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Noble Capital Markets (“Noble”) announced today that the 43rd&nbsp;President of the United States and Founder of the George W. Bush Presidential Center will be featured at NobleCon19, Noble’s 19th&nbsp;Annual Emerging Growth Conference to be held at Florida Atlantic University, College of Business, Executive Education, December 3-5, 2023, in Boca Raton, Florida. Noble’s Director of Research, Michael Kupinski will moderate the hour-long fireside chat with President Bush.



George W. Bush served as 43rd President of the United States of America from 2001 to 2009.&nbsp; As Commander in Chief, President Bush worked to expand freedom, opportunity, and security at home and abroad.&nbsp; His Administration reformed America’s education system, restored robust private-sector economic growth and job creation, protected our environment, and pursued a comprehensive strategy to keep America safe after the terrorist attacks on September 11, 2001.&nbsp;



In this more casual and personable format, President Bush will discuss his time in the Oval Office and the challenges facing our nation today.



In addition to admittance to the President Bush fireside chat, attendees of NobleCon19 will be exposed to 100+ executive teams from all across North America, through formal presentations, Q&amp;A sessions, organized breakouts and selected one-on-one meeting. Topical panel presentations, to-be-announced keynotes and networking events, and “The After” first-day evening event featuring world-class entertainment rounds out the agenda.



The objective of NobleCon19 is to build awareness for emerging growth companies that may shape the future of technology, media, telecom, medicine, manufacturing, retail, transportation and distribution, and natural resources. Most of the companies presenting will be public, thereby offering investment opportunities. Although institutional investors, licensed brokers and accredited investors will be in attendance, NobleCon19 is open to all individuals and organizations interested in learning more about these companies.&nbsp;&nbsp;



To receive NobleCon agenda updates and registration opportunities, <a href="https://www.channelchek.com/registration" target="_blank" rel="noreferrer noopener">join&nbsp;Channelchek.com</a>,&nbsp;Noble’s online investment community, listing more than 6,000 public emerging growth companies. This is an open-access site with no cost (ever) to join. Companies with market capitalization of $3 billion or less wishing to learn more about presenting at NobleCon19 can&nbsp;<a href="https://noblecon19.com/presenter-request/" target="_blank" rel="noreferrer noopener">Inquire Here</a>.



Please note: Some sessions of this conference are closed to the media with no personal recording, photography, or note-taking permitted.



About Noble Capital Markets



Noble Capital Markets, Inc. was incorporated in 1984 as a full-service SEC / FINRA registered broker-dealer, dedicated exclusively to serving underfollowed emerging growth companies through investment banking, wealth management, trading &amp; execution, and equity research activities. Over the past 39 years, Noble has raised billions of dollars for companies and published more than 45,000 equity research reports.&nbsp;<a href="https://protect-eu.mimecast.com/s/UvXBCovq2ilVZ0K5hzmLIR?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.noblecapitalmarkets.com</a>&nbsp;&nbsp;<a href="https://protect-eu.mimecast.com/s/nh4pCpR0YiQ0KBxqHYYXW-?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">contact@noblecapitalmarkets.com</a>



About Florida Atlantic University



Florida Atlantic University, established in 1961, officially opened its doors in 1964 as the fifth public university in Florida. Today, the University serves more than 30,000 undergraduate and graduate students across six campuses located along the southeast Florida coast. In recent years, the University has doubled its research expenditures and outpaced its peers in student achievement rates. Through the coexistence of access and excellence, FAU embodies an innovative model where traditional achievement gaps vanish. FAU is designated a Hispanic-serving institution, ranked as a top public university by U.S. News &amp; World Report and a High Research Activity institution by the Carnegie Foundation for the Advancement of Teaching. For more information, visit&nbsp;<a href="https://protect-eu.mimecast.com/s/y7pRCrEwkTwRoGD7HjqfVG?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.fau.edu</a>.



Media Contact: InvestorWire (IW) Los Angeles, California <a href="https://protect-eu.mimecast.com/s/QmjiCwEBpT0E9WRkUxa4VS?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.InvestorWire.com</a> 212.418.1217 Office <a href="https://protect-eu.mimecast.com/s/nQOWCxVDkfm5w3QDfgIMAm?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">Editor@InvestorWire.com</a>

Noble Capital Markets (“Noble”) announced today that the 43rd&nbsp;President of the United States and Founder of the George W. Bush Presidential Center will be featured at NobleCon19, Noble’s 19th&nbsp;Annual Emerging Growth Conference to be held at Florida Atlantic University, College of Business, Executive Education, December 3-5, 2023, in Boca Raton, Florida. Noble’s Director of Research, Michael Kupinski will moderate the hour-long fireside chat with President Bush.



George W. Bush served as 43rd President of the United States of America from 2001 to 2009.&nbsp; As Commander in Chief, President Bush worked to expand freedom, opportunity, and security at home and abroad.&nbsp; His Administration reformed America’s education system, restored robust private-sector economic growth and job creation, protected our environment, and pursued a comprehensive strategy to keep America safe after the terrorist attacks on September 11, 2001.&nbsp;



In this more casual and personable format, President Bush will discuss his time in the Oval Office and the challenges facing our nation today.



In addition to admittance to the President Bush fireside chat, attendees of NobleCon19 will be exposed to 100+ executive teams from all across North America, through formal presentations, Q&amp;A sessions, organized breakouts and selected one-on-one meeting. Topical panel presentations, to-be-announced keynotes and networking events, and “The After” first-day evening event featuring world-class entertainment rounds out the agenda.



The objective of NobleCon19 is to build awareness for emerging growth companies that may shape the future of technology, media, telecom, medicine, manufacturing, retail, transportation and distribution, and natural resources. Most of the companies presenting will be public, thereby offering investment opportunities. Although institutional investors, licensed brokers and accredited investors will be in attendance, NobleCon19 is open to all individuals and organizations interested in learning more about these companies.&nbsp;&nbsp;



To receive NobleCon agenda updates and registration opportunities, <a href="https://www.channelchek.com/registration" target="_blank" rel="noreferrer noopener">join&nbsp;Channelchek.com</a>,&nbsp;Noble’s online investment community, listing more than 6,000 public emerging growth companies. This is an open-access site with no cost (ever) to join. Companies with market capitalization of $3 billion or less wishing to learn more about presenting at NobleCon19 can&nbsp;<a href="https://noblecon19.com/presenter-request/" target="_blank" rel="noreferrer noopener">Inquire Here</a>.



Please note: Some sessions of this conference are closed to the media with no personal recording, photography, or note-taking permitted.



About Noble Capital Markets



Noble Capital Markets, Inc. was incorporated in 1984 as a full-service SEC / FINRA registered broker-dealer, dedicated exclusively to serving underfollowed emerging growth companies through investment banking, wealth management, trading &amp; execution, and equity research activities. Over the past 39 years, Noble has raised billions of dollars for companies and published more than 45,000 equity research reports.&nbsp;<a href="https://protect-eu.mimecast.com/s/UvXBCovq2ilVZ0K5hzmLIR?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.noblecapitalmarkets.com</a>&nbsp;&nbsp;<a href="https://protect-eu.mimecast.com/s/nh4pCpR0YiQ0KBxqHYYXW-?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">contact@noblecapitalmarkets.com</a>



About Florida Atlantic University



Florida Atlantic University, established in 1961, officially opened its doors in 1964 as the fifth public university in Florida. Today, the University serves more than 30,000 undergraduate and graduate students across six campuses located along the southeast Florida coast. In recent years, the University has doubled its research expenditures and outpaced its peers in student achievement rates. Through the coexistence of access and excellence, FAU embodies an innovative model where traditional achievement gaps vanish. FAU is designated a Hispanic-serving institution, ranked as a top public university by U.S. News &amp; World Report and a High Research Activity institution by the Carnegie Foundation for the Advancement of Teaching. For more information, visit&nbsp;<a href="https://protect-eu.mimecast.com/s/y7pRCrEwkTwRoGD7HjqfVG?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.fau.edu</a>.



Media Contact: InvestorWire (IW) Los Angeles, California <a href="https://protect-eu.mimecast.com/s/QmjiCwEBpT0E9WRkUxa4VS?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">www.InvestorWire.com</a> 212.418.1217 Office <a href="https://protect-eu.mimecast.com/s/nQOWCxVDkfm5w3QDfgIMAm?domain=globenewswire.com" target="_blank" rel="noreferrer noopener">Editor@InvestorWire.com</a>

Noble Capital Markets (“Noble”) announced today that the 43rd&nbsp;President of the United States and Founder of the George W. Bush Presidential Center will be featured at NobleCon19, Noble’s 19th&nbsp;Annual Emerging Growth Conference to be held at Florida Atlantic University, College of Business, Executive Education, December 3-5, 2023, in Boca Raton, Florida. Noble’s Director of Research, Michael Kupinski will moderate the hour-long fireside chat with President Bush.



George W. Bush served as 43rd President of the United States of America from 2001 to 2009.&nbsp; As Commander in Chief, President Bush worked to expand freedom, opportunity, and security at home and abroad.&nbsp; His Administration reformed America’s education system, restored robust private-sector economic growth and job creation, protected our environment, and pursued a comprehensive strategy to keep America safe after the terrorist attacks on September 11, 2001.&nbsp;



In this more casual and personable format, President Bush will discuss his time in the Oval Office and the challenges facing our nation today.



In addition to admittance to the President Bush fireside chat, attendees of NobleCon19 will be exposed to 100+ executive teams from all across North America, through formal presentations, Q&amp;A sessions, organized breakouts and selected one-on-one meeting. Topical panel presentations, to-be-announced keynotes and networking events, and “The After” first-day evening event featuring world-class entertainment rounds out the agenda.



The objective of NobleCon19 is to build awareness for emerging growth companies that may shape the future of technology, media, telecom, medicine, manufacturing, retail, transportation and distribution, and natural resources. Most of the companies presenting will be public, thereby offering investment opportunities. Although institutional investors, licensed brokers and accredited investors will be in attendance, NobleCon19 is open to all individuals and organizations interested in learning more about these companies.&nbsp;&nbsp;



To receive NobleCon agenda updates and registration opportunities, join&nbsp;Channelchek.com,&nbsp;Noble’s online investment community, listing more than 6,000 public emerging growth companies. This is an open-access site with no cost (ever) to join. Companies with market capitalization of $3 billion or less wishing to learn more about presenting at NobleCon19 can&nbsp;Inquire Here.



Please note: Some sessions of this conference are closed to the media with no personal recording, photography, or note-taking permitted.



About Noble Capital Markets



Noble Capital Markets, Inc. was incorporated in 1984 as a full-service SEC / FINRA registered broker-dealer, dedicated exclusively to serving underfollowed emerging growth companies through investment banking, wealth management, trading &amp; execution, and equity research activities. Over the past 39 years, Noble has raised billions of dollars for companies and published more than 45,000 equity research reports.&nbsp;www.noblecapitalmarkets.com&nbsp;&nbsp;contact@noblecapitalmarkets.com



About Florida Atlantic University



Florida Atlantic University, established in 1961, officially opened its doors in 1964 as the fifth public university in Florida. Today, the University serves more than 30,000 undergraduate and graduate students across six campuses located along the southeast Florida coast. In recent years, the University has doubled its research expenditures and outpaced its peers in student achievement rates. Through the coexistence of access and excellence, FAU embodies an innovative model where traditional achievement gaps vanish. FAU is designated a Hispanic-serving institution, ranked as a top public university by U.S. News &amp; World Report and a High Research Activity institution by the Carnegie Foundation for the Advancement of Teaching. For more information, visit&nbsp;www.fau.edu.



Media Contact:InvestorWire (IW)Los Angeles, Californiawww.InvestorWire.com212.418.1217 OfficeEditor@InvestorWire.com

NobleCon19 will Feature an Exclusive Conversation with President George W. Bush, Moderated Live by Noble Capital Markets' Director of Research

Investor Conference

Noblecon

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-ai-regulations-663.jpg" alt="" class="wp-image-64710"/></figure>



<h2 class="wp-block-heading">How Can Congress Regulate AI? Erect Guardrails, Ensure Accountability and Address Monopolistic Power</h2>







OpenAI CEO Sam Altman urged lawmakers to consider regulating AI during his Senate testimony on May 16, 2023. That recommendation raises the question of what comes next for Congress. The solutions Altman proposed – creating an <a href="https://www.channelchek.com/channelchek-in" target="_blank" rel="noreferrer noopener">AI regulatory agency</a> and requiring licensing for companies – are interesting. But what the other experts on the same panel suggested is at least as important: requiring transparency on training data and establishing clear frameworks for AI-related risks.



Another point left unsaid was that, given the economics of building large-scale AI models, the industry may be witnessing the emergence of a new type of tech monopoly.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of <a href="https://theconversation.com/profiles/anjana-susarla-334987">Anjana Susarla</a>, Professor of Information Systems, Michigan State University.



As a researcher who studies social media and artificial intelligence, I believe that Altman’s suggestions have highlighted important issues but don’t provide answers in and of themselves. Regulation would be helpful, but in what form? Licensing also makes sense, but for whom? And any effort to regulate the AI industry will need to account for the companies’ economic power and political sway.







<h3 class="wp-block-heading">An Agency to Regulate AI?</h3>



Lawmakers and policymakers across the world have already begun to address some of the issues raised in Altman’s testimony. The European Union’s AI Act is based on a risk model that assigns AI applications to three categories of risk: unacceptable, high risk, and low or minimal risk. This categorization recognizes that tools for social scoring by governments and automated tools for hiring pose different risks than those from the use of AI in spam filters, for example.



The U.S. National Institute of Standards and Technology likewise has an AI risk management framework that was created with extensive input from multiple stakeholders, including the U.S. Chamber of Commerce and the Federation of American Scientists, as well as other business and professional associations, technology companies and think tanks.



Federal agencies such as the Equal Employment Opportunity Commission and the Federal Trade Commission have already issued guidelines on some of the <a href="https://www.channelchek.com/news-channel/ai-now-represents-a-measurable-threat-to-the-workforce" target="_blank" rel="noreferrer noopener">risks inherent in AI</a>. The Consumer Product Safety Commission and other agencies have a role to play as well.



Rather than create a new agency that runs the risk of becoming compromised by the technology industry it’s meant to regulate, Congress can support private and public adoption of the NIST risk management framework and pass bills such as the Algorithmic Accountability Act. That would have the effect of imposing accountability, much as the Sarbanes-Oxley Act and other regulations transformed reporting requirements for companies. Congress can also adopt comprehensive laws around data privacy.



<a href="https://www.channelchek.com/news-channel/ai-is-exciting-and-an-ethical-minefield" target="_blank" rel="noreferrer noopener">Regulating AI</a> should involve collaboration among academia, industry, policy experts and international agencies. Experts have likened this approach to international organizations such as the European Organization for Nuclear Research, known as CERN, and the Intergovernmental Panel on Climate Change. The internet has been managed by nongovernmental bodies involving nonprofits, civil society, industry and policymakers, such as the Internet Corporation for Assigned Names and Numbers and the World Telecommunication Standardization Assembly. Those examples provide models for industry and policymakers today.







<h3 class="wp-block-heading">Licensing Auditors, Not Companies</h3>



Though OpenAI’s Altman suggested that companies could be licensed to release artificial intelligence technologies to the public, he clarified that he was referring to artificial general intelligence, meaning potential future AI systems with humanlike intelligence that could pose a threat to humanity. That would be akin to companies being licensed to handle other potentially dangerous technologies, like nuclear power. But licensing could have a role to play well before such a futuristic scenario comes to pass.



Algorithmic auditing would require credentialing, standards of practice and extensive training. Requiring accountability is not just a matter of licensing individuals but also requires companywide standards and practices.



Experts on AI fairness contend that issues of bias and fairness in AI cannot be addressed by technical methods alone but require more comprehensive risk mitigation practices such as adopting institutional review boards for AI. Institutional review boards in the medical field help uphold individual rights, for example.



Academic bodies and professional societies have likewise adopted standards for responsible use of AI, whether it is authorship standards for AI-generated text or standards for patient-mediated data sharing in medicine.



Strengthening existing statutes on consumer safety, privacy and protection while introducing norms of algorithmic accountability would help demystify complex AI systems. It’s also important to recognize that greater data accountability and transparency may impose new restrictions on organizations.



Scholars of data privacy and AI ethics have called for “technological due process” and frameworks to recognize harms of predictive processes. The widespread use of AI-enabled decision-making in such fields as employment, insurance and health care calls for licensing and audit requirements to ensure procedural fairness and privacy safeguards.



Requiring such accountability provisions, though, demands a robust debate among AI developers, policymakers and those who are affected by broad deployment of AI. In the absence of strong algorithmic accountability practices, the danger is narrow audits that promote the appearance of compliance.







<h3 class="wp-block-heading">AI Monopolies?</h3>



What was also missing in Altman’s testimony is the extent of investment required to train large-scale AI models, whether it is GPT-4, which is one of the foundations of ChatGPT, or text-to-image generator Stable Diffusion. Only a handful of companies, such as Google, Meta, Amazon and Microsoft, are responsible for developing the world’s largest language models.



Given the lack of transparency in the training data used by these companies, AI ethics experts Timnit Gebru, Emily Bender and others have warned that large-scale adoption of such technologies without corresponding oversight risks amplifying machine bias at a societal scale.



It is also important to acknowledge that the training data for tools such as ChatGPT includes the intellectual labor of a host of people such as Wikipedia contributors, bloggers and authors of digitized books. The economic benefits from these tools, however, accrue only to the technology corporations.



Proving technology firms’ monopoly power can be difficult, as the Department of Justice’s antitrust case against Microsoft demonstrated. I believe that the most feasible regulatory options for Congress to address potential algorithmic harms from AI may be to strengthen disclosure requirements for AI firms and users of AI alike, to urge comprehensive adoption of AI risk assessment frameworks, and to require processes that safeguard individual data rights and privacy.

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="376" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-ai-regulations-663.jpg" alt="" class="wp-image-64710" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-ai-regulations-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-ai-regulations-663-300x170.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">How Can Congress Regulate AI? Erect Guardrails, Ensure Accountability and Address Monopolistic Power</h2>







OpenAI CEO Sam Altman urged lawmakers to consider regulating AI during his Senate testimony on May 16, 2023. That recommendation raises the question of what comes next for Congress. The solutions Altman proposed – creating an <a href="https://www.channelchek.com/channelchek-in" target="_blank" rel="noreferrer noopener">AI regulatory agency</a> and requiring licensing for companies – are interesting. But what the other experts on the same panel suggested is at least as important: requiring transparency on training data and establishing clear frameworks for AI-related risks.



Another point left unsaid was that, given the economics of building large-scale AI models, the industry may be witnessing the emergence of a new type of tech monopoly.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of <a href="https://theconversation.com/profiles/anjana-susarla-334987">Anjana Susarla</a>, Professor of Information Systems, Michigan State University.



As a researcher who studies social media and artificial intelligence, I believe that Altman’s suggestions have highlighted important issues but don’t provide answers in and of themselves. Regulation would be helpful, but in what form? Licensing also makes sense, but for whom? And any effort to regulate the AI industry will need to account for the companies’ economic power and political sway.







<h3 class="wp-block-heading">An Agency to Regulate AI?</h3>



Lawmakers and policymakers across the world have already begun to address some of the issues raised in Altman’s testimony. The European Union’s AI Act is based on a risk model that assigns AI applications to three categories of risk: unacceptable, high risk, and low or minimal risk. This categorization recognizes that tools for social scoring by governments and automated tools for hiring pose different risks than those from the use of AI in spam filters, for example.



