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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 659.03

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Nov 21 4:00 PM EST

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To: Benkea who wrote (41389)	2/25/2000 8:49:00 PM
From: Kip518	Read Replies (2) of 99985

Favors said something about this time being different than any other time in the last 20 years. One thing that is very different this time is the contribution of index fund selling in a down market. Index funds didn't exist in 1987 or during any prior bear market. They maintain no cash for redemptions and meet redemptions by selling stocks. While many market-attentive folks and some institutions have begun to sell their index funds to move into techs, this selling is nothing compared to the waterfall that is likely to come if (when) endowments, trusts, retirements funds, etc. see the mainstay in their assets begin to melt away. Index funds are the nukes for this market. While they may attempt to stop the bleeding by distributing stock for redemptions rather than cash (as all mutual funds are entitled and likely to do as the market becomes increasingly illiquid), that will only add to the panic. Got to be a lot of loose bowels among the index fund managers (and some bigtime owners) this weekend.

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