Parity no one-way bet With the Federal Reserve about to finally hike interest rates and the ECB expected to announce further easing measures in Europe, it's easy to see why there's much talk about the euro potentially hitting parity with the dollar. However, this is no one-way bet.

Yes, a US rate-hike looks likely. The minutes from the Fed’s October meeting, released last week, show “most” Fed members felt conditions for a rate hike “could well be met” by December. Merrill Lynch’s latest fund manager survey shows 81 per cent of money managers expect a rate increase, up from 47 per cent last month. This about-turn in sentiment has resulted in the euro plunging from $1.14 to $1.06 since mid-October, with two-thirds of managers expecting further dollar gains next year.

However, are investors too bullish on the dollar? Merrill says the “long dollar” bet is easily the most crowded in global markets; with everyone positioned the same way, the greenback is vulnerable to a counter-trend correction.

Indeed, history shows markets tend to respond in a counter-intuitive manner to rate hikes. During each of the four tightening cycles since 1990, the dollar actually fell over the 100 days following the first rate hike.

The euro may eventually hit parity with the dollar, but market positioning and history suggest the short-term reaction to a December rate hike may well be another case of "buy the rumour, sell the news". CFOs should avoid golf course Beware golf-playing chief financial officers (CFOs). According to a new study, Chipping Away at Financial Reporting Quality, CFOs who spent more time on the golf course produced inferior reports characterised by more accrual errors and unexplained audit fees. Conference calls were shorter with a "more uncertain tone", while both investors and analysts had less confidence in the figures produced by the golfing CFOs.

This isn’t the first such study. Last year, StockTake reported on another paper, Fore! An Analysis of CEO Shirking, which came to similar conclusions.

The explanation is an obvious one; all that time on the golf course means time away from the boardroom. Golfing CFOs, it seems, may not be “putting in the effort required”.

Fickle fund managers Whatever about the dollar, Merrill's fund manager survey is a reminder of how fickle money managers can be towards equities.

Allocations towards equities have jumped to their highest level in six months, the survey shows. Now, bullishness is not excessive – cash allocations remain relatively high, potentially fuelling further gains – but the picture is nevertheless very different to September.

Then, cash levels hit seven-year highs; equity allocations plunged to three-year lows following the biggest monthly drop in four years; hedge funds, too, bailed out, lowering their asset exposure to their lowest level since 2012.

It’s the same old story, one you’ll see at every market bottom; fund managers are just as panicky as novice investors, and are all too fast to adopt a “sell first, think later” approach. All too often, the “smart money” set can be pretty dumb.

Who cares about low fees? The biggest determinant of investing success is fees – quite simply, the more you pay, the lower your returns are likely to be.

Unfortunately, a new Morningstar report suggests investors in Europe either don’t know this or don’t care.

The report found US investors “strongly prefer” cheaper funds. Over the last decade, much more money has flowed into passive funds than into active funds, which are invariably more expensive. As for the money that has made its way into active funds, 95 per cent of net new inflows have gone to funds in the cheapest quintile. This low-cost focus has helped drive down average investments costs.

The preference for low-cost funds is “virtually non-existent” outside the US, however, with European investors “especially agnostic” on the matter.

Why? Well, there has been a big move away from commission-based financial models to fee-based models in the US; things are different in Europe, where most people buy funds via their bank or insurer.

Additionally, the fact that academic researchers invariably stress the importance of a passive, low-cost investing approach is now routinely stressed by the US financial media; that is not the case on this side of the pond.

Whatever the reason, investors need to wise up to the fact that high fees mean lower returns.