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Non-Tech : Raptor's Den -- Ignore unavailable to you. Want to Upgrade?

To: velociraptor_ who wrote (4515)	10/17/2002 10:51:10 AM
From: Kip518	Respond to of 10157

thestreet.com Scott Reamer How's this for a theory? 10/17/02 10:26 AM ET Breathtaking moves over the last week. Big upside gaps. I spent 10 years marketing to mutual fund PMs. Here’s my theory on what’s behind these gap moves: long-only mutual fund managers panicking to get long, buying willy-nilly. Why? It’s a can’t lose bet. Here’s why. They hear that the stock market hasn’t had three negative years in a row in forever. They see the S&P held the July low. They see the bond market overbought. They know October to December seasonality is in their favor. They think there aren’t too many hedge funds that are willing to short aggressively with the indices near multi-year lows. Add to that background their own performance anxiety and here’s the win-win bet they see. They know they will be down for the year no matter what they do, but they want to match or beat their benchmark so they don’t lose assets. Years like this are all about keeping assets. That’s what the marketing people are telling them day in and day out. If they make a big bet now on the long side, they won’t miss any year-end rally if there is one. That’s a win because they will probably beat their benchmark and most of their peers, since they got in early on the rally. The marketing people will be ecstatic. If there isn’t a rally and stocks stay where they are, that’s a win too. They will meet the benchmark and not lose ground to competitors. The marketing people will be pleased. Here’s the kicker: if stocks continue to fall and go thru previous lows, they have done nothing more stayed invested – which is their charter – and bought stocks they considered “cheap”. The year end letter will be full of breathless talk about an eventually improving economy, how they are acting early to take advantage of the inevitable upturn in the economy and buying some of the best companies in America, etc., etc. They can defend themselves as being courageous and probably won’t lose too many assets since the negative relative performance will be small considering there is only 2 more months left in the performance year. The marketing people won’t be too angry. That’s a win/win/win. Heck, why not buy stocks if that’s the upside/downside of the bet?