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> KEY POINT: Most overseas markets complete their trading well ahead
of Wall
> Street's 4pm market close. A US based "International" fund, which
holds
> STOCKS TRADED ON FOREIGN EXCHANGES (i.e. Japanese stocks traded in
Tokyo, or
> German shares traded in Frankfurt, etc., NOT US listed ADRs) will
price those
> shares based on their earlier overseas markets closing level. EVEN
THOUGH THE
> OVERSEAS CLOSE MAY HAVE BEEN 4-16 HOURS EARLIER, IT IS THAT EARLIER
PRICE
> WHICH IS USED AT 4PM ECT TO VALUE THE INTNTL FUND'S NAV. BUYING
OVERSEAS
> MARKETS AT EARLIER DAY'S CLOSE KNOWING FULL WELL WHAT TO EXPECT THE
NEXT DAY
> IS THE ONLY "FREE LUNCH" IN MONEY MANAGEMENT.
I fail to see how this is a free lunch. The Nikkei closes down 5%.
You know this. You want to sell your holding. You place a sell order
which will be executed at the next available NAV. The fund company
calculates the NAV at the end of the day using the last market prices
which reflect the 5% decline. The only free lunch here is knowing
ahead of time that your investment is going to drop in value.
> Consider this,....Let's say at 9:00am you could make a decision to
buy or
> sell the previous day's cash SP500 close, like entering a mutual
> fund...knowing full well what the SPZ's (Dec. SP500 futures
contract) had
> done in the overnight session. Seems too good to be true, right?
It is. The futures contract drops 20% in overnight trading because of
some disaster. You know this. You want to sell your holding. You
place a sell order which will be executed at the next available NAV.
The fund company calculates the NAV at the end of the day using prices
that reflect the 20% decline. Where's the free lunch?
What is possible is the situation where the US market is significantly
affected by some news that has a high probability of affecting foreign
markets. The US market must be affected early enough in the day for
you to place a fund order that will get that night's NAV which is
based on pre-news foreign prices. That's a free lunch _IF_ there is
price follow through from the US market into the foreign market.
Regards,
Mike
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Aboard 35' Edel Cat "Moongate" in New Bern, NC
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