This isn’t normal fare for Watchdog Milwaukee but it’s definitely falls into the category of a story that needs a little watchdogging.

For those historians out there, you’ll recall that the Great Depression was started with a massive stock market crash. What was one of those things that caused that crash? It was loose rules which allowed “investors” to short a stock on the down tick. That means that as the price of a stock is falling, someone who wishes they would have purchased a short position, could purchase one. It created a death spiral in the stock market and many stocks took a dramatic plunge and the market collapsed.

In light of that tragic day, rules were instituted to lessen the possibility that the same thing would happen again.

Those rules have again changed.

Setting the stage for a dramatic plunge in the market, it is now again allowable to short a stock on the down tick. This can cause good companies who are experiencing what would otherwise be a normal dip in their stock price, experience the rug being pulled out from under them. Unfortunately, legitimate investors, and I’m not talking about the bottom feeders who make their living shorting stocks, can see their entire life savings stripped away from them.

This tactic requires tight monitoring of the market but with so many people who can now trade online from the comfort of even their homes, someone who sees a stock going down could easily jump on the bandwagon. Good, legitimate companies with strong growth could see their values decimated by these bottom feeders.

Investors be advised.