Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Christine Traut who wrote (33769)	11/19/1999 4:06:00 PM
From: j.o.	Read Replies (2) \| Respond to of 99985

Ohhhh boy. Plenty of fertile ground here for thought. I think that the piece Daniel Akst has written is evidence of the fact that he has never worked in an investment bank. <gggg> I could be wrong...but it was my immediate reaction. There will always be an extraordinary incentive for professional, well-informed investors to use their superior resources in order to make massive, valuation-changing bets in the market. These people (and I know a few of them...perhaps too many <gggg>) work long, hard, hours consulting company numbers, speaking with management, and generally working very hard to figure out which stocks are going to be winners and which will be losers. These analysts have massive insurance companies, mutual funds, banks, and the like behind them - institutions who are able to throw considerable weight behind the eventual decision. If such a company does indeed outperform, then the payoff to the institution and analyst (over time) will be truly enormous. It is in the hopes of such bonanzas that Wall Street employs an inordinate number of analysts - who usually (perhaps here is the 'evil' hand leading the flock) crowd around a common consensus for each stock. But since $100m positions in a given company create $1m in value for every percentage point of outperformance, the research from which we all benefit quickly becomes an almost incidental cost. So - first point is that the perceived 'tragedy of the commons' has no danger of striking Wall Street. It simply doesn't apply. Indeed, the average salaries of good analysts keep rising - clear empirical evidence that the increasing trend toward 'indexing' is not having the prophesied 'ill effects'. Second of all - it appears that the author would appeal to each 'retail' investor to make up their own minds about 1,000's of stocks on their own? In the face of heavily over-(and sometimes insider-)informed investment banks? This is a good opportunity for another 'sheep' saying...namely lambs to the slaughter. It is simply playing into the hands of the investment banks to make the small investor try to compete in 'stock-picking'. Regardless of the claims of the online brokers, the average investor does not have the time or resources to compete. Therefore the economically best choice is simply to decide 'in or out?', and Trade the Index to realize the exposure (on a macro-level, where they have sufficient information regarding the state of their own economic situation and that of their environment) that they wish to have. The 'bubble' is a whole new topic...I'll let someone else cover that. Briefly, I think that the rampant bullishness/speculation in MSFT stock is the reason for it's high weighting, as opposed to 'indexing' driving up one individual stock. That would be counter-intuitive. If everyone indexes, such 'gems' as MSFT would never have the chance to outperform...as their stellar numbers would (according to the 'evil' theory) never get noticed. That's my two cents on it <ggg> Ok...kind of turned into 4-5 cents. I hope that this helps - in any case, as you can see by our website, we feel strongly about the advantages to the individual of using indexes to quickly gain or modify their market exposure. Regards, j.o. indextrade.com

To: Christine Traut who wrote (33769)	11/19/1999 5:52:00 PM
From: HairBall	Respond to of 99985

Christine Traut: Thanks for the contribution and welcome to MDA. Regards, LG

To: Christine Traut who wrote (33769)	11/19/1999 11:16:00 PM
From: Dwight E. Karlsen	Read Replies (1) \| Respond to of 99985

Christine, re "I read on the Microsoft accounting protest site that MSFT's market weighting on the S&P is close to 40%." I would rely more on Standard & Poors own web site, which states that as of Oct. 29th 1999, MSFT accounts for 4.24% of the S&P 500: under "The top 10 issues by market value at October 29, 1999 were:" Microsoft Corp rank 1 Mkt value (millions) $475,898 % of index 4.24 Further, we see that the top 10 issues in terms of market cap altogether account for 23.13% of the S&P 500. It is most interesting to me though, that these same top 10 issues increased by an average of 29.2% ytd as of Nov. 1, 1999. There are a lot more statistics about the S&P 500 at the page I got these stats from: spglobal.com Regards