03:27 PM
Symons Reaps Benefits of Market Downturn
Many firms were affected by the market downturn on Tuesday, Feb. 27 - some negatively and some positively. Symons Capital Management was able to turn the chaos into an opportunity by dipping into its cash reserves and getting good prices as the market was going down."We've been anticipating this and had been sitting on some cash for a period of months - about 20 percent," notes Michael P. Czajka, CEO of Pittsburgh-based Symons, which has $260 million in assets under management. "Our clients have been beating us up for the cash positions we've taken, but we were able to put it to work [Tuesday]," he adds. Colin Symons, Symons' chief investment officer, says, "We flushed out some buys with our new clients, but we're still doing a lot of watching and waiting." As for anticipating a downturn, Symons adds that the market decline on Feb. 27 cannot simply be blamed on the 9 percent decline in Chinese stocks alone. "There were a lot of things out there that were pretty stretched," he says. "I don't think blaming China is accurate." Symons says he believes the problem occurred when the Yen went up against the dollar. "That's when we really saw excitement in terms of both bonds and futures," he asserts. Symons points out that stock futures were trading in the morning and they didn't go down based on the China news. The cause of the downturn wasn't the weak economy in China, he explains; it was when the Yen Carry traders- investors who borrow in low-yielding currencies to invest in higher yielding assets elsewhere - couldn't support the trade anymore, he adds. Of course, there was more excitement at around 3:00 p.m. EST when the Dow Jones Industrial Average (DJIA) plunged 200 points. "The Dow index experienced technical difficulties - the system backed up and a whole backlog of trades did not register until 70 minutes later, causing a quick drop of 200 points," Symons explains. At that point, "We tried to pick off some bad bid and asks. For example, Borders was down briefly 10 percent," he notes. The system that calculates the DJIA switched over to a back-up system, and when it caught up with the backlog of trades, it gave the appearance of a market plunge. Those trades had taken place over the previous 70 minutes - they were accurate. The Dow dropped when the systems caught up," explains Symons. Despite the excitement, Symons says, "This is one day in a long road. We don't react to minute-by-minute changes. We're more long-term." However, it was a very interesting day, Symons concedes. "The acceleration of change was the most interesting I've ever seen," he says. "That 70-minute slide was pretty impressive."Many firms were affected by the market downturn on Tuesday, Feb. 27 - some negatively and some positively. Symons Capital Management was able to turn the chaos into an opportunity by dipping into its cash reserves and getting good prices as the market was going down.