The Flinchum File

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Bull and Bull Markets


One of the rumors on the Street is that the reason stocks have been falling so much in October is that hedge funds have generally done poorly this year, under-performing mutual funds.  Feeling some financial pressure as individuals, they took a look at the 20% of profits that they keep and decided to take all the profits they could right now and sit out the rest of the year in cash.  This is Bull!  Most of them don’t have any investment profits to take 20% from.  Plus, any firm that lets investor’s money sit in cash, while they charge annual fees of 2%, will see investors run away from them.

Another rumor is probably true.  The strong rise in the dollar over the summer was due to foreign demand for dollars.  In August alone, foreigners bought $25.7 billion in U.S. Treasuries and $52.1 billion in corporate bonds.  Since you cannot buy U.S. bonds of any type with Euros or Yen or anything else, they had to sell those currencies to buy dollars, creating a bull market for the dollar.

Rumors come with all degrees of truth but some smell worse than others.

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