Monthly Archives: September 2009

What are the “pink sheets”?

September 7, 2009 By in pink sheets, Vocabulary Tags: , , , , Leave a comment

The pink sheets are a scary place, where you better know what you’re getting into before you dabble, with one exception–international stocks.

A little history

At one time, price quotes and the names of market makers for stocks not listed on stock exchanges were circulated to trading desks on long sheets of pink-colored paper.  That’s where the name “pink sheets” comes from.

The company that began this service in 1913, National Quotation Bureau, is now known as Pink OTC Markets and operates an interdealer quotation and trading service called Pink Quote, plus a financial web portal for small-cap OTC stocks, http://www.pinksheets.com.

Maybe there was a time when there were national stocks listed on the New York Stock Exchange, regional stocks listed on the Boston or Philadelphia or San Francisco Stock Exchanges and all the rest were tallied on the pink sheets.  If so, that was before I entered the business in 1978.  By the late Seventies, Nasdaq was well past its 1971 startup as a bulletin board and significantly down the road toward being the stock market power it is today.  So the process of pushing the toward the very smallest stocks had already begun.

Today’s listing choices Continue reading →

Why September and October can be tough months for stocks

September 2, 2009 By in Current Market Thoughts, Recent Market Action, Strategy Tags: , , , Leave a comment

September-October stock weakness

US stocks have a period of weakness virtually every year at around this time.  The rest of the world usually follows the US lead.  Selling typically lasts several weeks and is over by the beginning of the last week in October.  The starting time and the depth of the weakness vary from year to year.

Mutual funds are the culprits

The sellers are mutual funds–and nowadays, ETFs.  The main reason is taxes, although there is an element of yearend housecleaning as well.

Mutual funds and ETFs are specialized corporations that are exempt from income tax at the corporate level, provided that each year they distribute their income and realized capital gains to shareholders–who then pay Uncle Sam.   You can see more about this in my series of posts on mutual funds and ETFs.

In the early days, mutual funds ended their business year in December.  But twenty years or so ago, the government gave funds a chance to change to an October yearend, so they would have more time to close their books, report to shareholders and still accurately calculate and make the required distribution of profits.  Just about everyone took up the offer.  New mutual funds have set themselves up this way as well.

Post-Labor Day thoughts Continue reading →