Fidelity blamed for tech crash
By Craig Tolliver, CBS.MarketWatch.com
Last Update: 6:16 PM ET Nov 27, 2000
BOSTON (CBS.MW)—Playing the blame game, FreeEDGAR.com pointed the
finger squarely at Fidelity Investments Monday for the market's third-quarter
tech-astrophy.
"As technology and telecommunications stocks crashed in the third quarter, the
nation's largest mutual fund complex was selling them aggressively," the firm
wrote in its SECrets Newsletter.
Fidelity parent FMR Corp. sold more than $1 billion each of stock in market
leaders such as Nokia (NOK: news, msgs), Vodaphone and Nortel (NT: news,
msgs), and more than $500 million each of Lucent (LU: news, msgs), EMC (EMC:
news, msgs) and JDS Uniphase (JDSU: news, msgs), according to Alpha Equity
Research, which tracks Fidelity funds for institutional investors.
"As the single largest player in the stock market, accounting for an estimated 15
percent of total volume, Fidelity Investments undoubtedly contributed to the
market rout," FreeEDGAR said.
FreeEDGAR mines the Securities and Exchange Commission's database of filings
and registrations and makes them available to investors on their Web site. As an
"insider," Fidelity must file a quarterly statement of holdings, Form 13F-HR.
"FMR cut their Nokia stake in half in the third quarter. At the end of June they
owned 101.7 million shares. At the end of September they had 50.2 million
shares. At the end of June Nokia was selling at about $50 a share, (FMR) started
selling in July, the stock got down to $37 in the first week of August and then it
rallied up a little," FMR President David O'Leary told CBS.MarketWatch.com.
"Then the sell pressure came in again in late September, their stock traded down
to $40 and then collapsed in October to $27 dollars a share—which is probably
when Fidelity stopped selling."
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Fidelity to blame
by: toypoop
03/14/01 09:39 am EST
Msg: 10562 of 10569
For market crash.
Mutual funds and declared institutional funds typically sell to their brokerages at
lows and buy at highs. Take a stock like OPTV for example, Fidelity can sell its
OPTV stock to an Fidelity Brokerage starting at say $16 to $13, traders with level
II for example can watch Fidelity selling off at losses and so they go short. For
Fidelity, it is simply a transfer of the same shares from one division to the other.
This way, the price goes down to 13. Many dedicated longs sell off at huge losses
(transferring their wealth to Fidelity). Once all that selling is over, Fidelity’s
Brokerage will "sell" OPTV to Fidelity at higher and higher prices and restore the
hypothetical $16 per share. By this Fidelity generates a lot from small investors,
who had deposited their money in Fidelity, and from other shorts and longs
scared or forced out. This is not untypical behavior for the large brokerages
because they have the clout to pull it off. This market needs more diversification
of the capital that drives it.
I found this article below fascinating. I feel dealing with any brokerage that
trades for their own accounts with such magnitude ( Fildelity controls 15% of the
total volume in the markets) is against my best interests. Think about the volume
of trading statistics and information they can gleen for their own use. Too much
money in one basket IMO that in fact has affected the market. Kinda reminds me
of the Hunts when they corned the silver market years back in a disjointed way.
The point to me is that being able to control 15% of the volume in the market is
way too much, yea it’s great when they’re buying but that much control is not a
good thing and increases the volatility. It’s okay if you stick with mutual funds,
but not as a trader. This year I cancel my Fidelity account. |
