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

To: Christine Traut who wrote (33848)	11/21/1999 8:29:00 PM
From: j.o.	Respond to of 99985

OT* Christine, Thank you for bringing up the topic! I have enjoyed giving it some thought with this application of 'tragedy of the commons'...I guess that my background, as an 'arbitrage' and options trader whose job it was to exploit price anomalies, gives me a keen sense of the resources marshalled by banks to (effectively) keep prices in line. My experience is that, where there's 'flow' (i.e. lots of trading and lots of money changing hands) the banks throw even more resources at arbitraging those flows than the flows tend to produce in 'edge'. That's why bank's equity trading profits are very volatile...they end up 'betting' to make their operations profitable. But that's another topic altogether <gggg>. The point is that I think that there is plenty of leverage to go around to balance out any indexing. Again - my background may skew my perception here. The other point is the inefficiency created by the 'visibility' factor. And there you're 100% right. To the extent that certain types of issues are not part of the 'in' crowd, they will tend to suffer disadvantageous valuations - just as many internet companies get silly valuations because they're on the 'right side of the tracks'. Many of them have business plans that would get very far in a high-school small business course <gggg> (IMHO) So no - the market is not yet 'indexing' efficiently...maybe there's room for improvement here. It's certainly got me thinking about ways to leverage this in our business... I'll keep you in touch if I come up with a tangible way of working on this. In a way it's what Abbey Joseph Cohen is addressing when she effectively says 'buy the small caps' - i.e. don't just buy the momentum winners. History tells us that the 'dogs of the Dow' also have their day...over time they've outperformed, I believe. Thanks for the kind comments and do stick around on MDA - there are lots of great posters here, and I can't praise them enough! Regards, j.o. indextrade.com