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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: pater tenebrarum who wrote (103035)5/17/2001 4:41:09 PM
From: RocketMan  Read Replies (1) of 436258
 
I wonder how much of the market's action is the Index effect? Vanguard's Index 500 by itself has 75B in assets, and a stream of buy and hold mindless money pouring in every month that has to follow that index. Multiply that by dozens of other index holdings, that pay no mind to valuation, and you have the fuel for indices that go up regardless of fundamentals. Following this money flow are the traders, who pile on when the mo is going their way, or pull out when reverses happen, which gives us the volatility we've seen. When enough trader money pours out, you get the reverse index effect we had a couple of months ago, and even some net outflows, but unless and until there is panic in the streets the major indices will flourish. I don't count the Dung as a major index, that is primarily a trader's index without enough institutional indexing, so when it goes it dumps big.

We don't care p/e anymore, indices are blind to p/e.
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