LG; Another twist on the S&P500 index, I'v come into it looking
at the new Sector SPDRs, comparing their weights and all to
S&P weights, ever looking for that edge.
Now I know why very few funds can beat the S&P..by accident I said
well what would have happened if I bought every stock in the SPX
OCT 30th, wouldn't I be up just like the S&P, ? Heck no I wouldn't
I would be most 4% behind the S&P even if I had bought every stock
in it at exactly the percent they had.
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It's enhanced by the market cap trick, the gainers gained 13%
the losers lost 18% ( and that's not counting the 4 that got
kicked out ouch ) ..well index tracking funds buy more of the
gainers and sell more of the losers, every day..and the market
cap trick , is thus the losers effect the index less than the
winners, as the index is re-weighted dynamically and
hence the more a stock goes down the less percentage weight it
carries, ah but the runners get more percentage of weight
allocated to them..hence they effect it more and more and as the
losers effect it less and less..
Smoke and mirrors for the public..they see the index up and think
stocks are hot..and some are, but not as many are as hot as the
index lets you believe, or as much..and the losers now that's
another story..no wonder they say buy an index fund..a persons
odds of beating the index just trading are less than 20 to 1.
The indexers are tracking it on the fly, with a computer tossing
basket orders against the futures, and super cheap trading cost,
no way the average individual can match them, just trading stocks.
I know we on this theard are all above average though <G>
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Since OCT 30 I find only 330 winners out of the 500,
with an average win of 13.7% , But the 178 losers LOST 18.1%
one was dead even.. the index moves up over 10%..but the net
gain on the stocks in it is only 6.2%.. cap wise
well that's good , but what I'm saying is it's not as good as
the index would have you thinking.
it's in the weighting and it was invented to sell stocks,
& not to tell you what the market is really doing.
I suspected this all along, but now I see it with me own eyes
the winners don't just push the index up in the percentage they gain,
they push the index as they are given more effect, while the
losers have the ability to effect the index removed from them,
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If they were Dollar weighted instead of CAP weighted then each
stock would effect the index relative to it's own percentage move,
up or down, and the index would better reflect the over all health
of the stocks in it.
Last the average share was 44.31 in OCT,, it's now 47.30
which gives a better result than adding up the market cap,
but that may have to do with the 4 they kicked out, as I didn't
run them in the new price and they would have dropped it some.
I have it showing a average div yield of 1.677..and a P/E of
38.82 if I don't count all the N/As or negative ones
at best that equates to a 2.57% interest rate and with the div
it would equal about 4.24 % yield on the bond, with the bond
back up to 5.24% the market would have to drop the price to
about a $38 average be fair value. or drop about 20%.
Again that's not counting the negative P/Es.
Merry Christmas
Jim
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