Market ends lower with less trading days and shortened hours on last day. Institutional investors should have completed portfolio trimming. But some hedge funds are still speculating on further market retrenchment. Their selling was followed by some day traders and individual investors. As mentioned in the article "The One Number That Spells Market Upside or Downside in 2011", in this kind of market, it's wise to take profits when you can on any short-term moves while sitting tight on your long-term core holdings.
Although buying demand from individual investors appears to vanish in this week, investors are holding tight on existing portfolio. When the market declines, trading volume remains low whether the magnitude is large or small. This indicates that trading activities are mainly from day traders whether institutional or individual. As mentioned in earlier post, current market level should have support from individual investors. However, the confidence is still low because of stagnant economic growth despite soaring corporate earnings which boost investors' interest on stock. Since hedge fund can make profit on either market movement direction, there is probability that hedge fund can use herd behaviour to manipulate down the market for profit and to accumulate position for future appreciation. There may or may not be better entry point later for value investment. But long-term investors can still profit from cost averaging under current environment.
"Good for GM, Bad for Stocks?" Investors' stock-buying appetite is still hearty. After all, money has started to flow into stock funds again, and this year's U.S. debutantes are up an eye-catching 15%. Of course, whether investors will keep purchasing stocks depends ultimately on the state of the economy, and the surprises it holds. If it's any consolation, today's bulls are a fickle, faithless bunch, their optimism cloaked in layers of qualifiers and caveats, and they change their minds quicker than teenagers do.
The wealth effect has started to surface. From Yahoo! article, "Signs of Swagger, Wallets Out, Wall St. Dares to Indulge", exuberance made a comeback this year at Josh Koplewicz's annual Halloween party. More than 1,000 people packed into a 6,000-square-foot space at the Good Units night club in Manhattan, a substantially larger crowd than in the last several years. The scene was more extravagant in September, at a 50th birthday party in Hong Kong for Brian Brille, the head of Bank of America Asia Pacific.
Two years after the onset of the financial crisis, the stock market is recovering and Wall Street's moneyed elite are breathing easier again. And this means in some cases they are spending again - at times cautiously, but sometimes with a familiar swagger. Expensive restaurants report a pickup in bookings. Real estate agents say Wall Street executives have already begun lining up rentals in the Hamptons for next summer. Christie's auction house says investors from the financial world who fell out of the bidding market during the 2008 credit crisis are "pouring" back in. Most expenditures, however, are for more mainstream indulgences. Marc B. Porter, a senior executive at Christie's, says Wall Street workers for whom the auction market was recently seen as "out of range" are pouring back in. This resurgence of activity, he says, has followed the recovery of different economies, be it Hong Kong or the United States.
Lack of interest from the majority of household investors is the major bottleneck of market uptrend. "Probe leads investors to wonder: Is game rigged?" "A large part of trading has to do with trust, and I don't have it," says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks. Even before news broke that federal investigators were looking into whether hedge funds traded on inside information, small-time investors were pulling their money out of stocks -- despite a remarkable run for the market since the spring of 2009.
Some pros on Wall Street say hesitation by small investors is good news. It means that there's plenty of "dry powder" to propel the market higher in the next few months when and if the little guy finally relents and joins in the rally. The insider-trading probe could test that theory.
It's not the first time small investors have been scared out of stocks. Charles Geisst, a finance professor at Manhattan College who has written 18 books on the history of markets, says investors balked at buying for years after the Crash of 1929 and Black Monday in 1987. The view both times: The odds are stacked against the little guy.
The market needs them back. Most of the stock in U.S. companies, both public and private, is held by individuals, not institutions, according to Federal Reserve data. Small investors may be comforted to know that professional investors don't always fare better, even with the edge they have over the masses. "The edge is hugely exaggerated," says Richard Ferri, founder of the investment advisory firm Portfolio Solutions and an advocate of low-cost index funds. "If the small investor does the right thing, he can do better than 99 percent of anyone else."
No comments:
Post a Comment