Investment Warrior Report Archive Article
"The "Market Timing" Scandal - The Straight Truth - Bill Lussenheide
Recent fraudulent activities by mutual funds and others have mislabeled some forms of market timing as fraudulent. Market Timing, done legally, is neither fraudulent nor unethical. In fact, the very movement of the market is a function of investors and speculators trying to buy low and sell high - the very definition of market timing.
Actually, the scandal is really about a practice that is called "Late Trading", not so much about market timing. Unfortunately, in the confusion, some in the public are not aware of the differences. Late trading is where certain fund companies have given preferential treatment to some investors by providing them information and allowing them trading privileges not available to all shareholders. We at Lussenheide Capital Management Inc. find such activity to be fraudulent and immoral. In fact, it is illegal, and has prompted this current investigation by the SEC.
Management Inc. uses many of the mutual funds from Rydex
Investments for management of our client funds. Rydex Funds are not
under investigation for illegal activity in this scandal. They are
dedicated to providing flexibility for our management provided for
clients— including unlimited trading privileges at most of their
funds. They do not permit managers, such as ourselves, to initiate
trades after a fund's pricing time. On the subject of market timing, the
Rydex Funds’ stated policy has always been to permit unlimited trading
privileges, with no exchange fees, to all managers—not a selected few.
Rydex Funds’ portfolios are well positioned to manage frequent
trading and large cash flows. The Funds invest each day’s cash flow on
a real time basis and strive to remain fully invested at all times in
highly liquid securities. Rydex Funds were specifically designed to
provide an array of investment tools for actively managed portfolios
such as ours, and have successfully accommodated these
investment strategies for over ten years.
NOW MORE THAN EVER, REMEMBER AND COMMIT TO STRATEGY, PATIENCE, & DISCIPLINE!
Copyright © 2003 Lussenheide Capital Management Inc