Financial media powerhouses like CNBC, Bloomberg TV, and Fox Business News typically get through each day of programming by bringing in Wall Street insider after Wall Street insider to give their opinions on the financial markets and the economy. Sometimes, these heavyweights can actually impact the market’s performance on a given day due to a bullish or bearish call that influences traders. Whether it’s the words of David Tepper, Bill Ackman, Carl Icahn, the “Oracle of Omaha” Warren Buffett, or countless others, these big name investors and hedge funders’ opinions undoubtedly have some sway in the markets. But the question remains, should you go all in with the supposed smart money’s look into the markets?
More often than not, these Wall Street heavyweights go on to the various television programs in order to reassure their investors (and potential investors) that they have an adequate pulse on the markets. They are not announcing their calls, whether bullish or bearish, as a public service in order to help the little guy. At the end of the day, these big-name investors are in it for themselves, looking to get their names out there to attract clients and reassure current clients. It’s not necessarily about making the right call or scoring on a big trade, it’s more-or-less about bravado and boosting assets under management (AUM).
Paulson’s PlightTake, for instance, the words of hedge fund manager John Paulson, who has proclaimed all year that the Federal Reserve’s quantitative easing would cause runaway inflation, and thus be a boon for gold. As such, he has continuously added a gold position to his hedge fund’s portfolio. So far his hypothesis has been incorrect and gold has dipped substantially in value this year. As a result, his gold fund has lost 63% in 2013.
Don’t get me wrong, I’m sure Paulson finds this sort of performance tremendously disappointing; however, the hedge fund is still getting a cut of all assets under management, so he is still making money regardless of his incorrect market insight. If a retail investor like you or me were to have invested according to his opinions and intuition, then we would undoubtedly be in a worse position than Mr. Paulson. A 63% loss in a fund is backbreaking, especially for someone trying to save for financial prosperity down the road.
So, while these Wall Street hedge fund managers and big name investors might seem like they are stock market geniuses, it does not mean they know everything. You shouldn’t treat their opinions as if they are gospel. You need to remember that their goals are not the same as yours or mine. We are attempting to boost our own financial well-being over the long-run for retirement and the like. Meanwhile, the Wall Street heavyweights are doing anything and everything to boost their public perception and influence in order to increase AUM. Most of the time, these hits on CNBC and Fox Business News are about public relations, not true investing insights. By no means should you ignore what they have to say, but remember to take their words with a grain of salt.
Today in the MarketsThe major indices closed higher today, finishing up yet another winning week and hitting fresh all-time highs. Among the stocks leading today’s rally were Time Warner Cable (TWC
), following rumors that Charter Communications (CHTR) is looking to acquire the cable company; Foot Locker (FL), after it reported better-than-expected third quarter earnings; and Yum! Brands (YUM), following an upgrade by Bank of America Merrill Lynch.
On the other hand, shares of Ross Stores (ROST) plunged after giving disappointing fourth quarter earnings guidance. Other stocks taking a hit in today’s session included The Gap (GPS), PetSmart (PETM
No comments:
Post a Comment