Media Uptick Rule?
Until relatively recently (July 2007), equities markets in the US had something called the “uptick rule” which means that you couldn’t short a stock unless the immediately preceding transaction was at the same or higher price. The rationale of this rule is to prevent a run away downward spiral in a stock (or stocks, as the case may be). Most other major markets have an uptick rule and in fact the US banned short selling altogether last week (the ban of which expired today).
I actually think we might need a “media uptick rule” imposed on an emergency basis that can stabilize confidence. This rule would limit negative media news to something like 30 minutes per day unless the previous day’s news was the same or better.
Think about it. Why are people afraid of guns and airplanes when swimming pools and cars are far more dangerous (check out Freakonomics if you don’t believe me)? It’s in part because of media attention. I could give another metaphor about timeouts and my 2 year old son, but you get the point.