Just a reminder From Investopedia.com

"The action of a mutual fund or portfolio manager shifting investment assets from one sector of the economy to another. Sector rotation involves the sale of securities related to a particular investment sector and using the funds garnered from that sale to purchase securities in another sector. This strategy is most often used as a method of diversifying holdings over a specified holding period."

Mutuals must sell losers BY THE 30th...

Mutual fund "window dressing" may or may not occur by October 31. It depends on the fiscal year end of the mutual fund. Historically, a good half or more of mutual funds had October 31 fiscal year ending dates, which means whatever they owned at that date showed up on their annual report and affected the fund value and therefore investment results. This meant that they typically would dump losing stocks they did not want existing or potential investors to see and possibly buy more of winners. It would be interesting to know what number of mutual funds still have October 31 as their fiscal year end, and what percentage of total mutual fund assets they represent. Anyone out there with a good grasp of where to find such information?

That's funny! I was just reading that yesterday as I was going back through my WSB manuals.

I always thought of it as an all at once sort of deal, but I suppose it could be a gradual "selling of the losers" thought the last 3 weeks or so of the month.

From a common sense approach, how many losers do you think mutual funds had this year? The DOW beggining Nov last year was roughly 12,800 and it currently sits @15,500. Thats 21% and the mutuals should have had a really good year. Typically if there is not a crash in October then the market continues going up.

BCT,

Who knows how many MF's had losses? That will take some research but I would say more than you think.

I know that there is some such as Metacapital Management which is down about 6%. It went red losing 7% in May.

If you are a credit oriented hedge fund you lost quite a bit with the news that was floating that Fed Chair may end the 85 Billion treas and mortgage securities purchase. Gotta cover that reported loss that came out in June of this year. Those hedge funds such as Bridgwater Assoc, and Blue Crest Cap Management got hurt. Heck according to Kiplinger there's a gold fund who has lost half of it's value in the last 6 month's.

Europe wasn't all that hot...and then there's China. I'd say some of these are really being shorted. Just last week there was a big hulla-ba-lu in Europe about potash companies and in China fincancials and energy are seeing problems.

Bob Pisani (the 8 million dollar man )talked about hedge funds selling off their losses just today on CNBC. Heck some hedge funds will sell off their winners to keep the tax low or because the PE's are simply becoming more risky.
(http://www.cnbc.com/id/101129142)

I'd say watch the PE's. It the value gets out of line start paying attention. Look what happened to NFLX just today. Even the CEO grew concerned because it was trading at 133 times earnings. Today an anaylist stated NFLX can't "maintain high profits while facing increasing content costs." (Man I wish I had stayed in that trade!! )

I just got this feeling...better causious than crazy. I am of the opinion that some of these stocks that are having high PE's may get sold in the mutuals and those that are safer and sector related will get picked up.

IMHO the market is in rally mode because the fed will continue to pump $$ into our economy. This isn't growth in my opinion.

No I am not talking crash. I am talking a shift. Just little ole careful me.



Edited 1 time(s). Last edit at 10/25/2013 10:04AM by Darcy2.