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END-OF-YEAR FINANCE

By Staff Reporters

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We’ve discussed end of year mutual fund “window-dressing” before on this ME-P. Essentially, with mutual funds, window dressing refers to the superficial changes a fund might make to its portfolio of holdings to appear more attractive to current and prospective investors. At a glance, a potential investor might be drawn in with what appears to be good performance. 

For example, a mutual fund management team might choose to sell losing stocks and buy winning ones at or around the end of a quarter. This strategy hides weak performance and gives investors a perception of impressive returns. 

CITE: https://www.r2library.com/Resource/Title/082610254

Window dressing in stocks is an example from another part of the world of finance, as public companies sometimes use window dressing when reporting earnings. Depending on the specifics, this practice can range from “creative accounting” to something bordering on or actually qualifying as fraud.

For example, some economics researchers cite rounding as a manipulative form of window dressing. A firm might round $5.99 million in quarterly earnings up to $6 million because the round number can be more psychologically attractive.

MORE: https://medicalexecutivepost.com/2023/12/02/what-is-mutual-fund-window-dressing/

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The GM-owned self-driving car company Cruise will lay off 24% of its staff (~900 employees) as well as nine executives following a serious autonomous taxi crash in San Francisco in October 2023 and the vehicles’ subsequent banning in the state of California.

Cruise’s staff reduction appears mostly due to the safety concerns around the company’s robo-taxis, but it comes after a deluge of other high-profile companies made major cuts just before the holidays:

• Etsy. The online marketplace said it was laying off 11% of its staff. CEO Josh Silverman blamed the macroeconomic environment and previous over-hiring despite gross merchandise sales remaining flat since 2021.
• Hasbro. The toymaker laid off 1,100 workers (roughly 20% of its staff) after a period of less-than-stellar toy sales following a pandemic surge. This most recent layoff is in addition to the 800 jobs it cut earlier this year.
• Spotify. The streaming giant announced its third round of 2023 layoffs earlier this month. The company cut 1,500 jobs, which equates to about 17% of staff.
• Why do companies do this?

Pre-holiday layoffs might seem especially cruel, but sadly, they aren’t uncommon. December job cuts are the quickest way for companies to pad the balance sheet and EOY reports before they show them to shareholders. Plus, it means they’ll have to give out fewer end-of-year bonuses.

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Filed under: "Ask-an-Advisor", Accounting, Career Development, Experts Invited, Financial Planning, Funding Basics, Glossary Terms, Investing | Tagged: Cruise, employee lay-offs, Etsy, GM, Hasbro, John Silverman, layoffs, mutual fund windo dressing, Mutual Funds, Spotify, stock window dressing, unemployment, window dressing |