The U.S. National Institute of Standards and Technology likewise has an AI risk management framework that was created with extensive input from multiple stakeholders, including the U.S. Chamber of Commerce and the Federation of American Scientists, as well as other business and professional associations, technology companies and think tanks.



Federal agencies such as the Equal Employment Opportunity Commission and the Federal Trade Commission have already issued guidelines on some of the <a href="https://www.channelchek.com/news-channel/ai-now-represents-a-measurable-threat-to-the-workforce" target="_blank" rel="noreferrer noopener">risks inherent in AI</a>. The Consumer Product Safety Commission and other agencies have a role to play as well.



Rather than create a new agency that runs the risk of becoming compromised by the technology industry it’s meant to regulate, Congress can support private and public adoption of the NIST risk management framework and pass bills such as the Algorithmic Accountability Act. That would have the effect of imposing accountability, much as the Sarbanes-Oxley Act and other regulations transformed reporting requirements for companies. Congress can also adopt comprehensive laws around data privacy.



<a href="https://www.channelchek.com/news-channel/ai-is-exciting-and-an-ethical-minefield" target="_blank" rel="noreferrer noopener">Regulating AI</a> should involve collaboration among academia, industry, policy experts and international agencies. Experts have likened this approach to international organizations such as the European Organization for Nuclear Research, known as CERN, and the Intergovernmental Panel on Climate Change. The internet has been managed by nongovernmental bodies involving nonprofits, civil society, industry and policymakers, such as the Internet Corporation for Assigned Names and Numbers and the World Telecommunication Standardization Assembly. Those examples provide models for industry and policymakers today.







<h3 class="wp-block-heading">Licensing Auditors, Not Companies</h3>



Though OpenAI’s Altman suggested that companies could be licensed to release artificial intelligence technologies to the public, he clarified that he was referring to artificial general intelligence, meaning potential future AI systems with humanlike intelligence that could pose a threat to humanity. That would be akin to companies being licensed to handle other potentially dangerous technologies, like nuclear power. But licensing could have a role to play well before such a futuristic scenario comes to pass.



Algorithmic auditing would require credentialing, standards of practice and extensive training. Requiring accountability is not just a matter of licensing individuals but also requires companywide standards and practices.



Experts on AI fairness contend that issues of bias and fairness in AI cannot be addressed by technical methods alone but require more comprehensive risk mitigation practices such as adopting institutional review boards for AI. Institutional review boards in the medical field help uphold individual rights, for example.



Academic bodies and professional societies have likewise adopted standards for responsible use of AI, whether it is authorship standards for AI-generated text or standards for patient-mediated data sharing in medicine.



Strengthening existing statutes on consumer safety, privacy and protection while introducing norms of algorithmic accountability would help demystify complex AI systems. It’s also important to recognize that greater data accountability and transparency may impose new restrictions on organizations.



Scholars of data privacy and AI ethics have called for “technological due process” and frameworks to recognize harms of predictive processes. The widespread use of AI-enabled decision-making in such fields as employment, insurance and health care calls for licensing and audit requirements to ensure procedural fairness and privacy safeguards.



Requiring such accountability provisions, though, demands a robust debate among AI developers, policymakers and those who are affected by broad deployment of AI. In the absence of strong algorithmic accountability practices, the danger is narrow audits that promote the appearance of compliance.







<h3 class="wp-block-heading">AI Monopolies?</h3>



What was also missing in Altman’s testimony is the extent of investment required to train large-scale AI models, whether it is GPT-4, which is one of the foundations of ChatGPT, or text-to-image generator Stable Diffusion. Only a handful of companies, such as Google, Meta, Amazon and Microsoft, are responsible for developing the world’s largest language models.



Given the lack of transparency in the training data used by these companies, AI ethics experts Timnit Gebru, Emily Bender and others have warned that large-scale adoption of such technologies without corresponding oversight risks amplifying machine bias at a societal scale.



It is also important to acknowledge that the training data for tools such as ChatGPT includes the intellectual labor of a host of people such as Wikipedia contributors, bloggers and authors of digitized books. The economic benefits from these tools, however, accrue only to the technology corporations.



Proving technology firms’ monopoly power can be difficult, as the Department of Justice’s antitrust case against Microsoft demonstrated. I believe that the most feasible regulatory options for Congress to address potential algorithmic harms from AI may be to strengthen disclosure requirements for AI firms and users of AI alike, to urge comprehensive adoption of AI risk assessment frameworks, and to require processes that safeguard individual data rights and privacy.

How Can Congress Regulate AI? Erect Guardrails, Ensure Accountability and Address Monopolistic Power







OpenAI CEO Sam Altman urged lawmakers to consider regulating AI during his Senate testimony on May 16, 2023. That recommendation raises the question of what comes next for Congress. The solutions Altman proposed – creating an AI regulatory agency and requiring licensing for companies – are interesting. But what the other experts on the same panel suggested is at least as important: requiring transparency on training data and establishing clear frameworks for AI-related risks.



Another point left unsaid was that, given the economics of building large-scale AI models, the industry may be witnessing the emergence of a new type of tech monopoly.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Anjana Susarla, Professor of Information Systems, Michigan State University.



As a researcher who studies social media and artificial intelligence, I believe that Altman’s suggestions have highlighted important issues but don’t provide answers in and of themselves. Regulation would be helpful, but in what form? Licensing also makes sense, but for whom? And any effort to regulate the AI industry will need to account for the companies’ economic power and political sway.







An Agency to Regulate AI?



Lawmakers and policymakers across the world have already begun to address some of the issues raised in Altman’s testimony. The European Union’s AI Act is based on a risk model that assigns AI applications to three categories of risk: unacceptable, high risk, and low or minimal risk. This categorization recognizes that tools for social scoring by governments and automated tools for hiring pose different risks than those from the use of AI in spam filters, for example.



The U.S. National Institute of Standards and Technology likewise has an AI risk management framework that was created with extensive input from multiple stakeholders, including the U.S. Chamber of Commerce and the Federation of American Scientists, as well as other business and professional associations, technology companies and think tanks.



Federal agencies such as the Equal Employment Opportunity Commission and the Federal Trade Commission have already issued guidelines on some of the risks inherent in AI. The Consumer Product Safety Commission and other agencies have a role to play as well.



Rather than create a new agency that runs the risk of becoming compromised by the technology industry it’s meant to regulate, Congress can support private and public adoption of the NIST risk management framework and pass bills such as the Algorithmic Accountability Act. That would have the effect of imposing accountability, much as the Sarbanes-Oxley Act and other regulations transformed reporting requirements for companies. Congress can also adopt comprehensive laws around data privacy.



Regulating AI should involve collaboration among academia, industry, policy experts and international agencies. Experts have likened this approach to international organizations such as the European Organization for Nuclear Research, known as CERN, and the Intergovernmental Panel on Climate Change. The internet has been managed by nongovernmental bodies involving nonprofits, civil society, industry and policymakers, such as the Internet Corporation for Assigned Names and Numbers and the World Telecommunication Standardization Assembly. Those examples provide models for industry and policymakers today.







Licensing Auditors, Not Companies



Though OpenAI’s Altman suggested that companies could be licensed to release artificial intelligence technologies to the public, he clarified that he was referring to artificial general intelligence, meaning potential future AI systems with humanlike intelligence that could pose a threat to humanity. That would be akin to companies being licensed to handle other potentially dangerous technologies, like nuclear power. But licensing could have a role to play well before such a futuristic scenario comes to pass.



Algorithmic auditing would require credentialing, standards of practice and extensive training. Requiring accountability is not just a matter of licensing individuals but also requires companywide standards and practices.



Experts on AI fairness contend that issues of bias and fairness in AI cannot be addressed by technical methods alone but require more comprehensive risk mitigation practices such as adopting institutional review boards for AI. Institutional review boards in the medical field help uphold individual rights, for example.



Academic bodies and professional societies have likewise adopted standards for responsible use of AI, whether it is authorship standards for AI-generated text or standards for patient-mediated data sharing in medicine.



Strengthening existing statutes on consumer safety, privacy and protection while introducing norms of algorithmic accountability would help demystify complex AI systems. It’s also important to recognize that greater data accountability and transparency may impose new restrictions on organizations.



Scholars of data privacy and AI ethics have called for “technological due process” and frameworks to recognize harms of predictive processes. The widespread use of AI-enabled decision-making in such fields as employment, insurance and health care calls for licensing and audit requirements to ensure procedural fairness and privacy safeguards.



Requiring such accountability provisions, though, demands a robust debate among AI developers, policymakers and those who are affected by broad deployment of AI. In the absence of strong algorithmic accountability practices, the danger is narrow audits that promote the appearance of compliance.







AI Monopolies?



What was also missing in Altman’s testimony is the extent of investment required to train large-scale AI models, whether it is GPT-4, which is one of the foundations of ChatGPT, or text-to-image generator Stable Diffusion. Only a handful of companies, such as Google, Meta, Amazon and Microsoft, are responsible for developing the world’s largest language models.



Given the lack of transparency in the training data used by these companies, AI ethics experts Timnit Gebru, Emily Bender and others have warned that large-scale adoption of such technologies without corresponding oversight risks amplifying machine bias at a societal scale.



It is also important to acknowledge that the training data for tools such as ChatGPT includes the intellectual labor of a host of people such as Wikipedia contributors, bloggers and authors of digitized books. The economic benefits from these tools, however, accrue only to the technology corporations.



Proving technology firms’ monopoly power can be difficult, as the Department of Justice’s antitrust case against Microsoft demonstrated. I believe that the most feasible regulatory options for Congress to address potential algorithmic harms from AI may be to strengthen disclosure requirements for AI firms and users of AI alike, to urge comprehensive adoption of AI risk assessment frameworks, and to require processes that safeguard individual data rights and privacy.

How to Keep AI on the Right Path

Republish

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-new-investor-663.jpg" alt="" class="wp-image-64704"/></figure>



<h2 class="wp-block-heading">Need-to-Know for Those Starting to Dip Their Dough into the Stock Market</h2>







Maybe you’ve saved a little and know you ought to invest, or maybe school is finally out and you have time and a few dollars to build your future, but you don’t think you know enough about the world of stock market investing. It’s easy to feel overwhelmed by the abundance of information? It’s a big decision with many mysteries and unknowns for both newcomers, and veterans. This article aims to remove much of the mystery for new investors so you can be more confident in building a portfolio that can enhance your life plans.



Whether you become interested in small-cap stocks, growth stocks, or even IPOs, understanding key concepts such as risk tolerance, investment goals, investment style, risk management, and portfolio strategy is crucial. Let's dive in!







<h3 class="wp-block-heading">Set Investment Goals</h3>



Clearly defining your investment goals is essential so you can make decisions after comparing them to those goals. Are you investing for retirement, saving for a down payment on a house, or aiming for short-term gains? Your goals will influence the investment strategies you use. For example, if you're investing for retirement and have decades of working years left, it may mean to buy and mostly hold for a long period stocks that have more potential given a long time horizon. This wouldn’t totally exclude mature companies with large market capitalizations but may include far more small and microcap opportunities than someone that is just a few years from retirement. If you are closer to retirement and don’t have as long for the growth to play out, the strategy may be to invest in large companies with stable dividends. If they throw off enough income, then an allocation of more speculative growth opportunities may make sense. This portfolio portion can allow for further growth.







<h3 class="wp-block-heading">Define Your Risk Tolerance</h3>



Before swimming in the deep end of investing, it's important to assess your risk tolerance. Ask yourself how comfortable you are with potential fluctuations in stock prices. <a href="https://www.channelchek.com/news-channel/the-reasons-veteran-investors-are-now-eying-small-cap-stocks">Small-cap</a> stocks and microcaps, which represent companies with smaller market value, often offer greater growth potential, but they also come with increased volatility. Growth stocks, however, are known for their potential high returns over time, of course this could come with the cost of more volatility (sharp price moves) than established “blue-chip” stocks. Knowing your risk tolerance, or uneasiness with losing, or riding out drawdowns, versus gaining more than the potential loss (risk/reward tolerance) will help you make investment decisions aligned with your comfort level.







<h3 class="wp-block-heading">Determine Your Investment Style</h3>



After assessing your risk tolerance and setting goals, determine your investment style. Some investors prefer a more hands-on approach, engaging in frequent trading and closely monitoring stock market trends and evaluating stocks through websites like <a href="https://www.channelchek.com/registration">Channelchek</a>. Others may prefer a more passive approach, investing in broad-based index funds or exchange-traded funds (ETFs) that provide diversification across various stocks. Understanding your investment style will help shape your overall investment strategy.







<h3 class="wp-block-heading">Minimizing Risk</h3>



Investing inherently involves risk, but there are strategies to help minimize potential losses. One approach is to conduct thorough research on companies you're considering for investment. This includes analyzing company-sponsored research, equity research reports, and equity analysis provided by reputable sources. Understanding the financial health, competitive advantages, and growth prospects of a company can help you make informed investment decisions.







<h3 class="wp-block-heading">Developing an Investment Portfolio Strategy</h3>



Diversification is considered key when it comes to building an investment portfolio. Investing in a variety of stocks across different sectors and market capitalizations, including small-cap stocks and growth stocks, can help spread risk and potentially increase returns. Consider allocating a portion of your portfolio to IPOs if you have a higher risk appetite. However, it's important to exercise caution as IPOs can be volatile shortly after their public debut.







<h3 class="wp-block-heading">Stay Informed</h3>



Keeping up with investment news is vital for any investor. Stay updated on market trends, company announcements, and <a href="https://www.channelchek.com/news-channel/the-week-ahead-debt-ceiling-beige-book-and-employment">economic indicators</a> that may impact the stock market. Many financial news outlets provide lists of "<a href="https://www.channelchek.com/market-movers">stocks to watch</a>" or provide insights into market trends. Regularly reviewing investment news and equity research can help you stay informed, make timely investment decisions, and expose you to opportunities you may not have discovered otherwise.







<h3 class="wp-block-heading">Take Away</h3>



Knowing it is time to start building an investment portfolio is a good first step. Now may be the when you should implement, especially if you have a long road ahead of you and financial security is important. It will require careful consideration of your risk tolerance, investment goals, investment style, risk management techniques, and portfolio strategy. Be prepared to conduct research, analyze equity reports, and stay informed about market developments. Investing is ordinarily long-term, patience, discipline, and a well-structured portfolio are key to achieving your financial objectives. 



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="412" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-new-investor-663.jpg" alt="" class="wp-image-64704" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-new-investor-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-new-investor-663-300x186.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Need-to-Know for Those Starting to Dip Their Dough into the Stock Market</h2>







Maybe you’ve saved a little and know you ought to invest, or maybe school is finally out and you have time and a few dollars to build your future, but you don’t think you know enough about the world of stock market investing. It’s easy to feel overwhelmed by the abundance of information? It’s a big decision with many mysteries and unknowns for both newcomers, and veterans. This article aims to remove much of the mystery for new investors so you can be more confident in building a portfolio that can enhance your life plans.



Whether you become interested in small-cap stocks, growth stocks, or even IPOs, understanding key concepts such as risk tolerance, investment goals, investment style, risk management, and portfolio strategy is crucial. Let&#8217;s dive in!







<h3 class="wp-block-heading">Set Investment Goals</h3>



Clearly defining your investment goals is essential so you can make decisions after comparing them to those goals. Are you investing for retirement, saving for a down payment on a house, or aiming for short-term gains? Your goals will influence the investment strategies you use. For example, if you&#8217;re investing for retirement and have decades of working years left, it may mean to buy and mostly hold for a long period stocks that have more potential given a long time horizon. This wouldn’t totally exclude mature companies with large market capitalizations but may include far more small and microcap opportunities than someone that is just a few years from retirement. If you are closer to retirement and don’t have as long for the growth to play out, the strategy may be to invest in large companies with stable dividends. If they throw off enough income, then an allocation of more speculative growth opportunities may make sense. This portfolio portion can allow for further growth.







<h3 class="wp-block-heading">Define Your Risk Tolerance</h3>



Before swimming in the deep end of investing, it&#8217;s important to assess your risk tolerance. Ask yourself how comfortable you are with potential fluctuations in stock prices. <a href="https://www.channelchek.com/news-channel/the-reasons-veteran-investors-are-now-eying-small-cap-stocks">Small-cap</a> stocks and microcaps, which represent companies with smaller market value, often offer greater growth potential, but they also come with increased volatility. Growth stocks, however, are known for their potential high returns over time, of course this could come with the cost of more volatility (sharp price moves) than established “blue-chip” stocks. Knowing your risk tolerance, or uneasiness with losing, or riding out drawdowns, versus gaining more than the potential loss (risk/reward tolerance) will help you make investment decisions aligned with your comfort level.







<h3 class="wp-block-heading">Determine Your Investment Style</h3>



After assessing your risk tolerance and setting goals, determine your investment style. Some investors prefer a more hands-on approach, engaging in frequent trading and closely monitoring stock market trends and evaluating stocks through websites like <a href="https://www.channelchek.com/registration">Channelchek</a>. Others may prefer a more passive approach, investing in broad-based index funds or exchange-traded funds (ETFs) that provide diversification across various stocks. Understanding your investment style will help shape your overall investment strategy.







<h3 class="wp-block-heading">Minimizing Risk</h3>



Investing inherently involves risk, but there are strategies to help minimize potential losses. One approach is to conduct thorough research on companies you&#8217;re considering for investment. This includes analyzing company-sponsored research, equity research reports, and equity analysis provided by reputable sources. Understanding the financial health, competitive advantages, and growth prospects of a company can help you make informed investment decisions.







<h3 class="wp-block-heading">Developing an Investment Portfolio Strategy</h3>



Diversification is considered key when it comes to building an investment portfolio. Investing in a variety of stocks across different sectors and market capitalizations, including small-cap stocks and growth stocks, can help spread risk and potentially increase returns. Consider allocating a portion of your portfolio to IPOs if you have a higher risk appetite. However, it&#8217;s important to exercise caution as IPOs can be volatile shortly after their public debut.







<h3 class="wp-block-heading">Stay Informed</h3>



Keeping up with investment news is vital for any investor. Stay updated on market trends, company announcements, and <a href="https://www.channelchek.com/news-channel/the-week-ahead-debt-ceiling-beige-book-and-employment">economic indicators</a> that may impact the stock market. Many financial news outlets provide lists of &#8220;<a href="https://www.channelchek.com/market-movers">stocks to watch</a>&#8221; or provide insights into market trends. Regularly reviewing investment news and equity research can help you stay informed, make timely investment decisions, and expose you to opportunities you may not have discovered otherwise.







<h3 class="wp-block-heading">Take Away</h3>



Knowing it is time to start building an investment portfolio is a good first step. Now may be the when you should implement, especially if you have a long road ahead of you and financial security is important. It will require careful consideration of your risk tolerance, investment goals, investment style, risk management techniques, and portfolio strategy. Be prepared to conduct research, analyze equity reports, and stay informed about market developments. Investing is ordinarily long-term, patience, discipline, and a well-structured portfolio are key to achieving your financial objectives. 



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek

Need-to-Know for Those Starting to Dip Their Dough into the Stock Market







Maybe you’ve saved a little and know you ought to invest, or maybe school is finally out and you have time and a few dollars to build your future, but you don’t think you know enough about the world of stock market investing. It’s easy to feel overwhelmed by the abundance of information? It’s a big decision with many mysteries and unknowns for both newcomers, and veterans. This article aims to remove much of the mystery for new investors so you can be more confident in building a portfolio that can enhance your life plans.



Whether you become interested in small-cap stocks, growth stocks, or even IPOs, understanding key concepts such as risk tolerance, investment goals, investment style, risk management, and portfolio strategy is crucial. Let&#8217;s dive in!







