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Strategies & Market Trends : Point and Figure Charting

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To: Bwe who wrote (11011)	12/6/1998 8:54:00 AM
From: Mr. BSL	of 34816

Bruce, AMEX Sector SPDR update - This is posted by LARS on the Brinker Thread. * New Sector Index Shares For The AMEX * Omaha World-Herald November 23, 1998 - Expect to see more SPDRs, DIAMONDs and other so-called index shares in 1999 - And also expect many of these index shares on the AMEX to be much more tax efficient then their mutual fund industry friends (per JayBaker VP of Derivative Marketing and Research for the AMEX) - A major firm will introduce about 30 new investments for the AMEX - No one knows the firm yet but the new securities would represent other indexes such as the Russell 2000 and the NASDAQ 100 - There will also be 9 sector SPDRs competing DIRECTLY with Fidelity Select Funds - Investors have poured $11 billion into SPY since they started trading in 1993 - SPDRs are the most actively traded stock on the AMEX and have more daily volume than all but two stocks on the NYSE - DIAMONDs are also among the most actively traded stocks on the AMEX - Baker pointed out SPDRs and other index shares trade throughout the day so investors can get them at market price rather than the end of day price they get with MFs - He also noted the index shares are MUCH MORE tax efficient than regular MFs - The SPDR has distributed 9 cents worth of capital gains in it five years of existence compared with 55 cents distributed by Vanguard Index 500 - Plus the SPDR holds only $1 a share worth of unrealized capital gains, versus the $24 to $28 a share the Vanguard Index 500 currently holds - The real damage is done by capital gains distributions in capital accounts - SPDR makes fewer distributions and has so much less unrealized capital gains because each SPDR share is a piece of a unit investment trust that holds the corresponding stocks - When an investor sells a SPDR share their piece of the trust is sold to someone else - The corresponding stock is NOT sold out of the trust so there is no gain distributed to holders - If their were a big run on SPDRs the trust should still be able to avoid selling shares - If a lot of people wanted to sell traders would buy SPDRs and sell a corresponding amount of futures to hedge against losses so no shares would be sold out of the trust - MFs have to sell shares when they get redemptions and are required to pass on all their gains to shareholders - SPDR has been able to keep unrealized gains lower by passing along many of them to arbitrageurs who are constantly trading the difference between options, futures, indexes and index shares - Baker said they only have $100 million in unrealized gains because they have pushed out the lowest-priced stock - E.G. If an arbitrageur redeems 1 million SPDR shares @ $100, the trust will give him $100 million worth of S&P 500 stocks (the arbitrageur gets the current market price as his cost basis so he doesn't mind taking the shares)

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