Portfolio Managers Churn & Burn

While the major market averages show weakness, it is easy to see from the trading volume what most portfolio managers are doing today - they are adjusting their portfolios. Perhaps mostly out of boredom - but a lot of these morons have to justify their jobs by trading every day. Most of it is entirely unproductive and unnecessary, but if you're not paying for the trading costs out of your own pocket, then it doesn't matter much.

A clear example of this routine mindless trading? Just look at the buy interest today among the the homebuilding sector. Last week we saw several funds trim their exposure, but I'm hearing now that many of those same funds are buying back the same stocks only a minor decline. This group remains a tough short-term short for that reason, because it is viewed by many as a safe bet as long as interest rates remain low. Market perception is everything, especially when it is so commonly held by those who have the power to move groups of stocks up and down.

Portfolio managers are also losing a bit of their nerve here, as many stocks with lots of momentum, like Usana (USNA), literally fall from the sky. It has been relatively safe for many months just to own stocks because they are on the new 52-week high list. That has only started to change. As they say on Wall Street, the low hanging fruit has already been picked.