Prepare to be dazzled by hedge fund fiction
The only thing fund managers hate more than having a losing quarter is having a losing quarter with losers still on the account statement.
Only 2% of hedge fund managers beat the market in the long-term but 100% of them are experts at accounting, spin and making themselves look smart. That's what the next few days will be all about.
It's quarter-end and that means welcome to the window-dressing season.
Here's how Investopedia describes it.
A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.
Why it's especially important this week
Barring a miracle turnaround, this will be the worst quarter in the stock market in 4 years.
That means that despite losses, all the genius fund managers are going to want to their clients how they've positioned defensively, despite whatever red ink is on the account statement.
It's been a rough three months right around the globe.
The general theme will be selling stocks and buying better performing assets like long-dated bonds.
Drilling down a bit closer, look for buying of stocks that have outperformed and lagged this quarter.
What's next for stocks?
Look for a bit of a bounce back as money goes to work for the new quarter but it might be fleeting. Another bearish signal -- pointed out by Bloomberg -- is that volume on down days has been 27% higher than up days in September.