Set Investment Goals



Clearly defining your investment goals is essential so you can make decisions after comparing them to those goals. Are you investing for retirement, saving for a down payment on a house, or aiming for short-term gains? Your goals will influence the investment strategies you use. For example, if you&#8217;re investing for retirement and have decades of working years left, it may mean to buy and mostly hold for a long period stocks that have more potential given a long time horizon. This wouldn’t totally exclude mature companies with large market capitalizations but may include far more small and microcap opportunities than someone that is just a few years from retirement. If you are closer to retirement and don’t have as long for the growth to play out, the strategy may be to invest in large companies with stable dividends. If they throw off enough income, then an allocation of more speculative growth opportunities may make sense. This portfolio portion can allow for further growth.







Define Your Risk Tolerance



Before swimming in the deep end of investing, it&#8217;s important to assess your risk tolerance. Ask yourself how comfortable you are with potential fluctuations in stock prices. Small-cap stocks and microcaps, which represent companies with smaller market value, often offer greater growth potential, but they also come with increased volatility. Growth stocks, however, are known for their potential high returns over time, of course this could come with the cost of more volatility (sharp price moves) than established “blue-chip” stocks. Knowing your risk tolerance, or uneasiness with losing, or riding out drawdowns, versus gaining more than the potential loss (risk/reward tolerance) will help you make investment decisions aligned with your comfort level.







Determine Your Investment Style



After assessing your risk tolerance and setting goals, determine your investment style. Some investors prefer a more hands-on approach, engaging in frequent trading and closely monitoring stock market trends and evaluating stocks through websites like Channelchek. Others may prefer a more passive approach, investing in broad-based index funds or exchange-traded funds (ETFs) that provide diversification across various stocks. Understanding your investment style will help shape your overall investment strategy.







Minimizing Risk



Investing inherently involves risk, but there are strategies to help minimize potential losses. One approach is to conduct thorough research on companies you&#8217;re considering for investment. This includes analyzing company-sponsored research, equity research reports, and equity analysis provided by reputable sources. Understanding the financial health, competitive advantages, and growth prospects of a company can help you make informed investment decisions.







Developing an Investment Portfolio Strategy



Diversification is considered key when it comes to building an investment portfolio. Investing in a variety of stocks across different sectors and market capitalizations, including small-cap stocks and growth stocks, can help spread risk and potentially increase returns. Consider allocating a portion of your portfolio to IPOs if you have a higher risk appetite. However, it&#8217;s important to exercise caution as IPOs can be volatile shortly after their public debut.







Stay Informed



Keeping up with investment news is vital for any investor. Stay updated on market trends, company announcements, and economic indicators that may impact the stock market. Many financial news outlets provide lists of &#8220;stocks to watch&#8221; or provide insights into market trends. Regularly reviewing investment news and equity research can help you stay informed, make timely investment decisions, and expose you to opportunities you may not have discovered otherwise.







Take Away



Knowing it is time to start building an investment portfolio is a good first step. Now may be the when you should implement, especially if you have a long road ahead of you and financial security is important. It will require careful consideration of your risk tolerance, investment goals, investment style, risk management techniques, and portfolio strategy. Be prepared to conduct research, analyze equity reports, and stay informed about market developments. Investing is ordinarily long-term, patience, discipline, and a well-structured portfolio are key to achieving your financial objectives. 



Paul Hoffman



Managing Editor, Channelchek

Stocks 101: The Basics of Investing in the Stock Market

Educational

Investing

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-index-inclusion-663.jpg" alt="" class="wp-image-64699"/></figure>



<h2 class="wp-block-heading">Index Inclusion or Deletion Can Send Shockwaves Through Stocks</h2>



With the massive amount of assets in mutual funds and exchange-traded funds (ETFs) that are geared to return the same performance as a major index, there's been a lot of investor focus on the addition and subtraction of stocks from indexes, especially the widely followed, S&amp;P 500, Nasdaq, Russell, and Dow Industrials. This is because many institutional investors attempt to mirror the performance of these indexes by buying the same stocks. Some funds are even required by their charter or offering prospectus to hold the same stocks. This produces “unnatural” price movements in companies as they are moved in or out of an index. Self-directed investors, not beholden to a set of investing rules, may find opportunities by recognizing, then positioning themselves before institutions are required to buy or sell a company name.



Rebalancing of the most followed indices is a reality for individual investors, so it's good to understand the timing and dynamics.







<h3 class="wp-block-heading">Dynamics</h3>



When a stock is added to a broad index, millions or billions of investment dollars flow into that stock, typically driving its price higher. And the reverse is also true; when a stock is removed from an index, it's often sold by fund managers, which decreases demand and causes its price to weaken. There are conflicting studies that in some cases, indicate the added strength by inclusion is short-lived, and others that indicate that the stock begins to trade with an emphasis on whether or not money is flowing into the index it is included in, or out. All studies agree that there is typically an initial change in the stock's valuation.    



       



Timing



When a stock is added to a major index, as will happen with the Russell 3000, <a href="https://www.channelchek.com/news-channel/the-russell-reconstitution-preliminary-list">Russell 2000,</a> and Russell 1000 on <a href="https://www.channelchek.com/news-channel/russell-reconstitution-2023-what-investors-should-know">June 27</a>, &nbsp;it has historically had positive effects on its trading demand, this has impacted its price. As the Russell will reshuffle, or in their jargon “reconstitute” its indexes this month (June) let’s use the Russell 2000, which captures the performance of approximately 2,000 small-cap stocks in the United States. Here are the potential impacts of a stock being added to the index:



Price impact is what concerns investors most. The announcement of a stocks addition to an index can lead to a price impact. This is because investors who track the index may need to purchase the stock to align their portfolios with the index composition. The increased demand can push the stock's price higher.



It could also lead to investor recognition or Increased Visibility. Inclusion in a major index can come with increased visibility and recognition for a company. This can attract the attention of investors, including index funds, mutual funds, and other institutional investors who track or invest in the index. As a result, the stock may experience increased trading volume and better liquidity.



Institutional buying may increase. Index funds and other institutional investors that track the Russell 2000 (or other indices) may need to purchase the stock to replicate the index's performance. This can lead to increased buying pressure from these large investors, potentially driving the stock's price higher.



A nod by an index can bring overall positive sentiment. Being added to a major index can create a positive sentiment around a stock, signaling that the company is growing and gaining prominence. This positive sentiment may attract additional investors who believe the stock's inclusion in the index validates its prospects, potentially leading to further price appreciation.



Trading Activity usually escalates with inclusion. Inclusion in the Russell 2000 can result in increased trading activity as the stock becomes part of a widely tracked benchmark. More market participants are likely to trade the stock, increasing its overall trading volume.







<h3 class="wp-block-heading">When Are the Other (Non-Russell) Indexes Rebalanced?</h3>



While the FTSE Russell has a strict and easily understood set of rules and guidelines that make it easy to understand, the S&amp;P, Dow, and Nasdaq also rebalance under their own timeline.



The S&amp;P 500 is reviewed and rebalanced on a quarterly basis. During these reviews, S&amp;P Dow Jones Indices assess the constituents of the index and consider changes based on the selection criteria and market developments. They don’t follow hard and strict rules.



The Nasdaq 100 is a market-capitalization-weighted index that includes 100 of the largest non-financial companies listed on the Nasdaq stock market. The index is maintained by Nasdaq, and its rebalancing process involves an annual evaluation to determne eligibility, and potential rebalancing.



The annual evaluation involves Nasdaq reviewing the composition of the Nasdaq 100, this typically occurs in December. During this evaluation, companies are assessed based on their market capitalization, liquidity, and other factors. The top 100 eligible companies by market capitalization become or remain constituents of the index. They must be traded n the Nasdaq exchange.



Eligibility for companies is determined by their meeting certain criteria to allow inclusion in the Nasdaq 100. These include being listed on the Nasdaq Global Select Market, having a minimum average daily trading volume, and meeting liquidity requirements.



If rebalancing is necessary, Nasdaq conducts this during an annual rebalancing in December. Companies that no longer meet the eligibility criteria may be removed, and new companies that meet the criteria may be added. The weightings of the index constituents may also be adjusted based on their market caps.



The Dow 30, also known as the Dow Jones Industrial Average (DJIA), is a price-weighted index that represents the performance of 30 large, publicly traded companies in the United States. The index is maintained by S&amp;P Dow Jones Indices, and its rebalancing process is different from market-capitalization-weighted indices like the S&amp;P 500 or Nasdaq 100. It includes price weighting and selective changes.



Price-weighted for the Dow 30 index is based on the stock prices of its constituents rather than their market capitalizations. The impact investors should be aware of is that higher-priced stocks have a larger impact on the<a href="https://www.channelchek.com/news-channel/what-investors-in-stocks-can-learn-from-index-investors" target="_blank" rel="noreferrer noopener"> index's movements</a>.



Selective changes is best defined knowing the Dow 30 does not undergo regular rebalancing like other indices. Instead, changes in the index composition are infrequent and typically occur when a constituent company experiences a significant corporate action, such as a merger, acquisition, or bankruptcy. When such changes occur, the index committee at S&amp;P Dow Jones Indices makes a decision to replace the affected company with another suitable candidate.



It's important to note that the impact of being added to an index can vary depending on factors such as the stock's size, liquidity, and investor sentiment. Additionally, market conditions and investor behavior can influence the stock's performance. Therefore, while inclusion in a major index can have positive effects, it doesn't guarantee a specific outcome for the stock's price. And being removed from an index may only create potential.







<h3 class="wp-block-heading">Take Away</h3>



There is activity surrounding stocks as they are added or deleted from a major market index. Investors should be aware of when the index is being reconstituted or altered, so they may either benefit, stand clear, or be sure that they are not in harms way. The Russell indexes will be reconstituted at the close of the last Friday of this month (June).



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek



 











<a href="https://www.ftserussell.com/">https://www.ftserussell.com/</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="379" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-index-inclusion-663.jpg" alt="" class="wp-image-64699" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-index-inclusion-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-index-inclusion-663-300x171.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Index Inclusion or Deletion Can Send Shockwaves Through Stocks</h2>



With the massive amount of assets in mutual funds and exchange-traded funds (ETFs) that are geared to return the same performance as a major index, there&#8217;s been a lot of investor focus on the addition and subtraction of stocks from indexes, especially the widely followed, S&amp;P 500, Nasdaq, Russell, and Dow Industrials. This is because many institutional investors attempt to mirror the performance of these indexes by buying the same stocks. Some funds are even required by their charter or offering prospectus to hold the same stocks. This produces “unnatural” price movements in companies as they are moved in or out of an index. Self-directed investors, not beholden to a set of investing rules, may find opportunities by recognizing, then positioning themselves before institutions are required to buy or sell a company name.



Rebalancing of the most followed indices is a reality for individual investors, so it&#8217;s good to understand the timing and dynamics.







<h3 class="wp-block-heading">Dynamics</h3>



When a stock is added to a broad index, millions or billions of investment dollars flow into that stock, typically driving its price higher. And the reverse is also true; when a stock is removed from an index, it&#8217;s often sold by fund managers, which decreases demand and causes its price to weaken. There are conflicting studies that in some cases, indicate the added strength by inclusion is short-lived, and others that indicate that the stock begins to trade with an emphasis on whether or not money is flowing into the index it is included in, or out. All studies agree that there is typically an initial change in the stock&#8217;s valuation.    



       



Timing



When a stock is added to a major index, as will happen with the Russell 3000, <a href="https://www.channelchek.com/news-channel/the-russell-reconstitution-preliminary-list">Russell 2000,</a> and Russell 1000 on <a href="https://www.channelchek.com/news-channel/russell-reconstitution-2023-what-investors-should-know">June 27</a>, &nbsp;it has historically had positive effects on its trading demand, this has impacted its price. As the Russell will reshuffle, or in their jargon “reconstitute” its indexes this month (June) let’s use the Russell 2000, which captures the performance of approximately 2,000 small-cap stocks in the United States. Here are the potential impacts of a stock being added to the index:



Price impact is what concerns investors most. The announcement of a stocks addition to an index can lead to a price impact. This is because investors who track the index may need to purchase the stock to align their portfolios with the index composition. The increased demand can push the stock&#8217;s price higher.



It could also lead to investor recognition or Increased Visibility. Inclusion in a major index can come with increased visibility and recognition for a company. This can attract the attention of investors, including index funds, mutual funds, and other institutional investors who track or invest in the index. As a result, the stock may experience increased trading volume and better liquidity.



Institutional buying may increase. Index funds and other institutional investors that track the Russell 2000 (or other indices) may need to purchase the stock to replicate the index&#8217;s performance. This can lead to increased buying pressure from these large investors, potentially driving the stock&#8217;s price higher.



A nod by an index can bring overall positive sentiment. Being added to a major index can create a positive sentiment around a stock, signaling that the company is growing and gaining prominence. This positive sentiment may attract additional investors who believe the stock&#8217;s inclusion in the index validates its prospects, potentially leading to further price appreciation.



Trading Activity usually escalates with inclusion. Inclusion in the Russell 2000 can result in increased trading activity as the stock becomes part of a widely tracked benchmark. More market participants are likely to trade the stock, increasing its overall trading volume.







<h3 class="wp-block-heading">When Are the Other (Non-Russell) Indexes Rebalanced?</h3>



While the FTSE Russell has a strict and easily understood set of rules and guidelines that make it easy to understand, the S&amp;P, Dow, and Nasdaq also rebalance under their own timeline.



The S&amp;P 500 is reviewed and rebalanced on a quarterly basis. During these reviews, S&amp;P Dow Jones Indices assess the constituents of the index and consider changes based on the selection criteria and market developments. They don’t follow hard and strict rules.



The Nasdaq 100 is a market-capitalization-weighted index that includes 100 of the largest non-financial companies listed on the Nasdaq stock market. The index is maintained by Nasdaq, and its rebalancing process involves an annual evaluation to determne eligibility, and potential rebalancing.



The annual evaluation involves Nasdaq reviewing the composition of the Nasdaq 100, this typically occurs in December. During this evaluation, companies are assessed based on their market capitalization, liquidity, and other factors. The top 100 eligible companies by market capitalization become or remain constituents of the index. They must be traded n the Nasdaq exchange.



Eligibility for companies is determined by their meeting certain criteria to allow inclusion in the Nasdaq 100. These include being listed on the Nasdaq Global Select Market, having a minimum average daily trading volume, and meeting liquidity requirements.



If rebalancing is necessary, Nasdaq conducts this during an annual rebalancing in December. Companies that no longer meet the eligibility criteria may be removed, and new companies that meet the criteria may be added. The weightings of the index constituents may also be adjusted based on their market caps.



The Dow 30, also known as the Dow Jones Industrial Average (DJIA), is a price-weighted index that represents the performance of 30 large, publicly traded companies in the United States. The index is maintained by S&amp;P Dow Jones Indices, and its rebalancing process is different from market-capitalization-weighted indices like the S&amp;P 500 or Nasdaq 100. It includes price weighting and selective changes.



Price-weighted for the Dow 30 index is based on the stock prices of its constituents rather than their market capitalizations. The impact investors should be aware of is that higher-priced stocks have a larger impact on the<a href="https://www.channelchek.com/news-channel/what-investors-in-stocks-can-learn-from-index-investors" target="_blank" rel="noreferrer noopener"> index&#8217;s movements</a>.



Selective changes is best defined knowing the Dow 30 does not undergo regular rebalancing like other indices. Instead, changes in the index composition are infrequent and typically occur when a constituent company experiences a significant corporate action, such as a merger, acquisition, or bankruptcy. When such changes occur, the index committee at S&amp;P Dow Jones Indices makes a decision to replace the affected company with another suitable candidate.



It&#8217;s important to note that the impact of being added to an index can vary depending on factors such as the stock&#8217;s size, liquidity, and investor sentiment. Additionally, market conditions and investor behavior can influence the stock&#8217;s performance. Therefore, while inclusion in a major index can have positive effects, it doesn&#8217;t guarantee a specific outcome for the stock&#8217;s price. And being removed from an index may only create potential.







<h3 class="wp-block-heading">Take Away</h3>



There is activity surrounding stocks as they are added or deleted from a major market index. Investors should be aware of when the index is being reconstituted or altered, so they may either benefit, stand clear, or be sure that they are not in harms way. The Russell indexes will be reconstituted at the close of the last Friday of this month (June).



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek



 











<a href="https://www.ftserussell.com/">https://www.ftserussell.com/</a>

Index Inclusion or Deletion Can Send Shockwaves Through Stocks



With the massive amount of assets in mutual funds and exchange-traded funds (ETFs) that are geared to return the same performance as a major index, there&#8217;s been a lot of investor focus on the addition and subtraction of stocks from indexes, especially the widely followed, S&amp;P 500, Nasdaq, Russell, and Dow Industrials. This is because many institutional investors attempt to mirror the performance of these indexes by buying the same stocks. Some funds are even required by their charter or offering prospectus to hold the same stocks. This produces “unnatural” price movements in companies as they are moved in or out of an index. Self-directed investors, not beholden to a set of investing rules, may find opportunities by recognizing, then positioning themselves before institutions are required to buy or sell a company name.



Rebalancing of the most followed indices is a reality for individual investors, so it&#8217;s good to understand the timing and dynamics.







Dynamics



When a stock is added to a broad index, millions or billions of investment dollars flow into that stock, typically driving its price higher. And the reverse is also true; when a stock is removed from an index, it&#8217;s often sold by fund managers, which decreases demand and causes its price to weaken. There are conflicting studies that in some cases, indicate the added strength by inclusion is short-lived, and others that indicate that the stock begins to trade with an emphasis on whether or not money is flowing into the index it is included in, or out. All studies agree that there is typically an initial change in the stock&#8217;s valuation.    



       



Timing



When a stock is added to a major index, as will happen with the Russell 3000, Russell 2000, and Russell 1000 on June 27, &nbsp;it has historically had positive effects on its trading demand, this has impacted its price. As the Russell will reshuffle, or in their jargon “reconstitute” its indexes this month (June) let’s use the Russell 2000, which captures the performance of approximately 2,000 small-cap stocks in the United States. Here are the potential impacts of a stock being added to the index:



Price impact is what concerns investors most. The announcement of a stocks addition to an index can lead to a price impact. This is because investors who track the index may need to purchase the stock to align their portfolios with the index composition. The increased demand can push the stock&#8217;s price higher.



It could also lead to investor recognition or Increased Visibility. Inclusion in a major index can come with increased visibility and recognition for a company. This can attract the attention of investors, including index funds, mutual funds, and other institutional investors who track or invest in the index. As a result, the stock may experience increased trading volume and better liquidity.



Institutional buying may increase. Index funds and other institutional investors that track the Russell 2000 (or other indices) may need to purchase the stock to replicate the index&#8217;s performance. This can lead to increased buying pressure from these large investors, potentially driving the stock&#8217;s price higher.



A nod by an index can bring overall positive sentiment. Being added to a major index can create a positive sentiment around a stock, signaling that the company is growing and gaining prominence. This positive sentiment may attract additional investors who believe the stock&#8217;s inclusion in the index validates its prospects, potentially leading to further price appreciation.



Trading Activity usually escalates with inclusion. Inclusion in the Russell 2000 can result in increased trading activity as the stock becomes part of a widely tracked benchmark. More market participants are likely to trade the stock, increasing its overall trading volume.







When Are the Other (Non-Russell) Indexes Rebalanced?



While the FTSE Russell has a strict and easily understood set of rules and guidelines that make it easy to understand, the S&amp;P, Dow, and Nasdaq also rebalance under their own timeline.



