CFA Practice Question
Which of the following is NOT a smart money indicator?
A. Brokerage accounts debit balances
B. Treasury bill and euro-dollar spread, or Barron's confidence index
C. Brokerage account credit balances
Explanation: Debit balances reflect margin borrowing and such account holders are assumed to be smart investors. An increase is a bullish signal and vice-versa. Credit balances pertain to investors who make cash trades and are not considered to be knowledgeable or a part of "smart money."
User Contributed Comments 3
| User | Comment |
|---|---|
| uberstyle | why is B considered 'smart money'? |
| steved333 | My understanding is that only sophisticated investors deal with Eurodollars. If there is activity b/w domestic and foreign investments like that, then sophisticated folks are moving money. Therefore, it's "smart money" since "smart" investors are causing it to happen... |
| santibanez | If the T bill-deposit spread widens more risk is perceived (increasing demand for and price of treasuries and/or demanding higher interest rate on loans) being a bearish signal. The opposite is true. When the spread narrows the market is bullish |