when the pilot goes full scale, do they?
In a similar vein, this story from NPR (oh crap I’ve revealed myself a lefty liberal, NYTimes and NPR, oh my!) this morning on Treasury Secretary Paulson tells me that he is a great player of games. The story includes a description of Paulson playing paddle tennis for the first time and how his partner ran him around like crazy and was totally demolishing him to the point that he thought Paulson as going to fall over. The partner asked if he wanted to stop and Paulson said “no” but ended up winning by powering through. The final quote is from Paulson’s sparing partner:
“He’s been trying a bunch of things, in the best of faith, and they haven’t worked. And it’s just like he took a breadth, and he said ‘we’re not going to let this go, we’re going to turn it around.'”
Most people will probably focus on Paulson’s perseverance, but what I see in this quote is a game player. “He’s been trying a bunch of things.” If that doesn’t describe the modus operandi of a player of games, I don’t know what does.