We have often heard of talk
about Smart Money and Dumb Money. We
wish more investors were in the Smart Money category. However, what is Smart
Money?
According to Investopedia,
the Smart Money is defined as cash invested or wagered by those considered to
be experienced, well-informed, “in-the-know”, or all three.
The Smart Money sometime
seems very abstract. However, the Smart Money can be one individual person or
an institution, such as Warren Buffet, Jon Hilsenrath, Goldman Sachs, etc. These people or institutions have the
capacity to move the market dramatically.
Just in case, you are not
familiar with Jon Hilsenrath, he is a Wall Street Journal Federal Reserve
reporter. You can read the article, “Meet the Man Responsible For Today’s Huge
230 Point Dow Surge” from the following link to see how he
is capable of moving the stock market.
When Warren Buffet calls
for buying stocks, usually there will be considerable profit. Just recently, on 3/5/2013 he sent out emails
to shareholders to buy stocks. The S&P closed at 1,539 that day. On 5/6/2013, he said the market would go a
lot higher. Sure enough, the S&P closed at 1,617 on 5/6/2013, and it
registered a record intraday high at 1,709 on 8/2/2013.
On 12/5/2012, Goldman Sachs
said that gold had reached its peak and the real rate would rise.
The ETF
GLD, which mirrors the gold bullion supply, made record highs in October 2012.
On 12/5/2012, Goldman Sachs declared that gold had seen its highest level. ETF GLD was closed at 163 that day. It went
up a little bit before it drifted all the way down until 6/27/2013. The closing
price was 115 and the bleeding finally stopped.
This was equivalent to a 29% drop.
Here is
another example how to follow the Smart Money.
Billionaire
George Soros’s family office hedge fund, Soros Fund Management, filed its 13F
quarterly report with the Securities and Exchange Commission on 8/14/2013. According to Marketwatch reporter Barbara
Kollmeyer, Solos bought a bunch of puts on the SPDR S&P 500 ETF, which is a
bearish bet.
If you
follow the Smart Money, you can profit from their trading patterns.