The S&amp;P 500 is reviewed and rebalanced on a quarterly basis. During these reviews, S&amp;P Dow Jones Indices assess the constituents of the index and consider changes based on the selection criteria and market developments. They don’t follow hard and strict rules.



The Nasdaq 100 is a market-capitalization-weighted index that includes 100 of the largest non-financial companies listed on the Nasdaq stock market. The index is maintained by Nasdaq, and its rebalancing process involves an annual evaluation to determne eligibility, and potential rebalancing.



The annual evaluation involves Nasdaq reviewing the composition of the Nasdaq 100, this typically occurs in December. During this evaluation, companies are assessed based on their market capitalization, liquidity, and other factors. The top 100 eligible companies by market capitalization become or remain constituents of the index. They must be traded n the Nasdaq exchange.



Eligibility for companies is determined by their meeting certain criteria to allow inclusion in the Nasdaq 100. These include being listed on the Nasdaq Global Select Market, having a minimum average daily trading volume, and meeting liquidity requirements.



If rebalancing is necessary, Nasdaq conducts this during an annual rebalancing in December. Companies that no longer meet the eligibility criteria may be removed, and new companies that meet the criteria may be added. The weightings of the index constituents may also be adjusted based on their market caps.



The Dow 30, also known as the Dow Jones Industrial Average (DJIA), is a price-weighted index that represents the performance of 30 large, publicly traded companies in the United States. The index is maintained by S&amp;P Dow Jones Indices, and its rebalancing process is different from market-capitalization-weighted indices like the S&amp;P 500 or Nasdaq 100. It includes price weighting and selective changes.



Price-weighted for the Dow 30 index is based on the stock prices of its constituents rather than their market capitalizations. The impact investors should be aware of is that higher-priced stocks have a larger impact on the index&#8217;s movements.



Selective changes is best defined knowing the Dow 30 does not undergo regular rebalancing like other indices. Instead, changes in the index composition are infrequent and typically occur when a constituent company experiences a significant corporate action, such as a merger, acquisition, or bankruptcy. When such changes occur, the index committee at S&amp;P Dow Jones Indices makes a decision to replace the affected company with another suitable candidate.



It&#8217;s important to note that the impact of being added to an index can vary depending on factors such as the stock&#8217;s size, liquidity, and investor sentiment. Additionally, market conditions and investor behavior can influence the stock&#8217;s performance. Therefore, while inclusion in a major index can have positive effects, it doesn&#8217;t guarantee a specific outcome for the stock&#8217;s price. And being removed from an index may only create potential.







Take Away



There is activity surrounding stocks as they are added or deleted from a major market index. Investors should be aware of when the index is being reconstituted or altered, so they may either benefit, stand clear, or be sure that they are not in harms way. The Russell indexes will be reconstituted at the close of the last Friday of this month (June).



Paul Hoffman



Managing Editor, Channelchek



  











https://www.ftserussell.com/

What Happens to Your Stock Holding When it is Added to a Major Index?

Indexes

markets

Russell

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-aggregate-returns-663.jpg" alt="" class="wp-image-64652"/></figure>



<h2 class="wp-block-heading">Why Aggregate Portfolio Return is More Important than Any Single Holding</h2>







Have you ever agonized over a stock in your portfolio that is not performing as you had hoped? While it’s the nature of investing to not bat 1000, it can be hard not to think of the decision to have bought it as a mistake. It probably isn’t. Here is a better way to look at it that uses a recent example (June 1, 2023).



On the <a href="https://www.channelchek.com/news-channel/what-investors-learned-in-may-that-they-can-use-in-june" target="_blank" rel="noreferrer noopener">first day of June</a>, investors in the Nasdaq 100 (NDX) found themselves up 1.17%. That’s a decent run in one day, and since they are focused on the indexed fund that they are invested in as one investment (not 100), they are content and confident.



But what if they owned the underlying 100 stocks in the fund instead? They might be kicking themselves for having bought Lucid (LCID), or 22 other holdings that are down. Using Lucid as an example, it is lower by 15.6% (June 1); the day before it closed at $7.76, and it is only worth $6.55 today.



Ouch? Or no big deal?



The overall blend of the portfolio is up, yet at the same time, 23 holdings are down – no big deal – this is the way portfolio investing works. In fact ten of the stocks in the NDX declined by more than the 1.17% the overall portfolio is up. Most index fund investors just look at one number and don’t look under the hood for reasons to feel remorse (or glee).







<h3 class="wp-block-heading">Aggregate Return</h3>



There are many reasons investors, even professional financial advisors, avoid building a portfolio with individual stocks, but choose index funds. One is not taking responsibility. If you own, or if an investment manager buys a mix of stocks that are in total up a respectable amount, yet some are <a href="https://www.channelchek.com/news-channel/will-your-60-40-balanced-portfolio-turn-the-corner" target="_blank" rel="noreferrer noopener">underperformers</a>, laggards and drags on the overall portfolio performance, there is a feeling of responsibility for the holdings that are down, the dollar amount lost, and the drag on return that is staring them in the face possibly causing sleepless nights.



On this one day, almost 25% of the Nasdaq 100 was down while the index was up 1.17%. The biggest gainer, PDD Holdings (PDD), is only up by half the percentage of LCID’s is selloff. Yet those looking at the aggregate return and not individual return are feeling mighty good about themselves. And that’s good.



If you hold a portfolio of stocks and did your research, whether it be fundamental analysis, technical analysis, industry trends, etc., and understand why every stock is in your portfolio, you could easily be better off if you learn not to agonize over losers. The returns in most of the last five years in index funds have come because of the weighting of the stocks that have gained, not by having more winners. It has become normal for an index that is up on the year to have been carried by just a dozen or so stocks that are in the mix.







<h3 class="wp-block-heading">Don’t Undermine Your Portfolio</h3>



Investors can negatively impact their performance by focusing too much on one stock. When this happens, they can make bad decisions, some of these decisions might be pain-related, others ego, either way, rational decisions are based on investment probabilities, not human emotions, or overthinking; these can ruin good decisions that would have led to improved returns.



Other investors undermine their portfolio differently, by not wanting the responsibility. They buy the index, and they are done – its out of their hands. If average returns are their goal, they’ve succeeded. Or if they are a financial professional and separating themselves from responsibility is the objective, index funds allow them to blame “the market”; it isn’t their fault – they have succeeded.



If an investor can overcome both of these, they can manage their own holdings and be as or more content than an index fund investor. If they follow good portfolio management strategies including, diversification, analysis, research, etc., and then mainly focus on aggregate return, they can make bette decisions and lose less sleep. Individual stocks don’t matter as much when you are purposeful when choosing holdings. Most large indexed funds aren’t purposeful, they aren’t intended to be investments, there makeup is formulaic and meant to mimic the market, not provide stellar returns.  







<h3 class="wp-block-heading">Take Away</h3>



No investor bats 1000. Even top portfolios may have more losers than winners, the key is to have bigger winners and not overreact or over focus on a few holdings. For investors, a portfolio of individual companies can lead to more mental highs and lows as each stock is a personal decision with great expectations. Avoid this by thinking differently. If those one or two stocks don’t perform as expected, think of all the down stocks in all the index funds that the owners aren’t even paying attention to. All these investors are looking at is one number, aggregate return on all the holdings. Maybe you should too.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek











Source



<a href="https://www.nasdaq.com/market-activity/quotes/nasdaq-ndx-index">Nasdaq Market Activity</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="382" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-aggregate-returns-663.jpg" alt="" class="wp-image-64652" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-aggregate-returns-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-aggregate-returns-663-300x173.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Why Aggregate Portfolio Return is More Important than Any Single Holding</h2>







Have you ever agonized over a stock in your portfolio that is not performing as you had hoped? While it’s the nature of investing to not bat 1000, it can be hard not to think of the decision to have bought it as a mistake. It probably isn’t. Here is a better way to look at it that uses a recent example (June 1, 2023).



On the <a href="https://www.channelchek.com/news-channel/what-investors-learned-in-may-that-they-can-use-in-june" target="_blank" rel="noreferrer noopener">first day of June</a>, investors in the Nasdaq 100 (NDX) found themselves up 1.17%. That’s a decent run in one day, and since they are focused on the indexed fund that they are invested in as one investment (not 100), they are content and confident.



But what if they owned the underlying 100 stocks in the fund instead? They might be kicking themselves for having bought Lucid (LCID), or 22 other holdings that are down. Using Lucid as an example, it is lower by 15.6% (June 1); the day before it closed at $7.76, and it is only worth $6.55 today.



Ouch? Or no big deal?



The overall blend of the portfolio is up, yet at the same time, 23 holdings are down – no big deal – this is the way portfolio investing works. In fact ten of the stocks in the NDX declined by more than the 1.17% the overall portfolio is up. Most index fund investors just look at one number and don’t look under the hood for reasons to feel remorse (or glee).







<h3 class="wp-block-heading">Aggregate Return</h3>



There are many reasons investors, even professional financial advisors, avoid building a portfolio with individual stocks, but choose index funds. One is not taking responsibility. If you own, or if an investment manager buys a mix of stocks that are in total up a respectable amount, yet some are <a href="https://www.channelchek.com/news-channel/will-your-60-40-balanced-portfolio-turn-the-corner" target="_blank" rel="noreferrer noopener">underperformers</a>, laggards and drags on the overall portfolio performance, there is a feeling of responsibility for the holdings that are down, the dollar amount lost, and the drag on return that is staring them in the face possibly causing sleepless nights.



On this one day, almost 25% of the Nasdaq 100 was down while the index was up 1.17%. The biggest gainer, PDD Holdings (PDD), is only up by half the percentage of LCID’s is selloff. Yet those looking at the aggregate return and not individual return are feeling mighty good about themselves. And that’s good.



If you hold a portfolio of stocks and did your research, whether it be fundamental analysis, technical analysis, industry trends, etc., and understand why every stock is in your portfolio, you could easily be better off if you learn not to agonize over losers. The returns in most of the last five years in index funds have come because of the weighting of the stocks that have gained, not by having more winners. It has become normal for an index that is up on the year to have been carried by just a dozen or so stocks that are in the mix.







<h3 class="wp-block-heading">Don’t Undermine Your Portfolio</h3>



Investors can negatively impact their performance by focusing too much on one stock. When this happens, they can make bad decisions, some of these decisions might be pain-related, others ego, either way, rational decisions are based on investment probabilities, not human emotions, or overthinking; these can ruin good decisions that would have led to improved returns.



Other investors undermine their portfolio differently, by not wanting the responsibility. They buy the index, and they are done – its out of their hands. If average returns are their goal, they’ve succeeded. Or if they are a financial professional and separating themselves from responsibility is the objective, index funds allow them to blame “the market”; it isn’t their fault – they have succeeded.



If an investor can overcome both of these, they can manage their own holdings and be as or more content than an index fund investor. If they follow good portfolio management strategies including, diversification, analysis, research, etc., and then mainly focus on aggregate return, they can make bette decisions and lose less sleep. Individual stocks don’t matter as much when you are purposeful when choosing holdings. Most large indexed funds aren’t purposeful, they aren’t intended to be investments, there makeup is formulaic and meant to mimic the market, not provide stellar returns.  







<h3 class="wp-block-heading">Take Away</h3>



No investor bats 1000. Even top portfolios may have more losers than winners, the key is to have bigger winners and not overreact or over focus on a few holdings. For investors, a portfolio of individual companies can lead to more mental highs and lows as each stock is a personal decision with great expectations. Avoid this by thinking differently. If those one or two stocks don’t perform as expected, think of all the down stocks in all the index funds that the owners aren’t even paying attention to. All these investors are looking at is one number, aggregate return on all the holdings. Maybe you should too.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek











Source



<a href="https://www.nasdaq.com/market-activity/quotes/nasdaq-ndx-index">Nasdaq Market Activity</a>

Why Aggregate Portfolio Return is More Important than Any Single Holding







Have you ever agonized over a stock in your portfolio that is not performing as you had hoped? While it’s the nature of investing to not bat 1000, it can be hard not to think of the decision to have bought it as a mistake. It probably isn’t. Here is a better way to look at it that uses a recent example (June 1, 2023).



On the first day of June, investors in the Nasdaq 100 (NDX) found themselves up 1.17%. That’s a decent run in one day, and since they are focused on the indexed fund that they are invested in as one investment (not 100), they are content and confident.



But what if they owned the underlying 100 stocks in the fund instead? They might be kicking themselves for having bought Lucid (LCID), or 22 other holdings that are down. Using Lucid as an example, it is lower by 15.6% (June 1); the day before it closed at $7.76, and it is only worth $6.55 today.



Ouch? Or no big deal?



The overall blend of the portfolio is up, yet at the same time, 23 holdings are down – no big deal – this is the way portfolio investing works. In fact ten of the stocks in the NDX declined by more than the 1.17% the overall portfolio is up. Most index fund investors just look at one number and don’t look under the hood for reasons to feel remorse (or glee).







Aggregate Return



There are many reasons investors, even professional financial advisors, avoid building a portfolio with individual stocks, but choose index funds. One is not taking responsibility. If you own, or if an investment manager buys a mix of stocks that are in total up a respectable amount, yet some are underperformers, laggards and drags on the overall portfolio performance, there is a feeling of responsibility for the holdings that are down, the dollar amount lost, and the drag on return that is staring them in the face possibly causing sleepless nights.



On this one day, almost 25% of the Nasdaq 100 was down while the index was up 1.17%. The biggest gainer, PDD Holdings (PDD), is only up by half the percentage of LCID’s is selloff. Yet those looking at the aggregate return and not individual return are feeling mighty good about themselves. And that’s good.



If you hold a portfolio of stocks and did your research, whether it be fundamental analysis, technical analysis, industry trends, etc., and understand why every stock is in your portfolio, you could easily be better off if you learn not to agonize over losers. The returns in most of the last five years in index funds have come because of the weighting of the stocks that have gained, not by having more winners. It has become normal for an index that is up on the year to have been carried by just a dozen or so stocks that are in the mix.







Don’t Undermine Your Portfolio



Investors can negatively impact their performance by focusing too much on one stock. When this happens, they can make bad decisions, some of these decisions might be pain-related, others ego, either way, rational decisions are based on investment probabilities, not human emotions, or overthinking; these can ruin good decisions that would have led to improved returns.



Other investors undermine their portfolio differently, by not wanting the responsibility. They buy the index, and they are done – its out of their hands. If average returns are their goal, they’ve succeeded. Or if they are a financial professional and separating themselves from responsibility is the objective, index funds allow them to blame “the market”; it isn’t their fault – they have succeeded.



If an investor can overcome both of these, they can manage their own holdings and be as or more content than an index fund investor. If they follow good portfolio management strategies including, diversification, analysis, research, etc., and then mainly focus on aggregate return, they can make bette decisions and lose less sleep. Individual stocks don’t matter as much when you are purposeful when choosing holdings. Most large indexed funds aren’t purposeful, they aren’t intended to be investments, there makeup is formulaic and meant to mimic the market, not provide stellar returns.  







Take Away



No investor bats 1000. Even top portfolios may have more losers than winners, the key is to have bigger winners and not overreact or over focus on a few holdings. For investors, a portfolio of individual companies can lead to more mental highs and lows as each stock is a personal decision with great expectations. Avoid this by thinking differently. If those one or two stocks don’t perform as expected, think of all the down stocks in all the index funds that the owners aren’t even paying attention to. All these investors are looking at is one number, aggregate return on all the holdings. Maybe you should too.



Paul Hoffman



Managing Editor, Channelchek











Source



Nasdaq Market Activity

What Investors in Stocks Can Learn from Index Investors

Evergreen

Portfolio Management

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-may-lookback-663.png" alt="" class="wp-image-64632"/></figure>



<h2 class="wp-block-heading">Looking Back at the Markets in May and Forward to June</h2>







Conviction in the overall stock market was weak in May, while enthusiasm for specific sectors was strong. June investors may regain some clarity as markets may be relieved from the debt ceiling dark cloud that kept investors overly cautious. But a renewed fear that the Fed is losing ground to inflation may become the focal point until the coming FOMC meeting. In the meantime, any increase in the debt limit signed into law kicks the can down the road, ongoing increases in borrowing and spending may not haunt the overall market in June, but the path of escalating debt is unsustainable for a healthy U.S. economy.



The next scheduled FOMC meeting is June 13-14. We will have another look at consumer inflation numbers before the June 14 Fed monetary policy decision date CPI (June 13).



While the Fed is wrestling with stubborn inflation, it is keeping an eye on the strong labor markets, which provides leeway and perhaps even a strong reason fo it to continue riding the economic break pedal by being increasingly less accommodative. Although low unemployment is desirable, tight labor markets are helping to drive prices up. The Fed aims to find a better balance.







<figure class="wp-block-image aligncenter size-large is-resized"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1-1024x529.jpg" alt="" class="wp-image-64634" width="858" height="442"/><figcaption class="wp-element-caption">Image Credit: <a href="https://app.koyfin.com/share/bb2c80fad2">Koyfin</a></figcaption></figure>







<h3 class="wp-block-heading">Look Back</h3>



Three broad stock market indices (S&amp;P 500, Nasdaq 100, and Russell 2000) are positive on the month of May. The Dow Industrials spent the entire month in negative territory. The Nasdaq 100 was the big winner (+8.7%) on the back of tech stocks as many have been inspired by the earnings performance and stock price performance of Nvidia (NVDA). The S&amp;P 500 (+1.46%) and Russell 2000 (+1.21%) had a good showing putting the <a href="https://www.channelchek.com/news-channel/the-russell-reconstitution-preliminary-list">Russell 2000</a> back in positive territory for 2023. The Dow Industrials is negative (-2.30%), leaving this NYSE index down (-.72%) on the year.



During June, inflation showed signs that it was not decelerating but instead could be building strength. While the Fed raised rates by .25% and continued on pace with <a href="https://www.channelchek.com/news-channel/should-investors-expect-ongoing-monetary-policy-tightening-through-2023">quantitative tightening</a>, the impact has been seen as a sharp decrease in <a href="https://www.channelchek.com/news-channel/u-s-money-supply-heres-why-its-critical-for-inflation-forecasts">money supply (M2),</a> but the central banks’ intended effect has not been realized.



<a href="https://www.channelchek.com/news-channel/the-fomc-minutes-define-two-determinants-of-future-policy">Monetary policy</a> is seen as having a lagging effect; that is to say, when the Fed pushes rates up today, it may take a year to work its way into the system to cause slowing and less demand to reduce price increases. Whether the Fed has done enough can only be seen in the rearview mirror months from now.







<figure class="wp-block-image aligncenter size-large is-resized"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2-1024x529.jpg" alt="" class="wp-image-64635" width="859" height="443"/><figcaption class="wp-element-caption">Source:<a href="https://app.koyfin.com/share/1ab638fdb0"> Koyfin</a></figcaption></figure>







<h3 class="wp-block-heading">Market Sector Lookback</h3>



Of the 11 S&amp;P market sectors (SPDRs), three were in positive territory as May came to a close. Technology, ticker XLK (+8.85%), was the only sector that showed an increase the previous month as well (.08%). That is followed by Communications Services, ticker XLC (3.92%), and Consumer Discretionary, ticker XLY, (+3.56%).



The S&amp;P 500, which is comprised of the 11 market sectors, was barely positive during the month of May (+56%).&nbsp;



Of the three worst performers are Industrials, ticker XLI (-3.67%), it faired the best as the industrial sector has been relatively flat on the year. The Materials, ticker XLB, (-6.87%) took a larger hit as commodities prices dropped during the month; this sector was positive on the year going into May. Energy, ticker XLE, (-11.73%) has been volatile during 2023. It is just off its low (-12%) that it reached in mid-March.







