The Professionals
Then the ‘professionals’ came...they have no jobs and watch property, stocks or currency markets all the time. When they feel that the conditions for a bubble are ripe, they move in and create momentum. As the momentum builds, many small investors become greedy and jump in. That is when the professionals unwind their positions and take profits.
When the bubble deflates, these professionals kill time at various golf courses....and await their next chance. The professionals have turned speculation into a fine art. If a professional believes that conditions are right for speculating on a stock, he will jump in. When he feels momentum has sustained for long enough and small investors have jumped in, the professional will try to cash out with profits. Speculating works when the macro environment is right. It is tricky to assess when greed will return after a round of loss.
In some respects, hedge funds have been operating in a similar way to the professionals. What is happening in the oil market, differs little from what is happening in the property market. Hedge funds are speculating on oil prices in the belief that China will have to buy. The trick is working so far, as China is still allowing its economy to overheat and its property bubble is covering up the negative effect of high oil prices.
See: The Professionals
http://www.morganstanley.com/GEFdata/digests/latest-digest.html#anchor1
When the bubble deflates, these professionals kill time at various golf courses....and await their next chance. The professionals have turned speculation into a fine art. If a professional believes that conditions are right for speculating on a stock, he will jump in. When he feels momentum has sustained for long enough and small investors have jumped in, the professional will try to cash out with profits. Speculating works when the macro environment is right. It is tricky to assess when greed will return after a round of loss.
In some respects, hedge funds have been operating in a similar way to the professionals. What is happening in the oil market, differs little from what is happening in the property market. Hedge funds are speculating on oil prices in the belief that China will have to buy. The trick is working so far, as China is still allowing its economy to overheat and its property bubble is covering up the negative effect of high oil prices.
See: The Professionals
http://www.morganstanley.com/GEFdata/digests/latest-digest.html#anchor1
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