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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Rarebird who wrote (50491)	3/23/2001 3:15:58 AM
From: jimleon	Read Replies (1) \| Respond to of 94695

Hi all, is there an index on nasdaq that has a large number value to it- the problem with qqq index options at 40 is you need to write 20-30 and my broker is chargin $70 for 20 options. I prefer to deal with 3-5 options than 20-30 options . Is there any index out there one can use for trading? Jim

To: Rarebird who wrote (50491)	3/23/2001 9:30:22 AM
From: Oeconomicus	Read Replies (1) \| Respond to of 94695

Re the "SCFA", I agree - it was bunk then and is now. I also think the popularity of index funds contributed to the concentration of money flows into a relative few stocks, pumping their mkt caps and, therefore, their index weightings - a self reinforcing phenomenon where new money was forced to buy the same few stocks. The result? MSFT, CSCO, ORCL, INTL and other mega-caps got pushed to ever higher and unsustainable PEs. Well, we now know that money can actually flow out of funds. Guess what gets sold - the stocks that, by default, made up the largest portions of indexers' and closet indexers' portfolios. That said, just as it was bunk to argue money would always flow in, it is bunk to assume that, now that it is flowing out, it won't reverse again. The fact is people do save money - for retirement, for kids' educations, for a rainy day - and defined contribution plans are a common and easy way to do it (at least for the retirement needs). This isn't going to stop. People may get more conservative in the funds they choose for a while, but most, IMO, will stick with what they've been taught - that stocks are the best place for the long-term. Shorter-term savings will likely stay in MMFs and banks where they should be, and some scared investors will behave as they did between '74 and '83 - not trusting anything but "guaranteed" investments like CDs, but that's actually a good thing. We are very unlikely to get bubble mentality going again for a long, long time. Speaking of the post '74 bear market years, lots of money was made by active managers - particularly growth and value investors - during that period even though the indexes moved mostly sideways. Perhaps the collapse of the mega-cap, high PE "leaders" of the latest, but now-dead bull will lead to a better environment for small and mid-cap value and growth investment. In that environment, I don't really care what the Naz does or what it's PE is because I'm not buying the Naz - I'm buying individual companies. BTW, I think you are wrong in concluding that the Feb-to-yesterday, post-initial rate cuts, market reaction means we are headed for a Japan or Great Depression scenario. Anybody who expected the market to turn on a dime at the first step of Fed easing was dreaming - bear markets don't end that easily or cleanly. Lastly, I didn't say the "earnings recession" has hit bottom, so save your condescending "what makes you naively think" BS for someone else. My point was that such earnings recessions are not, historically, the time for PEs to contract. It is complete BS to conclude that, because earnings are likely to be flat or down this year, that those earnings deserve a lower valuation multiple than if they were going to be up. Targeting PEs based on current year earnings growth rates is simply idiotic. Oh, and again, there is no magic number for PEG ratios - your one-to-one assumption is arbitrary and meaningless.