<h3 class="wp-block-heading">Looking Forward</h3>



The <a href="https://www.channelchek.com/news-channel/plusses-and-minuses-of-abundant-jobs">job market</a> is strong, and inflation, at best, isn’t declining; this makes it more comfortable for the Fed to raise rates. Another way to look at it is it creates a need for them to continue to hammer away to reverse the inflationary trend – and the economic latitude in which to do it.



While the energy sector was the worst performer among S&amp;P 500 sectors, there are factors suggesting the trend could hold until OPEC and Russia begin to work in synch again. Oil prices are near their lowest levels all year, reflecting a drop in global demand, on the output side, since October, OPEC+ was supposed to be reducing production by 3.5 million barrels a day. There are signs that a key country in the alliance isn’t adhering to the announced production cuts. Whether this causes additional “cheating”, or causes the cartel to force members to fall in line remains to be seen.



Technology stocks, particularly those that could possibly benefit from the artificial intelligence revolution, are likely to be among the focus for a while. The sudden broad awareness of what the technology can do has sent investors scrambling for exposure. Whether the potential (AI) is unleashed quickly or the promise of AI now takes a slower road remains to be seen.



The <a href="https://www.channelchek.com/news-channel/russell-reconstitution-2023-what-investors-should-know">Russell Reconstitution</a> will be complete as of the first Monday in June. The index will have its new components and the portfolio managers of indexed funds ought to own the stocks that were added to the indexes in their funds and sell out of those that are no longer in the funds index. This creates a lot of activity around June 24. When the market opens on June 27, the index with its new makeup will be set.







<h3 class="wp-block-heading">Take-Away</h3>



The market was full of uncertainty in May. Yet three of the four major market indexes were higher. The signing into law of an increased debt ceiling will make one of the most worrisome objections to being involved disappear. This may unleash buyers that were sidelined.



Technology, caused by high expectations of AI was the focus during May; often, hype causes investors to shoot first and aim later. There will be winners and losers in this technology segment, as with any investment; remove yourself from the hype, carefully evaluate the opportunity, and read the professional research, positive and negative, of those you trust. &nbsp;



By the end of the month we will have two quarters of 2023 behind us, and there are no signs of a recession and little on the horizon to cause U.S. growth to falter quickly enough for there to be a <a href="https://www.channelchek.com/news-channel/solid-evidence-a-recession-is-unlikely-this-year">recession</a> this year. It is unlikely the Fed will ease in 2023. It is, however, likely a pause will eventually happen. There are reasons to believe that the pause won’t happen in June.



The axiom, sell in May and walk away is in question. Three of the four major indexes were up in May, so the jury is still out as to whether selling made sense for 2023.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek















Sources



<a href="https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting">https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting</a>



<a href="https://app.koyfin.com/charts/gm/et-n5kqqt?view=chart#">Koyfin | Advanced graphing and analytical tools for investors</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="368" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-may-lookback-663.png" alt="" class="wp-image-64632" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-may-lookback-663.png 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/cc-news-may-lookback-663-300x167.png 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Looking Back at the Markets in May and Forward to June</h2>







Conviction in the overall stock market was weak in May, while enthusiasm for specific sectors was strong. June investors may regain some clarity as markets may be relieved from the debt ceiling dark cloud that kept investors overly cautious. But a renewed fear that the Fed is losing ground to inflation may become the focal point until the coming FOMC meeting. In the meantime, any increase in the debt limit signed into law kicks the can down the road, ongoing increases in borrowing and spending may not haunt the overall market in June, but the path of escalating debt is unsustainable for a healthy U.S. economy.



The next scheduled FOMC meeting is June 13-14. We will have another look at consumer inflation numbers before the June 14 Fed monetary policy decision date CPI (June 13).



While the Fed is wrestling with stubborn inflation, it is keeping an eye on the strong labor markets, which provides leeway and perhaps even a strong reason fo it to continue riding the economic break pedal by being increasingly less accommodative. Although low unemployment is desirable, tight labor markets are helping to drive prices up. The Fed aims to find a better balance.






<div class="wp-block-image">
<figure class="aligncenter size-large is-resized"><img decoding="async" loading="lazy" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1-1024x529.jpg" alt="" class="wp-image-64634" width="858" height="442" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1-1024x529.jpg 1024w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1-300x155.jpg 300w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1-768x397.jpg 768w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-1.jpg 1430w" sizes="(max-width: 858px) 100vw, 858px" /><figcaption class="wp-element-caption">Image Credit: <a href="https://app.koyfin.com/share/bb2c80fad2">Koyfin</a></figcaption></figure></div>






<h3 class="wp-block-heading">Look Back</h3>



Three broad stock market indices (S&amp;P 500, Nasdaq 100, and Russell 2000) are positive on the month of May. The Dow Industrials spent the entire month in negative territory. The Nasdaq 100 was the big winner (+8.7%) on the back of tech stocks as many have been inspired by the earnings performance and stock price performance of Nvidia (NVDA). The S&amp;P 500 (+1.46%) and Russell 2000 (+1.21%) had a good showing putting the <a href="https://www.channelchek.com/news-channel/the-russell-reconstitution-preliminary-list">Russell 2000</a> back in positive territory for 2023. The Dow Industrials is negative (-2.30%), leaving this NYSE index down (-.72%) on the year.



During June, inflation showed signs that it was not decelerating but instead could be building strength. While the Fed raised rates by .25% and continued on pace with <a href="https://www.channelchek.com/news-channel/should-investors-expect-ongoing-monetary-policy-tightening-through-2023">quantitative tightening</a>, the impact has been seen as a sharp decrease in <a href="https://www.channelchek.com/news-channel/u-s-money-supply-heres-why-its-critical-for-inflation-forecasts">money supply (M2),</a> but the central banks’ intended effect has not been realized.



<a href="https://www.channelchek.com/news-channel/the-fomc-minutes-define-two-determinants-of-future-policy">Monetary policy</a> is seen as having a lagging effect; that is to say, when the Fed pushes rates up today, it may take a year to work its way into the system to cause slowing and less demand to reduce price increases. Whether the Fed has done enough can only be seen in the rearview mirror months from now.






<div class="wp-block-image">
<figure class="aligncenter size-large is-resized"><img decoding="async" loading="lazy" src="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2-1024x529.jpg" alt="" class="wp-image-64635" width="859" height="443" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2-1024x529.jpg 1024w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2-300x155.jpg 300w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2-768x397.jpg 768w, https://dashboard.channelchek.com/wp-content/uploads/2023/06/20230601-article1-2.jpg 1430w" sizes="(max-width: 859px) 100vw, 859px" /><figcaption class="wp-element-caption">Source:<a href="https://app.koyfin.com/share/1ab638fdb0"> Koyfin</a></figcaption></figure></div>






<h3 class="wp-block-heading">Market Sector Lookback</h3>



Of the 11 S&amp;P market sectors (SPDRs), three were in positive territory as May came to a close. Technology, ticker XLK (+8.85%), was the only sector that showed an increase the previous month as well (.08%). That is followed by Communications Services, ticker XLC (3.92%), and Consumer Discretionary, ticker XLY, (+3.56%).



The S&amp;P 500, which is comprised of the 11 market sectors, was barely positive during the month of May (+56%).&nbsp;



Of the three worst performers are Industrials, ticker XLI (-3.67%), it faired the best as the industrial sector has been relatively flat on the year. The Materials, ticker XLB, (-6.87%) took a larger hit as commodities prices dropped during the month; this sector was positive on the year going into May. Energy, ticker XLE, (-11.73%) has been volatile during 2023. It is just off its low (-12%) that it reached in mid-March.







<h3 class="wp-block-heading">Looking Forward</h3>



The <a href="https://www.channelchek.com/news-channel/plusses-and-minuses-of-abundant-jobs">job market</a> is strong, and inflation, at best, isn’t declining; this makes it more comfortable for the Fed to raise rates. Another way to look at it is it creates a need for them to continue to hammer away to reverse the inflationary trend – and the economic latitude in which to do it.



While the energy sector was the worst performer among S&amp;P 500 sectors, there are factors suggesting the trend could hold until OPEC and Russia begin to work in synch again. Oil prices are near their lowest levels all year, reflecting a drop in global demand, on the output side, since October, OPEC+ was supposed to be reducing production by 3.5 million barrels a day. There are signs that a key country in the alliance isn’t adhering to the announced production cuts. Whether this causes additional “cheating”, or causes the cartel to force members to fall in line remains to be seen.



Technology stocks, particularly those that could possibly benefit from the artificial intelligence revolution, are likely to be among the focus for a while. The sudden broad awareness of what the technology can do has sent investors scrambling for exposure. Whether the potential (AI) is unleashed quickly or the promise of AI now takes a slower road remains to be seen.



The <a href="https://www.channelchek.com/news-channel/russell-reconstitution-2023-what-investors-should-know">Russell Reconstitution</a> will be complete as of the first Monday in June. The index will have its new components and the portfolio managers of indexed funds ought to own the stocks that were added to the indexes in their funds and sell out of those that are no longer in the funds index. This creates a lot of activity around June 24. When the market opens on June 27, the index with its new makeup will be set.







<h3 class="wp-block-heading">Take-Away</h3>



The market was full of uncertainty in May. Yet three of the four major market indexes were higher. The signing into law of an increased debt ceiling will make one of the most worrisome objections to being involved disappear. This may unleash buyers that were sidelined.



Technology, caused by high expectations of AI was the focus during May; often, hype causes investors to shoot first and aim later. There will be winners and losers in this technology segment, as with any investment; remove yourself from the hype, carefully evaluate the opportunity, and read the professional research, positive and negative, of those you trust. &nbsp;



By the end of the month we will have two quarters of 2023 behind us, and there are no signs of a recession and little on the horizon to cause U.S. growth to falter quickly enough for there to be a <a href="https://www.channelchek.com/news-channel/solid-evidence-a-recession-is-unlikely-this-year">recession</a> this year. It is unlikely the Fed will ease in 2023. It is, however, likely a pause will eventually happen. There are reasons to believe that the pause won’t happen in June.



The axiom, sell in May and walk away is in question. Three of the four major indexes were up in May, so the jury is still out as to whether selling made sense for 2023.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek















Sources



<a href="https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting">https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting</a>



<a href="https://app.koyfin.com/charts/gm/et-n5kqqt?view=chart#">Koyfin | Advanced graphing and analytical tools for investors</a>

Looking Back at the Markets in May and Forward to June







Conviction in the overall stock market was weak in May, while enthusiasm for specific sectors was strong. June investors may regain some clarity as markets may be relieved from the debt ceiling dark cloud that kept investors overly cautious. But a renewed fear that the Fed is losing ground to inflation may become the focal point until the coming FOMC meeting. In the meantime, any increase in the debt limit signed into law kicks the can down the road, ongoing increases in borrowing and spending may not haunt the overall market in June, but the path of escalating debt is unsustainable for a healthy U.S. economy.



The next scheduled FOMC meeting is June 13-14. We will have another look at consumer inflation numbers before the June 14 Fed monetary policy decision date CPI (June 13).



While the Fed is wrestling with stubborn inflation, it is keeping an eye on the strong labor markets, which provides leeway and perhaps even a strong reason fo it to continue riding the economic break pedal by being increasingly less accommodative. Although low unemployment is desirable, tight labor markets are helping to drive prices up. The Fed aims to find a better balance.







Image Credit: Koyfin






Look Back



Three broad stock market indices (S&amp;P 500, Nasdaq 100, and Russell 2000) are positive on the month of May. The Dow Industrials spent the entire month in negative territory. The Nasdaq 100 was the big winner (+8.7%) on the back of tech stocks as many have been inspired by the earnings performance and stock price performance of Nvidia (NVDA). The S&amp;P 500 (+1.46%) and Russell 2000 (+1.21%) had a good showing putting the Russell 2000 back in positive territory for 2023. The Dow Industrials is negative (-2.30%), leaving this NYSE index down (-.72%) on the year.



During June, inflation showed signs that it was not decelerating but instead could be building strength. While the Fed raised rates by .25% and continued on pace with quantitative tightening, the impact has been seen as a sharp decrease in money supply (M2), but the central banks’ intended effect has not been realized.



Monetary policy is seen as having a lagging effect; that is to say, when the Fed pushes rates up today, it may take a year to work its way into the system to cause slowing and less demand to reduce price increases. Whether the Fed has done enough can only be seen in the rearview mirror months from now.







Source: Koyfin






Market Sector Lookback



Of the 11 S&amp;P market sectors (SPDRs), three were in positive territory as May came to a close. Technology, ticker XLK (+8.85%), was the only sector that showed an increase the previous month as well (.08%). That is followed by Communications Services, ticker XLC (3.92%), and Consumer Discretionary, ticker XLY, (+3.56%).



The S&amp;P 500, which is comprised of the 11 market sectors, was barely positive during the month of May (+56%).&nbsp;



Of the three worst performers are Industrials, ticker XLI (-3.67%), it faired the best as the industrial sector has been relatively flat on the year. The Materials, ticker XLB, (-6.87%) took a larger hit as commodities prices dropped during the month; this sector was positive on the year going into May. Energy, ticker XLE, (-11.73%) has been volatile during 2023. It is just off its low (-12%) that it reached in mid-March.







Looking Forward



The job market is strong, and inflation, at best, isn’t declining; this makes it more comfortable for the Fed to raise rates. Another way to look at it is it creates a need for them to continue to hammer away to reverse the inflationary trend – and the economic latitude in which to do it.



While the energy sector was the worst performer among S&amp;P 500 sectors, there are factors suggesting the trend could hold until OPEC and Russia begin to work in synch again. Oil prices are near their lowest levels all year, reflecting a drop in global demand, on the output side, since October, OPEC+ was supposed to be reducing production by 3.5 million barrels a day. There are signs that a key country in the alliance isn’t adhering to the announced production cuts. Whether this causes additional “cheating”, or causes the cartel to force members to fall in line remains to be seen.



Technology stocks, particularly those that could possibly benefit from the artificial intelligence revolution, are likely to be among the focus for a while. The sudden broad awareness of what the technology can do has sent investors scrambling for exposure. Whether the potential (AI) is unleashed quickly or the promise of AI now takes a slower road remains to be seen.



The Russell Reconstitution will be complete as of the first Monday in June. The index will have its new components and the portfolio managers of indexed funds ought to own the stocks that were added to the indexes in their funds and sell out of those that are no longer in the funds index. This creates a lot of activity around June 24. When the market opens on June 27, the index with its new makeup will be set.







Take-Away



The market was full of uncertainty in May. Yet three of the four major market indexes were higher. The signing into law of an increased debt ceiling will make one of the most worrisome objections to being involved disappear. This may unleash buyers that were sidelined.



Technology, caused by high expectations of AI was the focus during May; often, hype causes investors to shoot first and aim later. There will be winners and losers in this technology segment, as with any investment; remove yourself from the hype, carefully evaluate the opportunity, and read the professional research, positive and negative, of those you trust. &nbsp;



By the end of the month we will have two quarters of 2023 behind us, and there are no signs of a recession and little on the horizon to cause U.S. growth to falter quickly enough for there to be a recession this year. It is unlikely the Fed will ease in 2023. It is, however, likely a pause will eventually happen. There are reasons to believe that the pause won’t happen in June.



The axiom, sell in May and walk away is in question. Three of the four major indexes were up in May, so the jury is still out as to whether selling made sense for 2023.



Paul Hoffman



Managing Editor, Channelchek















Sources



https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting



Koyfin | Advanced graphing and analytical tools for investors

What Investors Learned in May That They Can Use in June

Monthly Recap

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-hedge-fund-fun-663.jpg" alt="" class="wp-image-64559"/></figure>



<h2 class="wp-block-heading">How Well Do You Know Hedge Funds?</h2>







There are many investment vehicles beyond just stock market investing. We hear the names of some of these enough to think we know exactly what they are, but we often realize when asked that we have a hard time defining them. I experienced this recently with a financial adviser I know that was asked what a hedge fund is. She knew that it was a pooled fund (more than one investor) and that it may involve complex strategies that require people to be an accredited investors in most cases, but the Series-7 licensed advisor doesn’t spend much time with alternative investments, so her answer was left incomplete.



There are many hedge fund types all with different strategies; in fact it is a wide-open field. Michael Burry proved this as he created his own way to sell short the subprime mortgage market for his hedge fund before the mortgage meltdown in 2008. So there is no shame in not knowing what a hedge fund is, the strategies are limitless. I referred to the SEC website and spoke with several hedge fund managers I interact with regularly to ensure there were no important gaps missing while writing a hedge fund refresher.







<h3 class="wp-block-heading">What is a Hedge Fund?</h3>



Hedge funds are investment vehicles that pool money from investors with the goal of generating positive returns. They differ from mutual funds in that they typically employ more flexible investment strategies. Many hedge funds aim to profit in various market conditions by engaging in practices such as leverage (borrowing to increase investment exposure), short-selling, and other speculative investment techniques that are less commonly used by mutual funds.



There are a number of different types of hedge funds, each with its own unique strategy. Some of the most common include:



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-Short Equity Funds: These are funds that invest in both long and short positions, meaning they buy stocks they believe will go up in value and sell stocks they believe will go down in value. The balance of the long and short, in theory, moderates risk in the management of many long-short equity funds.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Market Neutral Funds: These are funds that look to generate returns for investors that are not correlated to the overall market. They do this by investing in a variety of assets, including stocks, bonds, and derivatives. A market-neutral fund that adapts to any market condition by selecting positions for what is expected in the various markets allows the manager much more leeway than most mutual funds available.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Volatility Arbitrage Funds: These funds take advantage of volatility arbitrage which is a trading strategy that attempts to profit from the difference between the forecasted future price volatility of an asset, like a stock, and the implied volatility of options based on that asset. Success at calling the disconnect between the two that yields a profit (arbitrage) is the goal of these fund managers.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Merger Arbitrage Funds: These funds trade to benefit from the common price movement experienced when a company announces a merger or acquisition of another public company. Usually, the acquiring company's price will weaken while the company to be acquired rises. Benefiting from both sides while offsetting overall market risk being both long and short in equities, is how these funds aim to outperform the overall market.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Global Macro Funds: are what many investors think of when it comes to hedge funds. The manager can take a view on economic or political events and use derivatives on equities, bonds, currencies and commodities to try to profit from that view. Global macro hedge fund managers may be taking positions on the likely direction of interest rates, the outcome of a significant event, such as a vote to raise the U.S. debt ceiling or anything where they consider the market as not pricing an outcome correctly.



Depending on the size of the assets managed by a hedge fund manager, they may not be required to register or file public reports with the SEC (Securities and Exchange Commission). However, hedge funds are still subject to anti-fraud regulations, and fund managers have a fiduciary duty to the funds they manage.







<h3 class="wp-block-heading">Who Can Invest?</h3>



Hedge funds are generally only accessible to <a href="https://www.channelchek.com/news-channel/are-you-an-accredited-investor-heres-what-you-need-to-know">accredited investors,</a> meaning investors who have a net worth of at least $1 million or an annual income of at least $200,000. (there are <a href="https://www.channelchek.com/terms/accredited-investors">other criteria</a> that may allow access). This is because hedge funds are considered by the SEC to be high-risk investments.



If you are considering investing in a hedge fund, it is important to do your research and understand the risks involved. You should also make sure that you are comfortable with the investment strategy of the fund.







