OTCPK:CPPMF - Post by User
Post by
Chileanmafiaon Mar 27, 2020 1:45pm
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Post# 30853724
Quarterly Re-Balancing
Quarterly Re-Balancing End of quarter rebalancing
The funds control all of the money. Individual investors like us are irrelevent to the market.
Next Tuesday is the end of the quarter for fund reporting. The funds always perform "window dressing" at the end of every quarter because they typically report quarterly, just like public companies and they want to look good. It is imperative for funds to look like they are performing well as that is how they attract investors. The game is as old as the market itself.
The fund started exiting the market hard a month ago. The selling climaxed finally climaxed this past Monday.
For the last 3 days, the markets skyrocketed up 20% which is unprecedented. Why? Obviously the turnaround is a combination of a number of factors, but the real reason it that this week, the quarter-end window dressing was more like a store remodel. Funds have always preached a balance between stocks and bonds and a basket of equitey holdings. I have always maintained that the basket mentality is simply a means of justifying high management fees as buying the one "best" stock in each catagory is better than owning 5 stocks in each catagory. Why not just but the best one, but that discussion is for another day.
The funds have all gone to cash/near cash in the past month. The evidence has been seen in the massive rise in bond prices, specifically, the highly liquid US 10 year treasuries. You could see the funds start to pull back out of the treasuries in preparation for getting back into equities as the yields started to rise last week.
As mentioned above, the funds preach diversity, so they can't be seen holding an all-bond portfolio at the end of the quarter. The timing of the trillions being dumped into the system provided the funds with the back-story they needed to get back into the market.
We have seen the market roar back as the funds rebalanced. Now that they funds are rebalanced, they have another 3 months to figure out where they want to be the next time they report.
It is not a coincidence that trades today don't settle unitl April 1st, which is the first day of the next quarter. That means that the share positions on the books for funds yesterday represent the end of the first quarter. That also means that today, the funds can sell without having to report for three months. Tidy huh!
Every market crash has experienced a bounce back before settling back down again to test the initial bottom. In fact, the initial bottom is rarely the bottom when the cycle is viewed in hindsight.
Going forward expect more volatility in the markets - which will likely have a big impact on CMMC's SP.