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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: marc ultra who wrote (4248)4/3/1999 9:29:00 PM
From: Justa Werkenstiff  Read Replies (1) of 15132
 
Marc; Yes, Biderman seems to take the opposite scenario -- small caps will catch up to the large caps. I would give that scenario a higher probability but for the high sentiment indicators. I mean, if people are so wildly enthusiastic about stocks as evident by Brinker's sentiment indicators, why hasn't it carried over to the small caps by now?

I would like to see a study to show the sentiment indicators graphed with the performance of the small caps to see if there was ever another time when people were highly bullish but with the small caps underperforming in the flat to negative zone. I would doubt that there is any other time in recent history when this has been the case. The whole thing is a huge enigma.

And the liquidity argument by itself does not work for me anymore. I will add the laziness argument to the mix. I think the institutions are too damn lazy now to go down the capitalization chain. The large companies spoon feed the analysts. There is no need for them to do independent research if that is their choice. When I went to a recent analyst meeting, two analysts from the same firm were talking. One wanted the other to take over research on a smaller cap company for her. Why? She did not "have the time" to do the research on the smaller company. Too much work; not enough time. Yeah, sure, if the stock was performing that analyst would be making the time to cover it.

And then there is the performance chaser argument. Why else has AOL drawn so much institutional money the past month? It was the top performer for the quarter in the large cap arena. Gotta have it say the big boys no matter what the cost. Biriyni loves it for that reason alone -- the money flow. Yeah, these guys are all over the TV saying that the internet is a bubble while they are buying AOL like it is heyidiot.com. And tell me that the correction this past fall and the rocket ship recovery has not made momentum investors and performance chasers out of all of them? It did not pay to be cautious after October 8th and these guys have been playing catch up ever since. Too bad they have not stopped to check their valuation meters now.

THE LIQUIDITY ARGUMENT FAILS BECAUSE IT IS CIRCULAR. THE WALL STREET BRAINS SAY THE SMALL CAPS LACK LIQUIDITY WHICH THE LARGE CAPS HAVE IN SPADES. DUH? WHEN IN HISTORY HAS THIS BEEN A HUGE CONCERN? IT IS LIKE SAYING ONE DOES NOT LIKE SMALL CAPS BECAUSE THEY ARE NOT LARGE CAPS. DUH AGAIN? I THINK IT IS MORE ACCURATE TO SAY THAT INVESTORS AND PORTFOLIO MANAGERS DON'T LIKE SMALL CAPS BECASUE THEY HAVE NOT PERFROMED AS WELL AS LARGE CAPS OF LATE; THAT IS, THEY DON'T LIKE SMALL CAPS BECAUSE THEY ARE NOT LARGE CAPS. THE LIQUIDTY ARGUMENT IS JUST AN AD HOC RATIONALIZATION FOR THE OBVIOUS PERFORMANCE CHASING MOTIVATION UNDERLYING THE LIQUIDITY ARGUMENT. ONE MUST REALLY EXAMINE THIS LIQUIDITY ARGUMENT. HAS ANYONE EVER HEARD ANY MEDIA PUNDIT DIG A LITTLE INTO THIS LIQUIDITY ARGUMENT? NOT ME. THEY ACCEPT IT AT FACE VALUE. WHAT A JOKE.

HERE IS A LITTLE TEST FOR THE TRUTH. DURING THE GREAT SMALL CAP RUNS EARLY IN THIS DECADE, CAN ANYONE EVER RECALL ANY PORTFOLIO MANAGER MISSING THE OUTPERFORMANCE PERIOD BECAUSE THEY WERE CONCERNED ABOUT LIQUIDITY? HELL, NO. THEY WERE TOO BUSY PILING IN TO CARE.

Woops, sorry for shouting <g>. I do not know about anyone else on this thread, but while acknowledging that the S & P 500 is diversified and has many fairly valued companies, the thought of going into an S & P index fund now and paying one dime for silly multiple stocks makes me ill.
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