Monday, July 03, 2006

Kicking myself - twice over

Markets in Asia have rebounded strongly since the sell off last week. So have commodity prices. By way of example silver has jumped from US$9.72 per ounce on 14 June to US$11.12 at the time of writing.

I am kicking myself for not taking advantage of the opportunity to buy some assets and kicking myself twice over for letting myself be so easily influenced by short term market movements and indulging in "should have" retrospective thinking. I think it is time to add some books on physcology to my reading list.


Anonymous said...

It was a end-of-quarter market-rally so that funds could report positive returns. In other words, a bull-trap.

Pls read:

traineeinvestor said...

Thanks for the comment and the links.

I had not considered that there may be an "end-of-quarter" effect on the markets. Is there any statistical support for the occurance of such manipulations?

I am slightly sceptical that fund managers would actually be able to (or want to) collude to move the market for the following reasons:

1.index funds will not be able to do it - all their money is fully invested so they do not have cash (or gearing capability) to contribute to this. This takes a major portion of the market players out of consideration;

2.the active fund managers would have the ability to buy into the market at the end of a quarter - but most managers are there for the long haul and would recognise that artificially boosting returns this quarter would just make things harder next quarter. I suppose a strategy of buying physical stocks and shorting derviatives could give them some advantage - but they would be taking a big risk in relying on other managers/investors to also buy the physical;

3.if there was a pattern of markets rallying at the end of each quarter, it would logically follow that professional investors would identify the pattern and exploit it by selling into the rally effectively negating much of its effect. If there is such a pattern, let me know and I will join the party next time around);

4. buying in sufficient volume at or near the close to move the market is a highly risky (i.e. really really dumb) strategy in this day and age - queries from the regulators would arrive quite quickly.

The views of Marc Faber are interesting - especially his comment that gold could drop below US$500 per oz.