What You should Know about Stock Market Window Dressing The Art Of Looking Smart

As an investor, and as we are all modern investors, it is important to understand the inside and outside of stock market price data that we use to assist in decision-making. Investing in Wall Street can be a minefield for those who don't take the time to understand why stocks are at the levels stated in the quarterly report. At least four times a year, securities prices are a function of institutional marketing practices, not a reflection of the economic strength you want to see as a major determinant. Not approaching ... I've heard that towards the end of each calendar quarter, the financial media is effectively reporting that "window dressing activities for institutional investors" are in full swing. But it's as wide and deep as it gets. What are they talking about, and just what does it mean to you as an investor? There are at least three forms of Window Dressing, none of which should make you particularly happy and all of which should make you question the integrity of organizations that either authorize, implement, or condone their use. The better-known variety involves the culling from portfolios of stocks with significant losses and replacing them with shares of companies whose shares have been the most popular during recent months. Not only does this practice make the managers look smarter on reports sent to major clients, but it also makes Mutual Fund performance numbers appear significantly more attractive to prospective “fund switchers”. On the sell-side of the ledger, prices of the weakest performing stocks are pushed down even further. All fund management will take part in the ritual if they choose to survive. This form of window dressing is, by most definitions, neither investing nor speculating. But no one seems to care about the ethics, the legality, or the fact that this “Buy High, Sell Low” picture is being painted with your Mutual Fund palette. A more subtle form of Window Dressing takes place throughout the calendar quarter but is “unwound” before the portfolio`s Quarterly Reports reach the glossies. In this less prevalent (but even more fraudulent) variety, the managers invest in securities that are clearly out of sync with the fund`s published investment policy during a period when their particular specialty has fallen from grace with the gurus. For example, adding commodity ETFs and popular emerging market stocks to large-capitalization funds. Profit will be taken by the end of the quarter and the fund's inventory report will not change, but quarterly results will improve. The third form of window dressing, called "survivorship," affects only investment trust investors, while others undermine the information (and their market performance) used by individual securities investors. increase. You may want to study it. The media can't understand why these "normal business" practices are so superficial. Perhaps 90% of stock market price fluctuations are the result of institutional trading, and institutional money managers seem to be more interested in politics and marketing than investment. They try to impress key clients with their brilliance by reporting ownership of all hot tickets and reporting that there are no major losers. At the same time, work with the performance statistics contained in the promotional materials. They tried to "buy high and sell low" the investment strategies accepted in the investment trust industry. Individual securities investors, on the other hand, receive inaccurate signals and suffer collateral losses by moving in the wrong direction. From an analytical point of view, the reality of market value in this quarter (artificial demand for some stocks and unreasonable weakness of other stocks) is based on statistics for almost all securities or market sectors. Remove from conflict with the fundamentals of. But that's even vaguer and doesn't mean adorable. For fun, consider the impact on the "demand" of an ever-growing list of ETFs. I don't think I'm the only one who thinks the real meaning of stock prices is less and less relevant to the corporate economy than the morning betting line of ETF ponies ... the new millennium dot com. [Do you remember the "Circle of Gold" from the '70s? Isn't GLD and IAU almost the same? ] As if all these institutional powers weren't enough, we also need to consider the impact of tax-based transactions in the always fun final quarter of the year. You never guess that the purpose of your investment is to make money (after seeing millions of certified accountant-managed taxpayers happily lose billions of dollars)! The net impact of these (euphemistically named) "year-end tax-saving strategies" is similar to that of Type 1 window dressings above. But this is an out-of-quarter purchase opportunity that you really shouldn't miss. Simply put, buy the lows for the 52nd week of November, be amazed at the regular and mysterious "January effects" reported by the media, and get simple profits. There may be no way to decipher the true value of the common stock. Is the market price a function of corporate fundamentals, anthropogenic demand for "derivative" securities, or various forms of window dressing for institutional investors? However, this is a condition that can be used to bring great economic benefits. Transactions are the only operational one, as securities prices are less relevant to these old-fashioned basic themes such as dividends, expected returns, and unfunded pension obligations, and perhaps more relevant to anthropogenic demand factors. Seems like a choice. Buy a devastated (but investment grade) problem and profit from an unreasonably high level of problem-based on basic quality standards ... and do it in front of big players, please try. Simply put, the secret to success is to buy investment-grade stocks at bargain prices, boil them until they reach a reasonable and predefined