wsj Jan 27'
Gold Slumps to Four Month Low
wsj jan 25
ETF Investors Slowed Gold Investments in 2010
and first of many stories of this type large medium and small:
wsj jan 26
A resource for debunking the investments myths peddled by the financial press and Wall Street hype and presenting rational,sensible investing approaches based on sound research and academic findings. This blog is maintained by Lawrence Weinman MBA an independent Registered Investment Advisor www.lweinmanadvisor.com
Figures from the Commodity Futures Trading Commission, the US regulator, reveal very bullish bets among money managers such as hedge funds.
In late December they owned a record net “long”, or buying, position in crude oil futures and options on the New York Mercantile Exchange. In September the same types of traders held record net longs in corn.
As well as hedge funds analysing global economic trends, money managers include trend followers who use computer programs to ride market momentum and “high-frequency” traders who move in and out of positions in microseconds. Electronic traders helped send volumes last year in energy, metals and agricultural commodities at the CME, the largest US futures exchange, to a record.
But how much credence should we place in forecasts like these?
Byron R. Wien, the veteran strategist who has been issuing market forecasts for decades and is now vice chairman at Blackstone Advisory Services, says the quick answer is this: Don’t take these forecasts too seriously, and don’t view them as the literal truth.
Aaron Gurwitz, the chief investment officer at Barclays Wealth. “I don’t think market forecasts provide very useful information,” he says.
Instead, he focuses on asset allocation and on expected returns, volatility and correlations of specific asset classes over long periods. “I would really like my friends and neighbors to stop asking me whether I think the market is going up or down,” he says. “Investment strategy is the practice of decision-making under uncertainty,” he says, and it’s not wise to act as though the future is anything but uncertain.
December’s 6.5% melt-up on the S&P 500 caught a lot of investors by surprise, not least of which were active managers. According to numbers put out by Bank of America-Merrill Lynch yesterday, 39% of actively-managed funds beat the market in December — not bad, but lower than the 44% that beat in November.
Entering December, a quarter of funds were running ahead of their benchmark indexes, Subramanian writes Tuesday in a note to clients. But another dismal month, with fewer than half of managers beating their bogies, took that number down to a dismal 20% by year-end.yet amazingly the merrill research report argues:
With a new year upon us, and the economic recovery back on track (fingers crossed), this may be the moment to separate the wheat from the chaff, as far as active stock pickers go. With stock clustering starting to wane, good companies will likely be freer to rise on their own fundamental strengths — and weak companies more likely to fall on their inherent weaknesses. In BAML’s parlance, then, this is the year stock pickers “make a comeback,”indeed hope springs eternal
Computer trading, dark pools and exchange-traded funds are dominating market action on a daily basis, statistics show, killing the buy and hold philosophy still attempted by many professional and retail investors alike. Everything moves up or down together at a speed faster than which a normal person can react, traders said.
High frequency trading accounts for 70 percent of market volume on a daily basis, according to several traders' estimates.
The theory that buy-and-hold was the superior way to ensure gains over the long term, has been ditched completely in favor of technology," said Alan Newman, author of the monthly newsletter. "HFT promises gains are best provided by holding periods measuring as few as microseconds, possibly a few minutes, or at worst, a few hours."
The problem is only made worst by the proliferation of exchange-traded funds, traders said. The vehicles, which make trading a group of stocks as easy as buying and selling an individual security, passed the $1 trillion in assets mark at the end of last year, according to BlackRock. This is probably why all ten sectors of the S&;P 500 finished in the black for two consecutive years, something that's only happened one other time since 1960, according to Bespoke Investment Group.If the above has occurred for 2 consecutive years, why would there be any evidence to expect a "stock pickers" maket going forward. After all the growth of high speed trading and etfs in accelerating, not slowing.
In 2010, a growing number of companies offering actively managed mutual funds finally began to get creative in their efforts to halt the erosion of their business caused by low-cost, index-tracking exchange-traded funds....
The fund companies have had success in marketing:The alternative funds are actively managed, too, but they aim to invest and perform differently from funds that hold standard investments like stocks or bonds or cash. Alternative funds may hold uncommon assets or use particular strategies that historically haven't moved in lock step with plain-vanilla investments. For instance, many of the alternative stock funds buy some shares in hopes they will rise, while also placing bets that other shares will fall in price.....
Investors seem to like the idea. The funds have taken in more than $22 billion in the past year, Morningstar says....and they have been marketing them for good reason (for them):
One big reason the fund companies like alternative funds: They can charge much higher fees than they do for traditional funds because of the more complicated strategies, which can include sophisticated derivatives. The average management fee on alternative stock funds is 1.04%, compared with 0.62% on actively managed funds holding big-company U.S. stocks, according to Morningstar.