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To my mind, this points to the continual underperformance of most large money managers: They sell low (who else was bailing on Intel selling tens of millions of shares daily in the teens?), and they buy high (who was buying Cisco in the hundreds of millions of dollars worth each day in 2000?). Not the little guys -- not in that volume, not even when all combined.

I just linked a very meticulous study showing that mutual funds on either a value weighted or equally weighted basis do not buy high and sell low --- their stock picks outperform indexes by 1.3% a year on average. Similarly, there are many studies showing that individuals on balance do in fact buy high and sell low, which could make up for some of fund's apparent edge:

Your retort argues the tautology that only large money managers could have bought up the large volume of Cisco at the highs in 2000 and sold the similar volume on Intel at the lows in early 2003? How can you possibly make this argument without acknowledging that for ever buyer there is a seller, and vice versa? Who exactly was on the other side of those tens of millions of dollars of trades?

I just don't see what your point is in fighting against data that is well known, well documented, and accurate, and has been for years. Money managers can't all be above average. And most cannot outperform. A market naturally has a minority outperforming the majority.

I agree that you don't see my point, and I'll take the blame for it. As last ditch effort, my point was twofold. One, the performance of heavily shorted stocks for the first 8 months of 2003 shows absolutely nothing about whether large money managers are losers, just as the peformance of heavily shorted stocks in August of 1999 shows nothing. Moreover, better evidence in fact shows that heavy short interest tends to forecast poor subsequent returns, contrary to the implication from your article. Two, the performance of large mutual funds is much more nuanced than you or other Motley Fool articles tend to indicate, and there is much more evidence on the subject than what you normally present. Specifically, there is strong evidence that directly contradicts your argument the large institutions buy high and sell low. The fact that "money managers can't all be above average" is completely orthogonal but at least a point of agreement between us. Maybe we should quit while we're ahead.

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