Archive for the ‘Active Investment Management’ Category

September Is the Cruelest Month

Thursday, August 22nd, 2013

Oh, it’s a long, long while from May to December
But the days grow short when you reach September.

                                                                  September Song

T.S. Eliot was wrong about April being the cruelest month.  For investment managers, it’s September.

It’s bad enough that September marks the end of summer, shorter days, cooler weather, the beginning of school and the almost annual Red Sox meltdown.  It’s also the worst month, by far, for stock market performance.

Since 1955, the Dow Jones Industrials Average (DJIA) cumulatively has lost just under 50% during September, according to “Jay on the Markets.”  In contrast, the DJIA has gained 200% in April over the same period.  So, in spite of Mr. Eliot’s claims, April is the kindest month, not the cruelest.

Cumulative gains and losses in the DJIA by month since 1955.

Cumulative gains and losses in the DJIA by month since 1955.

May (-10.6%), June (-20.9%) and August (-11.6%) have also registered net losses over that period, as the chart shows, but September losses (-49.1%) total more than those three market-declining months added together.  In other words, September is a big loser.  Take September out of the calendar and the market would historically be flying high.

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High-Speed Casinos

Friday, April 26th, 2013

A tweet – 12 words, 140 characters – caused a selling frenzy last week, as the stock market dumped $134 billion in stocks in a minute and a half and the Dow Jones Industrial Average dropped 1 percent of its value, or 143 points.

The market recovered quickly, as the Associated Press announced that someone had hacked into its computer system and posted a fake tweet about two explosions in the White House.

But the hoax served as a frightening fire drill.  If it had been real, the average investor would have been burned alive.

We’ve warned readers about the dangers of high-frequency trading before.  This is an example of why we’re concerned.  If the White House explosions had been real, the algorithms that make decisions for high-speed traders would have continued selling, leaving the average investor behind as stock values tumbled.

Rick Santelli, on-air editor for CNBC Business News, said high-frequency trading has turned the markets into “high-speed casinos.”

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