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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: wooden ships who wrote (521)5/18/1997 9:07:00 AM
From: Scott D.   of 42834
 
"Touted the virtues of the Vanguard 500 index
fund (modeled after the S&P 500) to the ends
of the earth".

I think Bob is wrong here. If everybody buys
the index, the index will keep going up, and
everybody will make money. This sounds too
much like a pyrimid scheme to me. The earnings
of the index might not be able to keep up with
the price, and the smart money will leave.
Especially if capital gain tax relief happens.
Who will rush in to take advantage of an S&P
500 bargain if they have no non-S&P assets to
sell to raise the money? Bob is breaking his
diversification rule here. With more and more
money in these stocks as an index, the index
will move more like a single stock. I bet in
2 or 3 years, this index will be out of favor.
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