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Running Out the Clock on 2012 Stocks

Posted By Barry Ritholtz On September 24, 2012 @ 7:20 am In Hedge Funds,Investing,Markets | Comments Disabled

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Sometimes in a close football game, when the team with the ball has a small lead, and with only a few minutes left, they will run out the clock. They can use the maximum amount of time before, during and after each play, to burn off as many minutes and hold onto their lead.

This strategy will not work in Basketball, Soccer or Hockey, it only works with Football — and as the WSJ [2] reports this morning, with equities.

For 2012, the Dow Jones Industrial Average is up 11.1% this year, the S&P500 is up 16.1%, and the Nasdaq has gained 22%.

Mutual Fund managers sitting on big gains have plenty of macro reasons to move away from equities — Asia has softened, Europe is unable to resolve their crisis, and even China is facing economic¬† difficulties. Iron Ore, Copper, and Crude Oil are retreating, sending an ominous warning about the economy.

But from a strategic game theory approach, its not the macro issues that are giving them pause — its the desire to lock in gains and bonuses before the year ends, perhaps even before Q3 ends.

One group NOT sitting on big gains are hedge Fund managers: They have missed 2012′s equity. HFRX Equity Hedge Index [3] is up a mere 3.5% this year, lagging the S&P by an astonishing 14% (total including dividends). Perhaps they may pile in and drive markets higher.

Regardless, lots of investors have to be wondering, I am paying 2&20 for what?

 

 Moving to Cash?
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Source: WSJ [5]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2012/09/running-out-the-clock-on-2012-stocks/

URLs in this post:

[1] Image: http://www.bloomberg.com/markets/stocks/futures/

[2] WSJ: http://www.ritholtz.com/blogonline.wsj.com/article/SB10000872396390444083304578014111880047922.html

[3] HFRX Equity Hedge Index: https://www.hedgefundresearch.com/hfrx_reg/index.php

[4] Image: http://www.ritholtz.com/blog/wp-content/uploads/2012/09/MI-BR337_ABREAS_G_20120923181809.jpg

[5] WSJ: http://online.wsj.com/article/SB10000872396390444083304578014111880047922.html?mod=ITP_moneyandinvesting_0#project%3DABREAST0924%26articleTabs%3Darticle

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