If everybody's buying, who's selling?...
Lack of institutional support hurt prices
By Craig Tolliver, CBS.MarketWatch.com
Last Update: 5:33 PM ET Sept. 17, 2001
LOS ANGELES (CBS.MW) - While everybody from the patriotic small investor to the New York State Pension System said they were buying stocks on Monday, the massive decline in the equity markets made one thing clear: somebody was selling.
But an informal survey of analysts, strategists and large and small investors found that instead of a group of evil institutions intent on making a mint by short-selling the market, the 7 percent declines in the Dow and Nasdaq were caused by controlled selling of primarily airline and insurance stocks.
The situation was made worse with fund managers offering little in the way of any buying support.
"A lot of major institutions out there are standing by and waiting, not wanting to catch a falling knife," said Hugh Johnson, chief investment strategist at First Albany Corp.
Bob Anton, portfolio manager of all large-cap equity funds at Crabbe Huson, a unit of Liberty Financial (L: news, chart, profile), said he didn't do anything at all on Monday.
"It's a time of great risk on the upside and the downside," said Anton, adding that he wouldn't act "until we get some idea of where it's going to go."
Most institutional managers came into Monday's market open with large cash positions, reflective of defensive positions taken before terror attacks last week that closed the market for four days.
"Our fund was pretty well positioned, regrettably, for a market sell-off. We had an enormous cash position going into the day," said Scott Schoelzel, portfolio manager of the $16 billion Janus Twenty (JAVLX: news, chart, profile).
At the end of August, Janus Twenty had more than a third of its portfolio in cash. Schoelzel, who also runs money for several of Janus' separate and institutional accounts, said that he had been buying Monday, but only incrementally, and would probably be buying again Tuesday if he sees another significant drop.
"We are not making any sort of massive shifts in terms of direction. It's not like sell all the brokerage stocks and buy all the defense stocks. I'm not doing anything like that," Schoelzel explained. "I did initiate a small position in a company that I've been very interested in for a while that's never gotten cheap enough. Today it's pretty cheap and I got my toe in the water."
As a member of Janus' (SV: news, chart, profile) six-member executive investment committee, Schoelzel indicated that other managers have not been selling either.
"We've definitely not been a seller today I know that for sure. We have been 99.9 percent on the buy side," Schoelzel said.
As a bear fund, the $72 million Federated Market Opportunity (FMAAX: news, chart, profile) was also positioned defensively with a 29 percent cash position, but portfolio Steve Lehman was sitting tight on his cash.
"I've done nothing today other than watch. I've come close to doing some buying but haven't been compelled to do it today. Perhaps tomorrow," Leman said, noting that other managers at Federated (FII: news, chart, profile) were buying Monday but that the firm was not selling.
The picture coming in from hedge funds is pretty murky but Peter Gallo, the New York bureau chief for Hedge World, sees very little opportunity for hedge traders on the sell side.
"There are quite honestly few avenues that I'm aware of that they've been able to take advantage of. Obviously there's always talk how short managers exploit these opportunities but with the level of volatility, I don't think that to be the case," Gallo said.
While defense, airlines and insurance are obvious hot spots, "I do get a good sense from the people in the fund-of-funds area that there are a lot of people out there that are going to be as defensive as possible," Gallo added.
Calpers, the world's largest public pension fund with more than $156 billion in assets, also said it wasn't selling.
"Things are going about as expected. They're, of course, not engaging in any huge sell offs. We're sitting tight," said Calpers spokeswoman Pat Macht.
"We're feeling pretty good today because the Fed came in with their cut today two hours before the market opened, large corporations are buying back their stocks, we have an economic package for the relief effort that is giving people confidence," Macht said. "If at some point there are some good buying opportunities, we're poised to be able to go in and execute some buys."
The New York State Pension System, the second largest public pension fund, said it was buying, pumping about $250 million into stocks early Monday.
On Friday the National Association of State Retirement Administrators, with more than 40 state pension fund members, and the The National Council of Teacher Retirement Association issued a joint statement pledging their support for the market and the economy and urging investors not to sell.
On Friday, institutional managers polled by CBS.MarketWatch.com expressed the same sort of wait and see attitude, implying that they did not plan to be sellers on Monday. See full story.
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Craig Tolliver is the mutual funds editor for CBS.MarketWatch.com in Los Angeles. |