<h3 class="wp-block-heading">Downsides Commonly Associated With Hedge Funds</h3>



While every fund is unique, there is much overlap in the different types when it comes to the downside associated with many of the varieties. Remember the goal for most of these funds is to make above-market returns – greater returns usually come with a cost. &nbsp;



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Fees: Hedge funds typically charge high fees, which can eat into your returns.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Risk: Hedge funds are considered to be high-risk investments. They can lose money, even in rising markets.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lack of Liquidity: Hedge funds are typically illiquid, meaning it can be difficult to sell your shares if you need to.



If you are considering investing in a hedge fund, it is important to weigh the risks and rewards carefully. Hedge funds can be a good investment for investors who are looking for high returns and diversification. However, they are also high-risk investments and should only be considered by investors who can’t afford to lose their investment.







<h3 class="wp-block-heading">Evaluating Various Funds</h3>



If you're considering investing in a hedge fund, there are several key areas of information you should seek:



Read the fund's offering memorandum and related materials: These documents provide essential information about the fund's investment strategies, its location (U.S. or abroad), risks associated with the investment, fees charged by the manager, expenses borne by the fund, and potential conflicts of interest. It is crucial to thoroughly review these materials before making an investment decision and consider consulting an independent financial advisor.



Understand the fund's investment strategy. Hedge funds employ a wide range of investment strategies. Some may diversify across multiple strategies, managers, and investments, while others may focus on concentrated positions or a single strategy. It's important to grasp the level of risk involved in the fund's strategies and ensure they align with your investment goals, time horizon, and risk tolerance. Remember that higher potential returns usually come with higher risks.



Determine if the fund uses leverage or speculative investment techniques: Leverage involves borrowing money to amplify investment potential, but it also increases the risk of losses. Hedge funds may also use derivatives (such as options and futures) and engage in short-selling, which further impact potential gains or losses. Understanding these practices is crucial in evaluating the fund's risk profile.



Evaluate potential conflicts of interest disclosed by hedge fund managers: It's important to assess any conflicts of interest that may arise. For instance, if your investment advisor recommends a fund they manage, there may be a conflict since the advisor may earn higher fees from your investment in the hedge fund compared to other potential investments.



Understand how the fund's assets are valued. Hedge funds may invest in illiquid securities that can be challenging to value. Some funds exercise significant discretion in valuing such securities. It's essential to understand the fund's valuation process and the extent to which independent sources validate the valuation. Valuation practices can affect the fees charged by the manager.



Understand that hedge funds do not follow a standardized methodology for calculating performance, and their investments may involve relatively illiquid and hard-to-value securities. In contrast, mutual funds have specific guidelines for calculating and disclosing performance data. When presented with performance data for a hedge fund, inquire about its accuracy, including whether it reflects cash or actual assets received by the fund, and whether it accounts for deductions for fees.



There are ordinarily limitations on taking money out of the fund. Unlike mutual funds, hedge funds typically impose restrictions on redeeming (cashing in) shares. These are usually monthly, quarterly, or annual redemption windows. They may also impose lock-up periods, during which you cannot redeem your shares for a year or more. These limitations mean that the value of your shares can decrease during the redemption process, and redemption fees may apply.







<h3 class="wp-block-heading">Why Hedge Funds are Popular</h3>



The lure of possibly finding a hedge fund manager with a crystal ball is a nice fantasy, but dreaming aside, hedge funds are popular among investors for a number of other reasons.



First, hedge funds have the potential to generate higher returns than traditional investments, such as mutual funds. Second, hedge funds offer investors the opportunity to diversify their portfolios and reduce risk. Third, hedge funds, although not as liquid as SEC-registered mutual funds, are typically more liquid than other alternative investments, such as private equity.







<h3 class="wp-block-heading">Take Away</h3>



Hedge funds offer accredited investors a unique opportunity to potentially earn returns through diverse investment strategies not found in traditional mutual funds. With their focus on generating profits regardless of market direction, hedge funds have become popular due to the potential for higher returns, diversification benefits, customization, and access to unique investment opportunities. However, it is important for investors to thoroughly understand the risks involved, carefully evaluate fund managers, and consider their own investment objectives before considering hedge fund participation.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek











Source



<a href="https://www.sec.gov/files/ib_hedgefunds.pdf">SEC Investor Bulletin</a>



<a href="https://www.federalreserve.gov/releases/efa/efa-hedge-funds.htm">The Fed – Hedge Funds</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="380" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-hedge-fund-fun-663.jpg" alt="" class="wp-image-64559" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-hedge-fund-fun-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-hedge-fund-fun-663-300x172.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">How Well Do You Know Hedge Funds?</h2>







There are many investment vehicles beyond just stock market investing. We hear the names of some of these enough to think we know exactly what they are, but we often realize when asked that we have a hard time defining them. I experienced this recently with a financial adviser I know that was asked what a hedge fund is. She knew that it was a pooled fund (more than one investor) and that it may involve complex strategies that require people to be an accredited investors in most cases, but the Series-7 licensed advisor doesn’t spend much time with alternative investments, so her answer was left incomplete.



There are many hedge fund types all with different strategies; in fact it is a wide-open field. Michael Burry proved this as he created his own way to sell short the subprime mortgage market for his hedge fund before the mortgage meltdown in 2008. So there is no shame in not knowing what a hedge fund is, the strategies are limitless. I referred to the SEC website and spoke with several hedge fund managers I interact with regularly to ensure there were no important gaps missing while writing a hedge fund refresher.







<h3 class="wp-block-heading">What is a Hedge Fund?</h3>



Hedge funds are investment vehicles that pool money from investors with the goal of generating positive returns. They differ from mutual funds in that they typically employ more flexible investment strategies. Many hedge funds aim to profit in various market conditions by engaging in practices such as leverage (borrowing to increase investment exposure), short-selling, and other speculative investment techniques that are less commonly used by mutual funds.



There are a number of different types of hedge funds, each with its own unique strategy. Some of the most common include:



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-Short Equity Funds: These are funds that invest in both long and short positions, meaning they buy stocks they believe will go up in value and sell stocks they believe will go down in value. The balance of the long and short, in theory, moderates risk in the management of many long-short equity funds.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Market Neutral Funds: These are funds that look to generate returns for investors that are not correlated to the overall market. They do this by investing in a variety of assets, including stocks, bonds, and derivatives. A market-neutral fund that adapts to any market condition by selecting positions for what is expected in the various markets allows the manager much more leeway than most mutual funds available.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Volatility Arbitrage Funds: These funds take advantage of volatility arbitrage which is a trading strategy that attempts to profit from the difference between the forecasted future price volatility of an asset, like a stock, and the implied volatility of options based on that asset. Success at calling the disconnect between the two that yields a profit (arbitrage) is the goal of these fund managers.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Merger Arbitrage Funds: These funds trade to benefit from the common price movement experienced when a company announces a merger or acquisition of another public company. Usually, the acquiring company&#8217;s price will weaken while the company to be acquired rises. Benefiting from both sides while offsetting overall market risk being both long and short in equities, is how these funds aim to outperform the overall market.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Global Macro Funds: are what many investors think of when it comes to hedge funds. The manager can take a view on economic or political events and use derivatives on equities, bonds, currencies and commodities to try to profit from that view. Global macro hedge fund managers may be taking positions on the likely direction of interest rates, the outcome of a significant event, such as a vote to raise the U.S. debt ceiling or anything where they consider the market as not pricing an outcome correctly.



Depending on the size of the assets managed by a hedge fund manager, they may not be required to register or file public reports with the SEC (Securities and Exchange Commission). However, hedge funds are still subject to anti-fraud regulations, and fund managers have a fiduciary duty to the funds they manage.







<h3 class="wp-block-heading">Who Can Invest?</h3>



Hedge funds are generally only accessible to <a href="https://www.channelchek.com/news-channel/are-you-an-accredited-investor-heres-what-you-need-to-know">accredited investors,</a> meaning investors who have a net worth of at least $1 million or an annual income of at least $200,000. (there are <a href="https://www.channelchek.com/terms/accredited-investors">other criteria</a> that may allow access). This is because hedge funds are considered by the SEC to be high-risk investments.



If you are considering investing in a hedge fund, it is important to do your research and understand the risks involved. You should also make sure that you are comfortable with the investment strategy of the fund.







<h3 class="wp-block-heading">Downsides Commonly Associated With Hedge Funds</h3>



While every fund is unique, there is much overlap in the different types when it comes to the downside associated with many of the varieties. Remember the goal for most of these funds is to make above-market returns – greater returns usually come with a cost. &nbsp;



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Fees: Hedge funds typically charge high fees, which can eat into your returns.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Risk: Hedge funds are considered to be high-risk investments. They can lose money, even in rising markets.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lack of Liquidity: Hedge funds are typically illiquid, meaning it can be difficult to sell your shares if you need to.



If you are considering investing in a hedge fund, it is important to weigh the risks and rewards carefully. Hedge funds can be a good investment for investors who are looking for high returns and diversification. However, they are also high-risk investments and should only be considered by investors who can’t afford to lose their investment.







<h3 class="wp-block-heading">Evaluating Various Funds</h3>



If you&#8217;re considering investing in a hedge fund, there are several key areas of information you should seek:



Read the fund&#8217;s offering memorandum and related materials: These documents provide essential information about the fund&#8217;s investment strategies, its location (U.S. or abroad), risks associated with the investment, fees charged by the manager, expenses borne by the fund, and potential conflicts of interest. It is crucial to thoroughly review these materials before making an investment decision and consider consulting an independent financial advisor.



Understand the fund&#8217;s investment strategy. Hedge funds employ a wide range of investment strategies. Some may diversify across multiple strategies, managers, and investments, while others may focus on concentrated positions or a single strategy. It&#8217;s important to grasp the level of risk involved in the fund&#8217;s strategies and ensure they align with your investment goals, time horizon, and risk tolerance. Remember that higher potential returns usually come with higher risks.



Determine if the fund uses leverage or speculative investment techniques: Leverage involves borrowing money to amplify investment potential, but it also increases the risk of losses. Hedge funds may also use derivatives (such as options and futures) and engage in short-selling, which further impact potential gains or losses. Understanding these practices is crucial in evaluating the fund&#8217;s risk profile.



Evaluate potential conflicts of interest disclosed by hedge fund managers: It&#8217;s important to assess any conflicts of interest that may arise. For instance, if your investment advisor recommends a fund they manage, there may be a conflict since the advisor may earn higher fees from your investment in the hedge fund compared to other potential investments.



Understand how the fund&#8217;s assets are valued. Hedge funds may invest in illiquid securities that can be challenging to value. Some funds exercise significant discretion in valuing such securities. It&#8217;s essential to understand the fund&#8217;s valuation process and the extent to which independent sources validate the valuation. Valuation practices can affect the fees charged by the manager.



Understand that hedge funds do not follow a standardized methodology for calculating performance, and their investments may involve relatively illiquid and hard-to-value securities. In contrast, mutual funds have specific guidelines for calculating and disclosing performance data. When presented with performance data for a hedge fund, inquire about its accuracy, including whether it reflects cash or actual assets received by the fund, and whether it accounts for deductions for fees.



There are ordinarily limitations on taking money out of the fund. Unlike mutual funds, hedge funds typically impose restrictions on redeeming (cashing in) shares. These are usually monthly, quarterly, or annual redemption windows. They may also impose lock-up periods, during which you cannot redeem your shares for a year or more. These limitations mean that the value of your shares can decrease during the redemption process, and redemption fees may apply.







<h3 class="wp-block-heading">Why Hedge Funds are Popular</h3>



The lure of possibly finding a hedge fund manager with a crystal ball is a nice fantasy, but dreaming aside, hedge funds are popular among investors for a number of other reasons.



First, hedge funds have the potential to generate higher returns than traditional investments, such as mutual funds. Second, hedge funds offer investors the opportunity to diversify their portfolios and reduce risk. Third, hedge funds, although not as liquid as SEC-registered mutual funds, are typically more liquid than other alternative investments, such as private equity.







<h3 class="wp-block-heading">Take Away</h3>



Hedge funds offer accredited investors a unique opportunity to potentially earn returns through diverse investment strategies not found in traditional mutual funds. With their focus on generating profits regardless of market direction, hedge funds have become popular due to the potential for higher returns, diversification benefits, customization, and access to unique investment opportunities. However, it is important for investors to thoroughly understand the risks involved, carefully evaluate fund managers, and consider their own investment objectives before considering hedge fund participation.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek











Source



<a href="https://www.sec.gov/files/ib_hedgefunds.pdf">SEC Investor Bulletin</a>



<a href="https://www.federalreserve.gov/releases/efa/efa-hedge-funds.htm">The Fed – Hedge Funds</a>

How Well Do You Know Hedge Funds?







There are many investment vehicles beyond just stock market investing. We hear the names of some of these enough to think we know exactly what they are, but we often realize when asked that we have a hard time defining them. I experienced this recently with a financial adviser I know that was asked what a hedge fund is. She knew that it was a pooled fund (more than one investor) and that it may involve complex strategies that require people to be an accredited investors in most cases, but the Series-7 licensed advisor doesn’t spend much time with alternative investments, so her answer was left incomplete.



There are many hedge fund types all with different strategies; in fact it is a wide-open field. Michael Burry proved this as he created his own way to sell short the subprime mortgage market for his hedge fund before the mortgage meltdown in 2008. So there is no shame in not knowing what a hedge fund is, the strategies are limitless. I referred to the SEC website and spoke with several hedge fund managers I interact with regularly to ensure there were no important gaps missing while writing a hedge fund refresher.







What is a Hedge Fund?



Hedge funds are investment vehicles that pool money from investors with the goal of generating positive returns. They differ from mutual funds in that they typically employ more flexible investment strategies. Many hedge funds aim to profit in various market conditions by engaging in practices such as leverage (borrowing to increase investment exposure), short-selling, and other speculative investment techniques that are less commonly used by mutual funds.



There are a number of different types of hedge funds, each with its own unique strategy. Some of the most common include:



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-Short Equity Funds: These are funds that invest in both long and short positions, meaning they buy stocks they believe will go up in value and sell stocks they believe will go down in value. The balance of the long and short, in theory, moderates risk in the management of many long-short equity funds.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Market Neutral Funds: These are funds that look to generate returns for investors that are not correlated to the overall market. They do this by investing in a variety of assets, including stocks, bonds, and derivatives. A market-neutral fund that adapts to any market condition by selecting positions for what is expected in the various markets allows the manager much more leeway than most mutual funds available.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Volatility Arbitrage Funds: These funds take advantage of volatility arbitrage which is a trading strategy that attempts to profit from the difference between the forecasted future price volatility of an asset, like a stock, and the implied volatility of options based on that asset. Success at calling the disconnect between the two that yields a profit (arbitrage) is the goal of these fund managers.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Merger Arbitrage Funds: These funds trade to benefit from the common price movement experienced when a company announces a merger or acquisition of another public company. Usually, the acquiring company&#8217;s price will weaken while the company to be acquired rises. Benefiting from both sides while offsetting overall market risk being both long and short in equities, is how these funds aim to outperform the overall market.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Global Macro Funds: are what many investors think of when it comes to hedge funds. The manager can take a view on economic or political events and use derivatives on equities, bonds, currencies and commodities to try to profit from that view. Global macro hedge fund managers may be taking positions on the likely direction of interest rates, the outcome of a significant event, such as a vote to raise the U.S. debt ceiling or anything where they consider the market as not pricing an outcome correctly.



Depending on the size of the assets managed by a hedge fund manager, they may not be required to register or file public reports with the SEC (Securities and Exchange Commission). However, hedge funds are still subject to anti-fraud regulations, and fund managers have a fiduciary duty to the funds they manage.







Who Can Invest?



Hedge funds are generally only accessible to accredited investors, meaning investors who have a net worth of at least $1 million or an annual income of at least $200,000. (there are other criteria that may allow access). This is because hedge funds are considered by the SEC to be high-risk investments.



If you are considering investing in a hedge fund, it is important to do your research and understand the risks involved. You should also make sure that you are comfortable with the investment strategy of the fund.







Downsides Commonly Associated With Hedge Funds



While every fund is unique, there is much overlap in the different types when it comes to the downside associated with many of the varieties. Remember the goal for most of these funds is to make above-market returns – greater returns usually come with a cost. &nbsp;



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Fees: Hedge funds typically charge high fees, which can eat into your returns.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; High Risk: Hedge funds are considered to be high-risk investments. They can lose money, even in rising markets.



•&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lack of Liquidity: Hedge funds are typically illiquid, meaning it can be difficult to sell your shares if you need to.



If you are considering investing in a hedge fund, it is important to weigh the risks and rewards carefully. Hedge funds can be a good investment for investors who are looking for high returns and diversification. However, they are also high-risk investments and should only be considered by investors who can’t afford to lose their investment.







Evaluating Various Funds



If you&#8217;re considering investing in a hedge fund, there are several key areas of information you should seek:



Read the fund&#8217;s offering memorandum and related materials: These documents provide essential information about the fund&#8217;s investment strategies, its location (U.S. or abroad), risks associated with the investment, fees charged by the manager, expenses borne by the fund, and potential conflicts of interest. It is crucial to thoroughly review these materials before making an investment decision and consider consulting an independent financial advisor.



Understand the fund&#8217;s investment strategy. Hedge funds employ a wide range of investment strategies. Some may diversify across multiple strategies, managers, and investments, while others may focus on concentrated positions or a single strategy. It&#8217;s important to grasp the level of risk involved in the fund&#8217;s strategies and ensure they align with your investment goals, time horizon, and risk tolerance. Remember that higher potential returns usually come with higher risks.



Determine if the fund uses leverage or speculative investment techniques: Leverage involves borrowing money to amplify investment potential, but it also increases the risk of losses. Hedge funds may also use derivatives (such as options and futures) and engage in short-selling, which further impact potential gains or losses. Understanding these practices is crucial in evaluating the fund&#8217;s risk profile.



Evaluate potential conflicts of interest disclosed by hedge fund managers: It&#8217;s important to assess any conflicts of interest that may arise. For instance, if your investment advisor recommends a fund they manage, there may be a conflict since the advisor may earn higher fees from your investment in the hedge fund compared to other potential investments.



Understand how the fund&#8217;s assets are valued. Hedge funds may invest in illiquid securities that can be challenging to value. Some funds exercise significant discretion in valuing such securities. It&#8217;s essential to understand the fund&#8217;s valuation process and the extent to which independent sources validate the valuation. Valuation practices can affect the fees charged by the manager.



Understand that hedge funds do not follow a standardized methodology for calculating performance, and their investments may involve relatively illiquid and hard-to-value securities. In contrast, mutual funds have specific guidelines for calculating and disclosing performance data. When presented with performance data for a hedge fund, inquire about its accuracy, including whether it reflects cash or actual assets received by the fund, and whether it accounts for deductions for fees.



There are ordinarily limitations on taking money out of the fund. Unlike mutual funds, hedge funds typically impose restrictions on redeeming (cashing in) shares. These are usually monthly, quarterly, or annual redemption windows. They may also impose lock-up periods, during which you cannot redeem your shares for a year or more. These limitations mean that the value of your shares can decrease during the redemption process, and redemption fees may apply.







Why Hedge Funds are Popular



The lure of possibly finding a hedge fund manager with a crystal ball is a nice fantasy, but dreaming aside, hedge funds are popular among investors for a number of other reasons.



First, hedge funds have the potential to generate higher returns than traditional investments, such as mutual funds. Second, hedge funds offer investors the opportunity to diversify their portfolios and reduce risk. Third, hedge funds, although not as liquid as SEC-registered mutual funds, are typically more liquid than other alternative investments, such as private equity.







