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Strategies & Market Trends : Waiting for the big Kahuna
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To: J.T. who wrote (1376)6/25/1997 12:09:00 AM
From: Triffin   of 94695
 
Observations of a whipsawed trader..

Everyone "knows" passive indexers beat 90% of active managers
over time..so most money going into index funds..managers have
no choice but to own same stocks..active managers performance
bogey is same index ( which most can't beat )and therefore
end up owning same names to ensure some tracking co-efficient..

Big index funds Know by 1:00 PM how much new $$..have to
credit investors with closing NAV..so instead of buying
stocks they buy S&P 500 futures in SIZE..pushing premiums
beyond fair value and keeping it there...in come the arb boys
who create synthetic t-bill yields by selling S&P futures to
VANGUARD/FIDELITY/ etc and simultaneously buying the component
stocks to complete their trade..a trader who plays the index
arb game locked up 30 million $$$ above capital costs today alone
doing this....and merrily we go along..

No Kahuna until the music stops...what turns off the money
spigot??????
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