I just got off the phone which involves Southwest Airlines. Booking a flight to San Francisco the breeze. I'm flying in the market to the bay area in April for some people wedding. A mate, Babe (yes that's their real name) is embedding down, tying the knot and marrying this woman of his dreams. While sorting out a great travel plans I took a closer inspection at the calendar and that i realized a huge milestone was ready to be crossed.
It's close to the end of the quarter and suddenly you will find many market volatility is to produce sense. I believe the recent rallies are you searching are being caused by large funds wearing their portfolios.
What do i mean by that?
Every investment manager's examined on their performance in late every quarter - 4 times per year. It doesn't matter if investment manager's running a mutual fund maybe a hedge fund, the saturday or sunday the quarter is crucial. It's like the school student who slacked from semester only to study hard while keeping focused when it counts - at mid-terms and competition.
You're probably asking yourself why ending of the quarter concerns to these guys?
Remember, fund managers handle millions and billions for investors. They're paid primarily on the size of their fund. That's right. The more money they manage greater their paycheck. A nice job if you can get it. Naturally they do not want investors to pull profit out. That would make bad possibly leading to smaller paychecks, or shangri-la forbid, losing their activities.
Every quarter these loan managers are closely checked out. How'd they do resistant to the market? What's at first portfolio? How's it has performance? Next Monday is ending of the quarter these fund managers are doing everything in their capability make their portfolios look nice.
So what do they do?
Most of the investment dollars away are invested long only (meaning professions the market to go up in value). And for that reason, fund managers want to seek out their investments rally and offer good performance numbers. These managers follow "Window Dressing". However they dump small lesser-known provisions and anything performing inaccurately.
Think about it, who wants to see millions of products of Bear Stearns in her own portfolio after the passing away? Then they work hard to prop up purchases. They make the holdings look better by purchasing more and bidding the price.
Is this legal?
Remember we are work on very smart people. They won't push a stock higher using a last day of a lot of people quarter. No. Not any too obvious. Instead they will transport bidding the stock up a few days prior to the district end.
I think a certainly better question to ask is to find: "Is this the right thing to do". Clearly the correct answer is no. I firmly they think this portfolio window attire stuff is disingenuous. No matter what my feelings, it even so happens.
Do fund managers really inside a to move stocks this much? Of course they certainly, they manage enormous pounds.
Their buying and selling may have a huge impact on any stock. The impact is magnified on smaller than average mid cap stocks for low trading volumes. Money managers know this. Why do you consider they slowly build into and out of positions? A large buy order hitting industry would drive the ignore up significantly. A sell order the actual opposite effect.
So I wouldn't look at this latest rally as a sign of a market bottom. I still think it's a regarding market rally being judging by quarter-end window dressing by money managers. I would expect most of this week to whipsaw available as major institutions pretty-up their full capacity portfolios.
Can we income on this phenomenon?
The how to make money in this market is to stick to your convictions. We're contained in the confirmed bear market. The obvious trade during these times is selling throughout to rally and buying after a dips. I'm presenting tight to my Nasdaq put options.
Buying near the money alternatives on the various market indexes is a sure way to profit from many people moves... just make sure you're your past correct side of the particular problem trade. Lastly, for those investors with number of years horizons (5 years or more) now are sometimes a good time to turn over averaging into quality stock option and ETFs.
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