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This paragraph confused me a little. "Nevertheless, BofAML's chief investment strategist, Michael Hartnett, cautions that the robust flows into small caps may be "ETF creation for new shorts," which would suggest that traders are buying into an area that they would bet against."
Is he suggesting that traders buy the ETF, pushing the price of the included stocks up and then as Main Street gets interested and starts buying, the traders sell and ultimately go short? In some basic way this seems like its the nature of things. You buy when things are cheap and sell when they're expensive, and we know from study after study that the traders are doing a better job than the average guy of getting it right. On the other hand, if done in some coordinated way, it would be manipulating the market and although there are enough people out there who believe many markets are manipulated in some way, I tend to believe the cases are the exception rather than the rule.
Nonetheless I'm glad if some money is rotating back into small caps and hoping it brings a good finish to the year since most of my small cap funds have been dogs so far this year.
My thinking is that "big money" is going to move money from one asset class to another form time-to-time in seeking value. Once an asset class gets overbought well its time to move to another one that has become oversold. Small caps by my thinking and research recently became oversold and now are drawing some money. In addition, energy, by my thinking and research, is also presently oversold and come winter energy prices will most likely be moving upward. So, look for energy to start to draw money.
Comments
Is he suggesting that traders buy the ETF, pushing the price of the included stocks up and then as Main Street gets interested and starts buying, the traders sell and ultimately go short? In some basic way this seems like its the nature of things. You buy when things are cheap and sell when they're expensive, and we know from study after study that the traders are doing a better job than the average guy of getting it right. On the other hand, if done in some coordinated way, it would be manipulating the market and although there are enough people out there who believe many markets are manipulated in some way, I tend to believe the cases are the exception rather than the rule.
Nonetheless I'm glad if some money is rotating back into small caps and hoping it brings a good finish to the year since most of my small cap funds have been dogs so far this year.
Old_Skeet