INVESTMENT PORTFOLIO: More on Year End Mutual Fund “Window Dressing”

Posted on December 23, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

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By Steve Selengut

December values may not be what they seem

NOTE: Mr. Selengut is a private investor and a contributing editor to LIFE & Health Advisor. He is the author of the book ‘The Brainwashing of the American Investor: The book that Wall Street does not want you to read.’

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As [physician] investors, and we all are investors these days, it is important that we understand the idiosyncrasies of year-end Stock Market activity. On Wall Street, investing can be a minefield for those who don’t appreciate the non-economic, non-business-model, factors contributing to the market value numbers in fourth quarter brokerage account summaries.

Year end market values may not be what they seem ….

“Portfolio Window Dressing” (PWD) produces security pricing that is more a function of next year’s institutional marketing programs than a reflection of the economic forces that we would like to think are their primary determining factors. Not even close…

Toward the end of every calendar quarter, we hear the financial media report that “institutional PWD activities” are in full swing. But that is as deep as the stories ever go. What are they talking about, and just what does it mean to you as an investor?

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READ MORE: https://www.lifehealth.com/year-end-portfolio-window-dressing/

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What is Mutual Fund WINDOW DRESSING?

Posted on December 11, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITION

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

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To most people the holiday season means decorations at home and at work, but it also can mean “window dressing” in your mutual fund.

This somewhat disparaging term is used to describe the practice of a mutual fund making cosmetic changes to its portfolio just before the end of each calendar quarter. It’s done because funds publish their exact holdings of securities four times a year based on what they own at the end of each quarter.

“The basic concept is that managers are either hiding their mistakes or adding winners to make themselves look a little smarter,” says Russ Kinnel, director of manager research at fund researcher Morningstar Inc. in Chicago. “Of course, it doesn’t necessarily help performance,” he adds.

Santa Rally: https://medicalexecutivepost.com/2021/12/16/what-is-the-santa-claus-stock-market-rally/

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What is the SANTA CLAUS Stock Market Rally?

Posted on December 24, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

LATE DECEMBER – EARLY JANUARY RISE

By Staff Reporters

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RALLY: A rally is a period of sustained increases in the prices of stocks, bonds or indices … An increase in prices during a primary trend bear market is called a bear market rally. A bear market rally is sometimes defined as an increase of 10% to 20%.

Now, a Santa Claus Rally describes a sustained increase in the stock market that occurs in the last week of December through the first two trading days in January. There are numerous explanations for the causes of a Santa Claus rally including tax considerations, a general feeling of optimism and happiness on Wall Street, and the investing of holiday bonuses.

CITE: https://www.r2library.com/Resource/Title/0826102549

Another theory is that some very large institutional investors, a number of which are more sophisticated and pessimistic, tend to go on vacation at this time, leaving the market to retail investors, who tend to be more bullish.

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ORDER: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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EMPLOYEE LAYOFFS: A Different Type of Holiday “Window Dressing”

Posted on December 22, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

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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