Take Away



Hedge funds offer accredited investors a unique opportunity to potentially earn returns through diverse investment strategies not found in traditional mutual funds. With their focus on generating profits regardless of market direction, hedge funds have become popular due to the potential for higher returns, diversification benefits, customization, and access to unique investment opportunities. However, it is important for investors to thoroughly understand the risks involved, carefully evaluate fund managers, and consider their own investment objectives before considering hedge fund participation.



Paul Hoffman



Managing Editor, Channelchek











Source



SEC Investor Bulletin



The Fed – Hedge Funds

What Are Hedge Funds, and Why Are They Popular Among Investors?

Hedge Funds

Ranking Effort

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-Powellitscomplicated-663.jpg" alt="" class="wp-image-64551"/></figure>



<h2 class="wp-block-heading">Is the Fed Falling Behind on Slowing the Economy?</h2>



Is the Federal Reserve’s monetary policy losing out to inflationary pressures? While supply chain costs have long been taken out of the inflation forecast, demand pressures have been stronger than hoped for by the Fed. One area of demand is the labor markets. While the Federal Reserve has a dual mandate to keep prices stable and maximize employment, the shortage of workers is adding to demand-pull inflation as wages are a large input cost in a service economy. As employment remains strong, they have room to raise rates, but if strong employment is a significant cause of price pressures, they may decide to keep the increases coming.







<h3 class="wp-block-heading">Background</h3>



The number of new jobs unfilled increased last month as US job openings rose unexpectedly in April. The total job openings stood at 10.1 million. Make no mistake, the members of the Fed trying to steer this huge economic ship would like to see everyone working. However, with the Bureau of Labor Statistics (BLS) reporting “unemployed persons” at 5.7 million in April as compared to 10.1 million job openings, creates far more demand than there are people to fill the positions. Those with the right skills will find their worth has climbed as they get bid up by employers that are still financially better off hiring more expensive talent rather than doing without.



This causes wage inflation as these increased business costs work their way down into the final cost of goods and services we consume, as inflation.







<h3 class="wp-block-heading">Where We’re At</h3>



The 10.1 million job openings employers posted is an increase from the 9.7 million in the prior month. It is also the most since January 2023. In contrast, economists had expected vacancies to slip below <a href="https://www.channelchek.com/news-channel/the-week-ahead-debt-ceiling-beige-book-and-employment">9.5 million</a>. The increase and big miss by economists' forecasting increases in job opportunities is a clear sign of strength in the nation's labor market. This complicates Chair Jerome Powell’s position, along with other Fed members.&nbsp;



It isn’t popular to try to crush demand for new employees, but rising consumer costs at more than twice the Fed’s target will be viewed as too much.



The Fed says that it is data driven, this data is unsettling for those hoping for a pause or pivot.







<h3 class="wp-block-heading"> The Investment Climate</h3>



These numbers and other strong economic numbers that were reported in April, create some uncertainty for investors as most would prefer to see the Fed stimulating rather than tightening conditions.



But the market has been resilient, despite the <a href="https://www.channelchek.com/news-channel/the-fomc-minutes-define-two-determinants-of-future-policy">Feds’ resolve</a>. The Fed has raised its benchmark interest rate ten times in the last 14 months. Yet jobs remain unfilled, and the stock market has gained quite a bit of ground in 2023. The concern has been that the Fed may overdo it and cause a recession. While even the Fed Chair admitted this is a risk he is willing to take, he also added that it is easier to start a stalled economy than it is to reel one in and the<a href="https://www.channelchek.com/news-channel/cathie-woods-non-mainstream-inflation-concern-could-unfold-as-feared"> inflation</a> that goes along with expansion.



So the strong labor market (along with other <a href="https://www.channelchek.com/news-channel/solid-evidence-a-recession-is-unlikely-this-year">recent data releases</a>) provides room for the Fed to tighten as there are still nearly two jobs for every job seeker. Additional tightening will eventually have the effect of simmering inflation to a more tolerable temperature. If the Fed overdoes it on the brake pedal, according to Powell, he knows where the gas pedal is.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek















Sources



<a href="https://www.bls.gov/news.release/pdf/empsit.pdf">https://www.bls.gov/news.release/pdf/empsit.pdf</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="421" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-Powellitscomplicated-663.jpg" alt="" class="wp-image-64551" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-Powellitscomplicated-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-Powellitscomplicated-663-300x190.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Is the Fed Falling Behind on Slowing the Economy?</h2>



Is the Federal Reserve’s monetary policy losing out to inflationary pressures? While supply chain costs have long been taken out of the inflation forecast, demand pressures have been stronger than hoped for by the Fed. One area of demand is the labor markets. While the Federal Reserve has a dual mandate to keep prices stable and maximize employment, the shortage of workers is adding to demand-pull inflation as wages are a large input cost in a service economy. As employment remains strong, they have room to raise rates, but if strong employment is a significant cause of price pressures, they may decide to keep the increases coming.







<h3 class="wp-block-heading">Background</h3>



The number of new jobs unfilled increased last month as US job openings rose unexpectedly in April. The total job openings stood at 10.1 million. Make no mistake, the members of the Fed trying to steer this huge economic ship would like to see everyone working. However, with the Bureau of Labor Statistics (BLS) reporting “unemployed persons” at 5.7 million in April as compared to 10.1 million job openings, creates far more demand than there are people to fill the positions. Those with the right skills will find their worth has climbed as they get bid up by employers that are still financially better off hiring more expensive talent rather than doing without.



This causes wage inflation as these increased business costs work their way down into the final cost of goods and services we consume, as inflation.







<h3 class="wp-block-heading">Where We’re At</h3>



The 10.1 million job openings employers posted is an increase from the 9.7 million in the prior month. It is also the most since January 2023. In contrast, economists had expected vacancies to slip below <a href="https://www.channelchek.com/news-channel/the-week-ahead-debt-ceiling-beige-book-and-employment">9.5 million</a>. The increase and big miss by economists&#8217; forecasting increases in job opportunities is a clear sign of strength in the nation&#8217;s labor market. This complicates Chair Jerome Powell’s position, along with other Fed members.&nbsp;



It isn’t popular to try to crush demand for new employees, but rising consumer costs at more than twice the Fed’s target will be viewed as too much.



The Fed says that it is data driven, this data is unsettling for those hoping for a pause or pivot.







<h3 class="wp-block-heading"> The Investment Climate</h3>



These numbers and other strong economic numbers that were reported in April, create some uncertainty for investors as most would prefer to see the Fed stimulating rather than tightening conditions.



But the market has been resilient, despite the <a href="https://www.channelchek.com/news-channel/the-fomc-minutes-define-two-determinants-of-future-policy">Feds’ resolve</a>. The Fed has raised its benchmark interest rate ten times in the last 14 months. Yet jobs remain unfilled, and the stock market has gained quite a bit of ground in 2023. The concern has been that the Fed may overdo it and cause a recession. While even the Fed Chair admitted this is a risk he is willing to take, he also added that it is easier to start a stalled economy than it is to reel one in and the<a href="https://www.channelchek.com/news-channel/cathie-woods-non-mainstream-inflation-concern-could-unfold-as-feared"> inflation</a> that goes along with expansion.



So the strong labor market (along with other <a href="https://www.channelchek.com/news-channel/solid-evidence-a-recession-is-unlikely-this-year">recent data releases</a>) provides room for the Fed to tighten as there are still nearly two jobs for every job seeker. Additional tightening will eventually have the effect of simmering inflation to a more tolerable temperature. If the Fed overdoes it on the brake pedal, according to Powell, he knows where the gas pedal is.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek















Sources



<a href="https://www.bls.gov/news.release/pdf/empsit.pdf">https://www.bls.gov/news.release/pdf/empsit.pdf</a>

Is the Fed Falling Behind on Slowing the Economy?



Is the Federal Reserve’s monetary policy losing out to inflationary pressures? While supply chain costs have long been taken out of the inflation forecast, demand pressures have been stronger than hoped for by the Fed. One area of demand is the labor markets. While the Federal Reserve has a dual mandate to keep prices stable and maximize employment, the shortage of workers is adding to demand-pull inflation as wages are a large input cost in a service economy. As employment remains strong, they have room to raise rates, but if strong employment is a significant cause of price pressures, they may decide to keep the increases coming.







Background



The number of new jobs unfilled increased last month as US job openings rose unexpectedly in April. The total job openings stood at 10.1 million. Make no mistake, the members of the Fed trying to steer this huge economic ship would like to see everyone working. However, with the Bureau of Labor Statistics (BLS) reporting “unemployed persons” at 5.7 million in April as compared to 10.1 million job openings, creates far more demand than there are people to fill the positions. Those with the right skills will find their worth has climbed as they get bid up by employers that are still financially better off hiring more expensive talent rather than doing without.



This causes wage inflation as these increased business costs work their way down into the final cost of goods and services we consume, as inflation.







Where We’re At



The 10.1 million job openings employers posted is an increase from the 9.7 million in the prior month. It is also the most since January 2023. In contrast, economists had expected vacancies to slip below 9.5 million. The increase and big miss by economists&#8217; forecasting increases in job opportunities is a clear sign of strength in the nation&#8217;s labor market. This complicates Chair Jerome Powell’s position, along with other Fed members.&nbsp;



It isn’t popular to try to crush demand for new employees, but rising consumer costs at more than twice the Fed’s target will be viewed as too much.



The Fed says that it is data driven, this data is unsettling for those hoping for a pause or pivot.







The Investment Climate



These numbers and other strong economic numbers that were reported in April, create some uncertainty for investors as most would prefer to see the Fed stimulating rather than tightening conditions.



But the market has been resilient, despite the Feds’ resolve. The Fed has raised its benchmark interest rate ten times in the last 14 months. Yet jobs remain unfilled, and the stock market has gained quite a bit of ground in 2023. The concern has been that the Fed may overdo it and cause a recession. While even the Fed Chair admitted this is a risk he is willing to take, he also added that it is easier to start a stalled economy than it is to reel one in and the inflation that goes along with expansion.



So the strong labor market (along with other recent data releases) provides room for the Fed to tighten as there are still nearly two jobs for every job seeker. Additional tightening will eventually have the effect of simmering inflation to a more tolerable temperature. If the Fed overdoes it on the brake pedal, according to Powell, he knows where the gas pedal is.



Paul Hoffman



Managing Editor, Channelchek















Sources



https://www.bls.gov/news.release/pdf/empsit.pdf

Should Investors Expect Ongoing Monetary Policy Tightening Through 2023?

Jobs

Powell

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-opioid-new-663.jpg" alt="" class="wp-image-64523"/><figcaption class="wp-element-caption">Opioid neurotransmitters are located in many areas of the body, including the brain, spine and gut.</figcaption></figure>



<h2 class="wp-block-heading">Understanding the Molecular Pathways of How Opioids Work</h2>



Your body naturally produces opioids without causing addiction or overdose – studying how this process works could help reduce the side effects of opioid drugs. Opioids such as morphine and fentanyl are like the two-faced Roman god Janus: The kindly face delivers pain relief to millions of sufferers, while the grim face drives an opioid abuse and overdose crisis that claimed nearly 70,000 lives in the U.S. in 2020 alone.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, <a href="https://theconversation.com/profiles/john-michael-streicher-1431300">John Michael Streicher</a>, Associate Professor of Pharmacology, University of Arizona.



Scientists like me who study pain and opioids have been seeking a way to separate these two seemingly inseparable faces of opioids. Researchers are trying to design drugs that deliver effective pain relief without the risk of side effects, including addiction and overdose.



One possible path to achieving that goal lies in understanding the <a href="https://www.channelchek.com/news-channel/the-trend-away-from-opioids-provides-investors-with-many-opportunities" target="_blank" rel="noreferrer noopener">molecular pathways opioid</a>s use to carry out their effects in your body.







<h3 class="wp-block-heading">How Do Opioids Work</h3>



The opioid system in your body is a set of neurotransmitters your brain naturally produces that enable communication between neurons and activate protein receptors. These neurotransmitters include small protein-like molecules like enkephalins and endorphins. These molecules regulate a tremendous number of functions in your body, including pain, pleasure, memory, the movements of your digestive system and more.



Opioid neurotransmitters activate receptors that are located in a lot of places in your body, including pain centers in your spinal cord and brain, reward and pleasure centers in your brain, and throughout the neurons in your gut. Normally, opioid neurotransmitters are released in only small quantities in these exact locations, so your body can use this system in a balanced way to regulate itself.



The problem comes when you take an opioid drug like morphine or fentanyl, especially at high doses for a long time. These drugs travel through the bloodstream and can activate every opioid receptor in your body. You’ll get pain relief through the pain centers in your spinal cord and brain. But you’ll also get a euphoric high when those drugs hit your brain’s reward and pleasure centers, and that could lead to addiction with repeated use. When the drug hits your gut, you may develop constipation, along with other common opioid side effects.







<h3 class="wp-block-heading">Targeting Opioid Signal Transduction</h3>



How can scientists design opioid drugs that won’t cause side effects?



One approach my research team and I take is to understand how cells respond when they receive the message from an opioid neurotransmitter. Neuroscientists call this process opioid receptor signal transduction. Just as neurotransmitters are a communication network within your brain, each neuron also has a communication network that connects receptors to proteins within the neuron. When these connections are made, they trigger specific effects like pain relief. So, after a natural opioid neurotransmitter or a synthetic opioid drug activates an opioid receptor, it activates proteins within the cell that carry out the effects of the neurotransmitter or the drug.



Opioid signal transduction is complex, and scientists are just starting to figure out how it works. However, one thing is clear: Not every protein involved in this process does the same thing. Some are more important for pain relief, while some are more important for side effects like respiratory depression, or the decrease in breathing rate that makes overdoses fatal.







<figure class="wp-block-image size-large"><a href="https://noblecon19.com/"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1-1024x101.jpg" alt="" class="wp-image-64101"/></a></figure>







So what if we target the “good” signals like pain relief, and avoid the “bad” signals that lead to addiction and death? Researchers are tackling this idea in different ways. In fact, in 2020 the U.S. Food and Drug Administration approved the first opioid drug based on this idea, oliceridine, as a painkiller with fewer respiratory side effects.



However, relying on just one drug has downsides. That drug might not work well for all people or for all types of pain. It could also have other side effects that show up only later on. Plenty of options are needed to treat all patients in need.



My research team is targeting a protein called Heat shock protein 90, or Hsp90, which has many functions inside each cell. Hsp90 has been a hot target in the cancer field for years, with researchers developing Hsp90 inhibitors as a treatment for many cancer types.



We’ve found that Hsp90 is also really important in regulating opioid signal transduction. Blocking Hsp90 in the brain blocked opioid pain relief. However, blocking Hsp90 in the spinal cord increased opioid pain relief. Our recently published work uncovered more details on exactly how inhibiting Hsp90 leads to increased pain relief in the spinal cord.



Our work shows that manipulating opioid signaling through Hsp90 offers a path forward to improve opioid drugs. Taking an Hsp90 inhibitor that targets the spinal cord along with an opioid drug could improve the pain relief the opioid provides while decreasing its side effects. With improved pain relief, you can take less opioid and reduce your risk of addiction. We are currently developing a new generation of Hsp90 inhibitors that could help realize this goal.



There may be many paths to developing an improved opioid drug without the burdensome side effects of current drugs like morphine and fentanyl. Separating the kindly and grim faces of the opioid Janus could help provide pain relief we need without addiction and overdose.

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="373" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-opioid-new-663.jpg" alt="" class="wp-image-64523" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-opioid-new-663.jpg 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-opioid-new-663-300x169.jpg 300w" sizes="(max-width: 663px) 100vw, 663px" /><figcaption class="wp-element-caption">Opioid neurotransmitters are located in many areas of the body, including the brain, spine and gut.</figcaption></figure></div>


<h2 class="wp-block-heading">Understanding the Molecular Pathways of How Opioids Work</h2>



Your body naturally produces opioids without causing addiction or overdose – studying how this process works could help reduce the side effects of opioid drugs. Opioids such as morphine and fentanyl are like the two-faced Roman god Janus: The kindly face delivers pain relief to millions of sufferers, while the grim face drives an opioid abuse and overdose crisis that claimed nearly 70,000 lives in the U.S. in 2020 alone.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, <a href="https://theconversation.com/profiles/john-michael-streicher-1431300">John Michael Streicher</a>, Associate Professor of Pharmacology, University of Arizona.



Scientists like me who study pain and opioids have been seeking a way to separate these two seemingly inseparable faces of opioids. Researchers are trying to design drugs that deliver effective pain relief without the risk of side effects, including addiction and overdose.



One possible path to achieving that goal lies in understanding the <a href="https://www.channelchek.com/news-channel/the-trend-away-from-opioids-provides-investors-with-many-opportunities" target="_blank" rel="noreferrer noopener">molecular pathways opioid</a>s use to carry out their effects in your body.







<h3 class="wp-block-heading">How Do Opioids Work</h3>



The opioid system in your body is a set of neurotransmitters your brain naturally produces that enable communication between neurons and activate protein receptors. These neurotransmitters include small protein-like molecules like enkephalins and endorphins. These molecules regulate a tremendous number of functions in your body, including pain, pleasure, memory, the movements of your digestive system and more.



Opioid neurotransmitters activate receptors that are located in a lot of places in your body, including pain centers in your spinal cord and brain, reward and pleasure centers in your brain, and throughout the neurons in your gut. Normally, opioid neurotransmitters are released in only small quantities in these exact locations, so your body can use this system in a balanced way to regulate itself.



The problem comes when you take an opioid drug like morphine or fentanyl, especially at high doses for a long time. These drugs travel through the bloodstream and can activate every opioid receptor in your body. You’ll get pain relief through the pain centers in your spinal cord and brain. But you’ll also get a euphoric high when those drugs hit your brain’s reward and pleasure centers, and that could lead to addiction with repeated use. When the drug hits your gut, you may develop constipation, along with other common opioid side effects.







<h3 class="wp-block-heading">Targeting Opioid Signal Transduction</h3>



How can scientists design opioid drugs that won’t cause side effects?



One approach my research team and I take is to understand how cells respond when they receive the message from an opioid neurotransmitter. Neuroscientists call this process opioid receptor signal transduction. Just as neurotransmitters are a communication network within your brain, each neuron also has a communication network that connects receptors to proteins within the neuron. When these connections are made, they trigger specific effects like pain relief. So, after a natural opioid neurotransmitter or a synthetic opioid drug activates an opioid receptor, it activates proteins within the cell that carry out the effects of the neurotransmitter or the drug.



Opioid signal transduction is complex, and scientists are just starting to figure out how it works. However, one thing is clear: Not every protein involved in this process does the same thing. Some are more important for pain relief, while some are more important for side effects like respiratory depression, or the decrease in breathing rate that makes overdoses fatal.







<figure class="wp-block-image size-large"><a href="https://noblecon19.com/"><img decoding="async" loading="lazy" width="1024" height="101" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1-1024x101.jpg" alt="" class="wp-image-64101" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1-1024x101.jpg 1024w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1-300x30.jpg 300w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1-768x76.jpg 768w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/202305-article2-1.jpg 1488w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure>







So what if we target the “good” signals like pain relief, and avoid the “bad” signals that lead to addiction and death? Researchers are tackling this idea in different ways. In fact, in 2020 the U.S. Food and Drug Administration approved the first opioid drug based on this idea, oliceridine, as a painkiller with fewer respiratory side effects.



However, relying on just one drug has downsides. That drug might not work well for all people or for all types of pain. It could also have other side effects that show up only later on. Plenty of options are needed to treat all patients in need.



