The act of pumping up a stock the final day of the quarter (or year) to 'boost performance' - isn't this falling into the are of market manipulation (and potential fraud or at least misleading advertising against fund investors)? People have been prosecuted in the futures markets for jamming the close before expiry, so why do stock fund managers get a free pass? Either make all 'market manipulation' legal, or enforce the laws in all cases - the current selective enforcement makes no sense at all.
there is not pumping of anything in 'window dressing' all that means is if i'm a mutual fund with a bunch of shity stocks, at the end of the quarter or year i may sell them and buy some that performed very well. That way you can present good looking stocks in your marketing material or your clients arent getting year end or quarter end statements that have a list of stocks that are down 30%. "hey look at fund xyz, they own a bunch of stocks that did really well this year, maybe its a good fund" yeah, its stupid and so are most money managers on wall st.
Hmm we have different definitions of window dressing then. To clarify, what I mean is deliberately bidding up the price of stocks on your books on the last day of the quarter, to try and juice performance numbers for that quarter. The object being to alter the price, rather than to alter the composition of your trading book. Obviously, if I was talking about just shifting your holdings, there would be no question of illegality.
What you are describing is called "stock manipulation". What ChikitOut described is called "window dressing".
I agree with Cutten, and I understand what he is talking about but I checked investopedia and other sites and the CK is correct. Now I don't know what they call the eom manipulatioon of stock prices that Cutten is referring to but it's done and he has a valid point.
If you think it is unnatural, why not simply short into it? (I say this tongue-in-cheek as sometimes over the Internet these things could be misinterpreted). Enforcement is a sticky wicket. You can't catch everyone and even if you could it would become very unpopular for you to do so. Better to take clear-cut egregious offenders and fry the hell out of them in a public spectacle (better for regulators, better for the string pullers in industry). I agree with Cutten in premise though, but I think it is unrealistic to enforce in this case as it is so easily masked as legitimate activity. What I find entertaining is how those guys gamed the Timber Hill market making bot, started smacking the house around, and then they get a nasty enforcement action. You would almost think they were counting cards in Nigeria or something It sure wakes one up to who the regulators work for...
History has shown that investing is a "follow the leader" mentality. If you're a fund and you're not holding what everyone who has positive returns is holding, then you wait until the last minute and get those stocks in your portfolio. This is the most rediculous attemp to hop on the bandwagon I've ever seen. These fund managers are almost criminal in their actions because they are just following the crowd. If they weren't they would have done their research and gotten in when they were supposed to not when the train left the station.