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Strategies & Market Trends : Nasdaq 100 Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (5)	11/18/2001 1:49:32 PM
From: Steve Lee	Read Replies (1) \| Respond to of 238

My point is they are not "declining" market caps, but already "declined". For example, the last two companies to leave the index, were 0.03% and 0.01% of total weighting (EXDS & ATHM). The QQQ holders had already taken their loss as EXDS and ATHM declined out of the high market cap bracket, but don't get to participate in the fortunes of the new components, until those new components have already had enough great growth to have high market caps. The replacements were GILD & ADRX at 0.58% and 0.39% weightings respectively. So QQQ trustee gets "nothing" for selling the outgoing components, yet has to pay for the incoming ones. This cost comes out of QQQ equity. i.e the trustee has to sell a few shares of MSFT, INTC, CSCO etc in order to afford the GILD and ADRX. And they have to pay for it in the first 3 days of it being added to the index. Additionally, the trustee for QQQ often gets to buy the new components at a price higher than the "normal" price. They have to bid the stock up as there is a limited time window in which to buy the stock into the fund. Over time, the ratio of the QQQ price to the NDX 100 index price decreases due to these inefficiencies as well as management costs. If you look at the chart of GILD and ADRX around October 4, you can literally see the QQQ holders getting "screwed" <g>