What Lurks Beneath

October 1, 2020

In another edition of “unbelievable shit” or perhaps more politely phrased, “jumping at shadows”.

I ran out of time to quip about yesterdays Australian ASX market action but writing about it today makes it even clearer when pointing out the absurd.

Here’s how I saw it…….traders react to a Trump/Biden calamity and the ASX 200 closed Wednesday’s trading session with a decline of 2.3%.

It seemed like it was anticipating a negative Wall Street reaction to a woeful debate, for the previous night’s action in the overseas markets was benign with the S&P 500 only falling 0.5%.

On Wednesday, BHP fell 3.5%, Woodside tanked 5%, a mining explosives company (Orica) slid 3.5%, a fruit and vegetable wholesaler (Costa) dropped 2.9%, a private hospital business (Ramsay Healthcare) eased 2.6% and banks kept pace with the index declining 2%.

Investors seemingly threw away their shares. 

How did the fortunes of your little biddy Australian company change by 3% in a single day as a result of U.S. Presidential debate shenanigans?

These are the days when you should consider adding to your portfolio…..

Add to the mix that yesterday was the last day of the month and quarter….one can’t help think that institutional fund managers were the main participants in the decline.

p.s. day traders and private clients can’t move these large stocks by such percentages.

Although I’m sure some poor amateur investors also got spooked (cause there is nothing like a little extra commission to top up the month for your broker), but it’s your trusted managed (super, hedge etc) fund who exacerbate such moves.

Some brokers were telling me that the market was “overbought and due for some profit taking”…..

after all, the ASX 200 had risen 2.9% over the past 5 days…a very nice performance indeed.

Incidentally, the S&P 500 had risen 3% in the same time…

Of course it’s institutional fund managers who are responsible for such gyrations……

keep in mind that they need to book their quarterly gains so they can charge their performance fees or at least report something profitable in upcoming marketing material.

You see…….if the fund managers hug the index or match their benchmark, there is less chance of monies being withdrawn from their pool and they get to keep their job.

The regular investor who sends (invests) money to the funds management industry don’t see or hear of the daily going’s on.

But it’s OK, 

Wall Street didn’t fall in a reaction to the debate, in fact it rose 1%.

So today’s strategy amongst the folk seems to…..

“oh shit, we better buy those stocks back even if its a higher price at which we sold at yesterday and don’t forget it’s the start of a new quarter”

The ASX 200 is up 1.7% (as I write this).

Until next time,

warm regards, Rob

October 1, 2020

by Rob Zdravevski

rob@karriasset.com.au