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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Jerry Olson who wrote (33155)	9/15/2000 2:36:09 PM
From: Jeff Jordan	Read Replies (1) \| Respond to of 50167

yep...not good! Is this getting old or what<g>

To: Jerry Olson who wrote (33155)	9/15/2000 2:38:05 PM
From: PMG	Read Replies (1) \| Respond to of 50167

hmm...thanks for warning me...

To: Jerry Olson who wrote (33155)	9/17/2000 10:08:41 PM
From: Jeff Jordan	Respond to of 50167

stocks.about.com Here are a few quotes from the above article written December 31, 1998, and what was true then appears true today. I thought appropriate reading after some rebalancing and reweighting of the SP500 on the close Friday. As you know I place great faith in the index as a barometer of the market, if not the sentiment of institutional money that really makes the market IMO. "the capacity of most people to find comfort when following the crowd toward the speculative frenzy of the moment." The idea lives on today! a discussion of how the most common market averages have now become extraordinary popular illusions by creating a common perception of market levels and trends that do not always square with reality. Beating The Market, The average stock is not the stock averages, and beating the market is not the same as beating the market averages. The 500 is calculated as a capitalization-weighted index. This means that it does not measure the market price of individual shares, but rather the market value of the entire body of shares outstanding for each company. While this method results in an index that includes a big chunk of the total capitalization of the equity sector of our economy, which is good in one sense, it also creates an index that is skewed drastically towards relatively few corporate behemoths. Thus, share price movements of a small percentage of companies in the index often end up controlling the index itself. It’s not the Price, it’s the Weight Just how seriously skewed the 500 has become is illustrated by the fact that at the end of December, 1998 the top 50 companies, just 10% of the total, accounted for 54.83% of the weight of the index. In other words, a situation could exist whereby 50 companies were up, 450 were down--a ratio of 9 to 1-- and yet the index would tell us the market was up. In the same way they think about the Dow, the public thinks that the 500 is a depiction of a real world market portfolio of 500 stocks, and here again the index doesn’t square with reality. Most of the trading activity in our markets today is on the part of institutions. In effect, these institutions are the market, yet most cannot beat the market averages, because the market averages overstate reality and have a positive bias. The Dow and the S&P 500 are not the only questionable market indexes, but they are the most popular and therefore may tend to generate the greatest amount of confusion. One thing is very clear: However you wish to measure or index the market, we have been involved in a very strong bull market for many years.