My research team is targeting a protein called Heat shock protein 90, or Hsp90, which has many functions inside each cell. Hsp90 has been a hot target in the cancer field for years, with researchers developing Hsp90 inhibitors as a treatment for many cancer types.



We’ve found that Hsp90 is also really important in regulating opioid signal transduction. Blocking Hsp90 in the brain blocked opioid pain relief. However, blocking Hsp90 in the spinal cord increased opioid pain relief. Our recently published work uncovered more details on exactly how inhibiting Hsp90 leads to increased pain relief in the spinal cord.



Our work shows that manipulating opioid signaling through Hsp90 offers a path forward to improve opioid drugs. Taking an Hsp90 inhibitor that targets the spinal cord along with an opioid drug could improve the pain relief the opioid provides while decreasing its side effects. With improved pain relief, you can take less opioid and reduce your risk of addiction. We are currently developing a new generation of Hsp90 inhibitors that could help realize this goal.



There may be many paths to developing an improved opioid drug without the burdensome side effects of current drugs like morphine and fentanyl. Separating the kindly and grim faces of the opioid Janus could help provide pain relief we need without addiction and overdose.

Opioid neurotransmitters are located in many areas of the body, including the brain, spine and gut.


Understanding the Molecular Pathways of How Opioids Work



Your body naturally produces opioids without causing addiction or overdose – studying how this process works could help reduce the side effects of opioid drugs. Opioids such as morphine and fentanyl are like the two-faced Roman god Janus: The kindly face delivers pain relief to millions of sufferers, while the grim face drives an opioid abuse and overdose crisis that claimed nearly 70,000 lives in the U.S. in 2020 alone.



This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, John Michael Streicher, Associate Professor of Pharmacology, University of Arizona.



Scientists like me who study pain and opioids have been seeking a way to separate these two seemingly inseparable faces of opioids. Researchers are trying to design drugs that deliver effective pain relief without the risk of side effects, including addiction and overdose.



One possible path to achieving that goal lies in understanding the molecular pathways opioids use to carry out their effects in your body.







How Do Opioids Work



The opioid system in your body is a set of neurotransmitters your brain naturally produces that enable communication between neurons and activate protein receptors. These neurotransmitters include small protein-like molecules like enkephalins and endorphins. These molecules regulate a tremendous number of functions in your body, including pain, pleasure, memory, the movements of your digestive system and more.



Opioid neurotransmitters activate receptors that are located in a lot of places in your body, including pain centers in your spinal cord and brain, reward and pleasure centers in your brain, and throughout the neurons in your gut. Normally, opioid neurotransmitters are released in only small quantities in these exact locations, so your body can use this system in a balanced way to regulate itself.



The problem comes when you take an opioid drug like morphine or fentanyl, especially at high doses for a long time. These drugs travel through the bloodstream and can activate every opioid receptor in your body. You’ll get pain relief through the pain centers in your spinal cord and brain. But you’ll also get a euphoric high when those drugs hit your brain’s reward and pleasure centers, and that could lead to addiction with repeated use. When the drug hits your gut, you may develop constipation, along with other common opioid side effects.







Targeting Opioid Signal Transduction



How can scientists design opioid drugs that won’t cause side effects?



One approach my research team and I take is to understand how cells respond when they receive the message from an opioid neurotransmitter. Neuroscientists call this process opioid receptor signal transduction. Just as neurotransmitters are a communication network within your brain, each neuron also has a communication network that connects receptors to proteins within the neuron. When these connections are made, they trigger specific effects like pain relief. So, after a natural opioid neurotransmitter or a synthetic opioid drug activates an opioid receptor, it activates proteins within the cell that carry out the effects of the neurotransmitter or the drug.



Opioid signal transduction is complex, and scientists are just starting to figure out how it works. However, one thing is clear: Not every protein involved in this process does the same thing. Some are more important for pain relief, while some are more important for side effects like respiratory depression, or the decrease in breathing rate that makes overdoses fatal.















So what if we target the “good” signals like pain relief, and avoid the “bad” signals that lead to addiction and death? Researchers are tackling this idea in different ways. In fact, in 2020 the U.S. Food and Drug Administration approved the first opioid drug based on this idea, oliceridine, as a painkiller with fewer respiratory side effects.



However, relying on just one drug has downsides. That drug might not work well for all people or for all types of pain. It could also have other side effects that show up only later on. Plenty of options are needed to treat all patients in need.



My research team is targeting a protein called Heat shock protein 90, or Hsp90, which has many functions inside each cell. Hsp90 has been a hot target in the cancer field for years, with researchers developing Hsp90 inhibitors as a treatment for many cancer types.



We’ve found that Hsp90 is also really important in regulating opioid signal transduction. Blocking Hsp90 in the brain blocked opioid pain relief. However, blocking Hsp90 in the spinal cord increased opioid pain relief. Our recently published work uncovered more details on exactly how inhibiting Hsp90 leads to increased pain relief in the spinal cord.



Our work shows that manipulating opioid signaling through Hsp90 offers a path forward to improve opioid drugs. Taking an Hsp90 inhibitor that targets the spinal cord along with an opioid drug could improve the pain relief the opioid provides while decreasing its side effects. With improved pain relief, you can take less opioid and reduce your risk of addiction. We are currently developing a new generation of Hsp90 inhibitors that could help realize this goal.



There may be many paths to developing an improved opioid drug without the burdensome side effects of current drugs like morphine and fentanyl. Separating the kindly and grim faces of the opioid Janus could help provide pain relief we need without addiction and overdose.

How Can Scientists Design Opioid Drugs that Won’t Cause Side Effects?

Opioids

<figure class="wp-block-image aligncenter size-full"><img src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-enterprise-value-663.png" alt="" class="wp-image-64497"/></figure>



<h2 class="wp-block-heading">Why Some Investors Evaluate a Stock Using Enterprise Value vs. Market Cap</h2>







Stock selection between different companies is always an apples to oranges comparison – even when the companies are in the same industry. But uncovering comparative value among the universe of stocks and other investment options is fundamental to successful investing. So successful stock market investors must sift for certain criteria, these filters are often financial measures. While data such as Earnings Per Share and P/E ratio get a  lot of attention, other metrics may help investors sort and filter to create their watch list, as some companies move toward the investor's buy list. One of these is Enterprise Value in comparison to Market Capitalization.







<h3 class="wp-block-heading">Understanding Enterprise Value</h3>



Enterprise value (EV) is the total value of a company, defined in terms of its financing. It includes the current market capitalization (share price x shares outstanding) and compares it to the cost to pay off debt, then adds in asset values. The below calculation results in establishing &nbsp;the company’s enterprise value, indicating what one might think should be the minimum needed to buy the company.



EV=Market Cap+Debt-Cash



The result can be thought of as the potential cost to acquire a business based on the company’s capital structure. As a concept, enterprise value gives you a realistic starting point for what one would need to spend to acquire a public company outright.  In reality, it typically takes a premium to EV for an acquisition offer to be accepted.







<h3 class="wp-block-heading">Trading Below Enterprise Value</h3>



When a company is trading below its enterprise value, it suggests that the market is valuing the company at a price lower than what its underlying assets would be worth if sold separately. In some circumstances, This situation presents investors with potential opportunities and indicates that further research and investigation may be prudent.



A popular example of a company that has traded below EV, or less than the net of its assets and debt, is Apple. The company has had on its books massive amounts of cash, along with longer-term assets, the value less any debt is higher than the market cap (Outstanding Shares x Price Per Share). 







<h3 class="wp-block-heading">Looking for Potential Buys</h3>



There are times when it may be worth considering an investment in a company that is trading below its enterprise value:



Temporary Market Pessimism: Companies may experience short-term setbacks, negative market sentiment, or sector-wide pessimism that leads to their stock price trading below enterprise value. It is important to assess whether the company's fundamental strengths remain intact despite these challenges. If the negative sentiment appears temporary and the company is expected to rebound, it could be a window of opportunity.



Mispricing and Market Inefficiencies: The stock market is less than perfectly efficient, and mispricings do occur. Investors who identify stocks trading below enterprise value due to market inefficiencies can potentially capitalize on these pricing discrepancies. The investor may have to roll up their sleeves to do more analysis to determine whether the undervaluation is based on actual fundamental weaknesses or if it is a result of temporary market inefficiencies.



Asset-Rich Companies: Companies with significant tangible or intangible assets, such as real estate, patents, or intellectual property, may trade below enterprise value. Investors may find these stocks attractive as the underlying assets can provide a margin of safety and potential upside. Assessing the value and potential monetization of these assets is crucial before considering an investment.



In the case of Apple above, cash is easier to evaluate than real estate, patents, or other assets.







<h3 class="wp-block-heading">Considering Sellling</h3>



While stocks trading below enterprise value can present attractive opportunities, there are circumstances when it may be wise to consider selling.



Fundamental Deterioration: If a company's underlying financials are weakening, for example, declining sales, increasing debt levels, or increased costs of doing business could indicate a problem. It is important to evaluate whether the company's operational challenges are likely to persist, as this could impact its ability to sustain value.



Industry Decline or Structural Issues: Some companies trade below enterprise value due to broader industry decline or structural issues specific to the company. If the industry's prospects are exoeriencing prolonged weakening, or the company faces inherent challenges that limit its growth potential, it may be prudent to sell the stock, even if it appears undervalued based on enterprise value alone.







<h3 class="wp-block-heading">Take Away</h3>



Understanding enterprise value and using it while sifting through <a href="https://www.channelchek.com/news-channel/valuing-a-stock-can-you-determine-its-true-worth" target="_blank" rel="noreferrer noopener">opportunities</a> could help bring stocks to the surface that one may not have considered.  



Using EV as an evaluation tool is not a slam dunk, if investing was that easy we’d all be wealthier. However it is a good starting point to <a href="https://www.channelchek.com/news-channel/the-reasons-veteran-investors-are-now-eying-small-cap-stocks" target="_blank" rel="noreferrer noopener">isolate stocks</a> and then evaluate why they may be trading below EV. Is it warranted, is it unwarranted?



Let Channelchek be your data source for small and microcap stocks, many of which can be found to be trading below enterprise value. Sign-up for a no-cost account and gain access to information to over 6,000 less talked about companies as well as insightful daily emails.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek



Sources







<a href="https://www.investopedia.com/terms/e/enterprisevalue.asp">https://www.investopedia.com/terms/e/enterprisevalue.asp</a>

<div class="wp-block-image">
<figure class="aligncenter size-full"><img decoding="async" loading="lazy" width="663" height="380" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-enterprise-value-663.png" alt="" class="wp-image-64497" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-enterprise-value-663.png 663w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-news-enterprise-value-663-300x172.png 300w" sizes="(max-width: 663px) 100vw, 663px" /></figure></div>


<h2 class="wp-block-heading">Why Some Investors Evaluate a Stock Using Enterprise Value vs. Market Cap</h2>







Stock selection between different companies is always an apples to oranges comparison – even when the companies are in the same industry. But uncovering comparative value among the universe of stocks and other investment options is fundamental to successful investing. So successful stock market investors must sift for certain criteria, these filters are often financial measures. While data such as Earnings Per Share and P/E ratio get a  lot of attention, other metrics may help investors sort and filter to create their watch list, as some companies move toward the investor&#8217;s buy list. One of these is Enterprise Value in comparison to Market Capitalization.







<h3 class="wp-block-heading">Understanding Enterprise Value</h3>



Enterprise value (EV) is the total value of a company, defined in terms of its financing. It includes the current market capitalization (share price x shares outstanding) and compares it to the cost to pay off debt, then adds in asset values. The below calculation results in establishing &nbsp;the company’s enterprise value, indicating what one might think should be the minimum needed to buy the company.



EV=Market Cap+Debt-Cash



The result can be thought of as the potential cost to acquire a business based on the company’s capital structure. As a concept, enterprise value gives you a realistic starting point for what one would need to spend to acquire a public company outright.  In reality, it typically takes a premium to EV for an acquisition offer to be accepted.







<h3 class="wp-block-heading">Trading Below Enterprise Value</h3>



When a company is trading below its enterprise value, it suggests that the market is valuing the company at a price lower than what its underlying assets would be worth if sold separately. In some circumstances, This situation presents investors with potential opportunities and indicates that further research and investigation may be prudent.



A popular example of a company that has traded below EV, or less than the net of its assets and debt, is Apple. The company has had on its books massive amounts of cash, along with longer-term assets, the value less any debt is higher than the market cap (Outstanding Shares x Price Per Share). 







<h3 class="wp-block-heading">Looking for Potential Buys</h3>



There are times when it may be worth considering an investment in a company that is trading below its enterprise value:



Temporary Market Pessimism: Companies may experience short-term setbacks, negative market sentiment, or sector-wide pessimism that leads to their stock price trading below enterprise value. It is important to assess whether the company&#8217;s fundamental strengths remain intact despite these challenges. If the negative sentiment appears temporary and the company is expected to rebound, it could be a window of opportunity.



Mispricing and Market Inefficiencies: The stock market is less than perfectly efficient, and mispricings do occur. Investors who identify stocks trading below enterprise value due to market inefficiencies can potentially capitalize on these pricing discrepancies. The investor may have to roll up their sleeves to do more analysis to determine whether the undervaluation is based on actual fundamental weaknesses or if it is a result of temporary market inefficiencies.



Asset-Rich Companies: Companies with significant tangible or intangible assets, such as real estate, patents, or intellectual property, may trade below enterprise value. Investors may find these stocks attractive as the underlying assets can provide a margin of safety and potential upside. Assessing the value and potential monetization of these assets is crucial before considering an investment.



In the case of Apple above, cash is easier to evaluate than real estate, patents, or other assets.







<h3 class="wp-block-heading">Considering Sellling</h3>



While stocks trading below enterprise value can present attractive opportunities, there are circumstances when it may be wise to consider selling.



Fundamental Deterioration: If a company&#8217;s underlying financials are weakening, for example, declining sales, increasing debt levels, or increased costs of doing business could indicate a problem. It is important to evaluate whether the company&#8217;s operational challenges are likely to persist, as this could impact its ability to sustain value.



Industry Decline or Structural Issues: Some companies trade below enterprise value due to broader industry decline or structural issues specific to the company. If the industry&#8217;s prospects are exoeriencing prolonged weakening, or the company faces inherent challenges that limit its growth potential, it may be prudent to sell the stock, even if it appears undervalued based on enterprise value alone.







<h3 class="wp-block-heading">Take Away</h3>



Understanding enterprise value and using it while sifting through <a href="https://www.channelchek.com/news-channel/valuing-a-stock-can-you-determine-its-true-worth" target="_blank" rel="noreferrer noopener">opportunities</a> could help bring stocks to the surface that one may not have considered.  



Using EV as an evaluation tool is not a slam dunk, if investing was that easy we’d all be wealthier. However it is a good starting point to <a href="https://www.channelchek.com/news-channel/the-reasons-veteran-investors-are-now-eying-small-cap-stocks" target="_blank" rel="noreferrer noopener">isolate stocks</a> and then evaluate why they may be trading below EV. Is it warranted, is it unwarranted?



Let Channelchek be your data source for small and microcap stocks, many of which can be found to be trading below enterprise value. Sign-up for a no-cost account and gain access to information to over 6,000 less talked about companies as well as insightful daily emails.



<a href="mailto:phoffman@channelchek.com">Paul Hoffman</a>



Managing Editor, Channelchek



Sources







<a href="https://www.investopedia.com/terms/e/enterprisevalue.asp">https://www.investopedia.com/terms/e/enterprisevalue.asp</a>

Why Some Investors Evaluate a Stock Using Enterprise Value vs. Market Cap







Stock selection between different companies is always an apples to oranges comparison – even when the companies are in the same industry. But uncovering comparative value among the universe of stocks and other investment options is fundamental to successful investing. So successful stock market investors must sift for certain criteria, these filters are often financial measures. While data such as Earnings Per Share and P/E ratio get a  lot of attention, other metrics may help investors sort and filter to create their watch list, as some companies move toward the investor&#8217;s buy list. One of these is Enterprise Value in comparison to Market Capitalization.







Understanding Enterprise Value



Enterprise value (EV) is the total value of a company, defined in terms of its financing. It includes the current market capitalization (share price x shares outstanding) and compares it to the cost to pay off debt, then adds in asset values. The below calculation results in establishing &nbsp;the company’s enterprise value, indicating what one might think should be the minimum needed to buy the company.



EV=Market Cap+Debt-Cash



The result can be thought of as the potential cost to acquire a business based on the company’s capital structure. As a concept, enterprise value gives you a realistic starting point for what one would need to spend to acquire a public company outright.  In reality, it typically takes a premium to EV for an acquisition offer to be accepted.







Trading Below Enterprise Value



When a company is trading below its enterprise value, it suggests that the market is valuing the company at a price lower than what its underlying assets would be worth if sold separately. In some circumstances, This situation presents investors with potential opportunities and indicates that further research and investigation may be prudent.



A popular example of a company that has traded below EV, or less than the net of its assets and debt, is Apple. The company has had on its books massive amounts of cash, along with longer-term assets, the value less any debt is higher than the market cap (Outstanding Shares x Price Per Share). 







Looking for Potential Buys



There are times when it may be worth considering an investment in a company that is trading below its enterprise value:



Temporary Market Pessimism: Companies may experience short-term setbacks, negative market sentiment, or sector-wide pessimism that leads to their stock price trading below enterprise value. It is important to assess whether the company&#8217;s fundamental strengths remain intact despite these challenges. If the negative sentiment appears temporary and the company is expected to rebound, it could be a window of opportunity.



Mispricing and Market Inefficiencies: The stock market is less than perfectly efficient, and mispricings do occur. Investors who identify stocks trading below enterprise value due to market inefficiencies can potentially capitalize on these pricing discrepancies. The investor may have to roll up their sleeves to do more analysis to determine whether the undervaluation is based on actual fundamental weaknesses or if it is a result of temporary market inefficiencies.



Asset-Rich Companies: Companies with significant tangible or intangible assets, such as real estate, patents, or intellectual property, may trade below enterprise value. Investors may find these stocks attractive as the underlying assets can provide a margin of safety and potential upside. Assessing the value and potential monetization of these assets is crucial before considering an investment.



In the case of Apple above, cash is easier to evaluate than real estate, patents, or other assets.







Considering Sellling



While stocks trading below enterprise value can present attractive opportunities, there are circumstances when it may be wise to consider selling.



Fundamental Deterioration: If a company&#8217;s underlying financials are weakening, for example, declining sales, increasing debt levels, or increased costs of doing business could indicate a problem. It is important to evaluate whether the company&#8217;s operational challenges are likely to persist, as this could impact its ability to sustain value.



Industry Decline or Structural Issues: Some companies trade below enterprise value due to broader industry decline or structural issues specific to the company. If the industry&#8217;s prospects are exoeriencing prolonged weakening, or the company faces inherent challenges that limit its growth potential, it may be prudent to sell the stock, even if it appears undervalued based on enterprise value alone.







Take Away



Understanding enterprise value and using it while sifting through opportunities could help bring stocks to the surface that one may not have considered.  



Using EV as an evaluation tool is not a slam dunk, if investing was that easy we’d all be wealthier. However it is a good starting point to isolate stocks and then evaluate why they may be trading below EV. Is it warranted, is it unwarranted?



Let Channelchek be your data source for small and microcap stocks, many of which can be found to be trading below enterprise value. Sign-up for a no-cost account and gain access to information to over 6,000 less talked about companies as well as insightful daily emails.



Paul Hoffman



Managing Editor, Channelchek



Sources







https://www.investopedia.com/terms/e/enterprisevalue.asp