Fund Managers Bottom Fish and Speculate with your Nest Egg

The more I watch what is happening in the markets, the more I am convinced the professional fund managers have no idea about how and when to invest. Many are bottom fishing speculators who buy the rumours and sell the facts or buy the dips. All their tools are out of action right now and they don’t trust anyone either.

Just look at the volatility in the last few days. The image

Australian ASX 200 is a prime example. Yesterday the ASX was down almost 150 points but closed 67 points down. Today it has been as high as 150 points. At around 4,900 that represents a 6% move over a 24 hour period.

Look at the diagram on historical moves in the US Stock market on the right by Benoit Mandlebrot, a Yale University mathematician. It makes sobering reading.

Whilst mere mortal who use their own money to invest, not trade are sitting on the side lines and shaking their heads in amazement at the volatility, I suspect the fund managers are wallowing in your cash and are using it to speculate in the markets.

They need to book profits and grow the severely depleted funds they “manage” (I use that word advisedly). The rational must be if they can get in at the bottom and ride the short term rally then exit before everyone else does, they can book some profits. It’s not about long term investing with stocks being 30%, 40% or more below their all time highs. It’s all about trading, buying and selling fast because there is no trust in the markets or in the major institutions to report truthfully.

If you are a professional trader this market may be your dream opportunity to make it big. But fund managers aren’t supposed to be traders. They tell us they use fundamental analysis, extensive research and some technical analysis perhaps to decide on what to invest in for the long term supposedly.

Fundamentals are out the window right now, researchers are probably looking for another job and the technical’s are all over the place. So what are they using to base their trading (I mean investment) decisions on? By all accounts they should be sitting on the side lines since they have nothing to go on except pure speculation as all the usual tools are not working right now.

It’s pretty obvious they are speculating pure and simple. What’s more important though they are doing it with your money. As soon as Mr Paulson or Mr Bernanke makes a statement that even hints of saving the world they rush in and buy. Even our own Glenn Stevens can start a buying frenzy by just a hint he might lower interest rates sometime in the future.

The problem is exacerbated because most of you have no control over the money you are paying into your retirement fund every month to invest for your retirement, compulsorily or voluntarily. If you stopped that money and told fund managers to get their act together before you put in more of your money, then maybe they’d listen. But right now they are sitting pretty with new cash rolling in each week and with heaps of cash they traded out, so they have plenty of money to run their little empires and play the markets until the good times roll again. (Admittedly many funds are forced to be in the market regardless of what is happening so fund managers will be following their prospectus’ and losing your money in the process too most likely).

That’s the good times for you and me I’m talking about. Fund Managers are still gorging themselves at our retirement money trough. I heard the other day many of the more expensive New York restaurants are not feeling the effects of the stock market crash yet. I suspect expense accounts are being replenished from your retirement funds pre unit price setting. These will be called “administration expenses” and be hidden from fund investors because they are deducted before the unit prices are published.

Please ask your financial planner or fund manager to write to you and tell you what they are doing to protect your money. Also ask them where their money is invested right now. It could be evidence for litigation down the road to get some of your money back.

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