Horizon Kinetics Third Quarter Commentary
Prices in the marketplace are made by the marginal, or last, buyers or sellers—it's not the 99%+ of Apple (AAPL)'s shareholders who determine its price, but the net buying or selling pressure of the fractional percent who are transacting on a given day. It's certainly not us: we've been accused of harboring really long-term holding periods—years and even decades. Granted, we inhabit one end of the spectrum. So, here are some recognizable benchmarks: the annual turnover rate for IBM (IBM)(the proportion of its outstanding shares traded each year) is about 83%; the figure for ExxonMobil (XOM) is 68%. The average mutual fund has 68% annual turnover.
Now, for two of the most popular exchange-traded funds (ETFs), the large-company SPDR S&P 500 Index ETF and the iShares Russell 2000 Index ETF, which is supposed to provide exposure to small company stocks, their annualized turnover, respectively, is 3,309% and 3,340%! Yes, I said 3,340%! The average holding period is measured in days.
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