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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: marc ultra who wrote (1740)10/24/1998 1:30:00 AM
From: marc ultra  Read Replies (3) of 15132
 
weekly impressions and musings.

Issue 1, small caps. Russell 2000 index fund up 7.03% this week vs 1.35% for index S&P500 fund! This is getting to be awfully convincing and was even up today with other major indexes down. I have seen the argument most recently in current smartmoney.com about reasons why small caps won't start moving in particular the story goes that funds won't buy them for liquidity reasons. After 33 seconds of deep reflection I am declaring this argument bogus and here's why. Yes its true Magellan can't reasonably buy a small or micro cap stock but what about all these funds with the name small cap and microcap in their name or charter. They are going to continue buying small caps as always, the only thing that will determine buying pressure is the amount of new money flowing into these funds which need to be invested and if small caps are moving and outperforming the families are always happy to open up new funds. To make sure investors get the message if necessary we will see The ITSY BITSY TEENY WEENY FUND which will be aimed at older baby boomers reminiscing about bikini songs. So if small cap stocks continue to outperform, the small cap funds will start getting a greater proportion of money and big cap fund holders including S&P500 Index fund holders will want to chase performance after awhile and will start moving money to small cap funds also easily done in 401k's and this will lead to a virtuous cycle of small cap performance. It sounds to me like some people on this thread including myself have started to shift money to small caps already. One caveat, I recall a number of years ago I got caught up in this and dumped my 500 fund for small or managed funds and of course shortly after this the 500 ruled for many years making me feel like a jerk.

Issue2) semi equipment stocks. Since just Oct 8th all the major stocks seem up 50%+, thank you Bob Brinker. Justa and other experts out there do you think we're due for a nasty correction on our way up. I know these moves can be huge but how long can this go on without a major correction and considering there is only a suggestion of an industry turn in the future. I have to wait until early Nov until I can sell some high basis NVLS at a small loss, this thing could be up or down 10 points by then. Thanks

Marc

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