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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Math Junkie who wrote (15479)	12/18/2001 4:00:07 PM
From: Math Junkie	Respond to of 42834

I saw an interesting discussion of the potential consequences of periodic index reweighting for people who are holding the NASDAQ 100 for eventual recovery. It starts here: Message 16675329 "I think QQQ holders get screwed when the NDX 100 is reweighted. Because the reweighting is by market cap, the real dogs get to devalue the NDX on the way down, but when they get taken out, their weighting is so insignificant that it gives the index no benefit, instead getting replaced by some other stock that has a large market cap, and by implication has already done a substantial amount of the appreciation outside of the index. It is kind of like an index always composed of last year's winners."

To: Math Junkie who wrote (15479)	12/18/2001 4:14:55 PM
From: geode00	Read Replies (1) \| Respond to of 42834

Buffet gives speeches about market outlook. I don't follow him that closely (not a shareholder although that would have been nice) but I doubt he shares strategic plans with the general public. That would be a huge disservice to his company. Consider the consequences of actually being able to time the market accurately even most of the time. You could take, say $100K or even $10K and make a fortune moving in and out of the market (using volatile stocks and funds) in just a few years or even months. Why bother selling that information and having all the overhead associated with customers? That would eat into your market timing time and probably reduce your returns. In fact, if your market timing results were that great, others in the market would hear about it, move with you and then your outsized returns would disappear as well. It just doesn't make sense. I surmise that Bob didn't say to put equity money into bonds because: 1. He thought in January 2000 that the biggest problem with the economy continuing its merry way was the lack of skilled labor. 2. He didn't think rates were going to come down then. 3. He thought the correction would be sharp but that there would be money making opportunities in equities and that placing money into bonds would risk capital. I don't think he thought the downturn would be this severe, this long lasting or that rates would reach these levels. Since he's asset allocating like everyone else, he's taking outsized credit IMO for the Ginne Mae's that are returning gobs of capital appreciation as well as income returns as rates plummet to around 40 year lows. He didn't predict it, in fact I think he predicted quite a different scenario. It may also explain partly (though not wholly) why he made such a massive bet on the QQQs. If the trade went awry, they would become an investment but the bear market wouldn't be so severe or so long lasting as to make them dead money for so long. It would have been a lost opportunity but I doubt seriously if he thought they would lose 70% of their value when he suggested them. Regardless of what he says, I don't think he had a clue as to how this bear market would play out. I don't think anyone has a clue as to whether this is a CTR, a baby bull or something entirely different. Don't know these guys, but those are pretty nice returns: cbs.marketwatch.com "Hulbert's top total-return newsletter, through November, for the past 10 and 20 years is California-based The Prudent Speculator. Of 64 newsletters ranked by Hulbert, Al Frank's Prudent Speculator tops the list with a 29.8 percent yearly return in the 10-year category and 17.9 percent return in the 20-year category."

To: Math Junkie who wrote (15479)	12/18/2001 7:18:01 PM
From: Kirk ©	Respond to of 42834

I, too, have wondered why he didn't advocate increasing bond allocation when prices were low. He thought rates were going higher and that inflation would be a problem due to a lack of skilled workers, etc. Go back and read the Jan 00 MT... it is spelled out right there in the 5 reasons for a bear market (Tight money, rising rates, high inflation, rapid growth and over valuation.) He says, among other things, the feds would raise rates to kill growth and we'd get a recession. What actually happened is their was a perfect storm of Y2K buying of computers and upgrades in 1999 AND a telecom bubble where more telecom capacity was built than needed. Add to that the internet bubble where the dot.bombs were buying technology with investor dollars and you had companies adding more capacity as if this demand would continue. When companies were saturated with new technology, they had little reason to buy more and the Nasdaq growth numbers collapsed. This started the dot.bombs to crater and their routers, PCs, etc hit the market at pennies on the dollar and there was really no reason to buy new stuff when you could find new Sun servers and Cisco routers unopened in failed dot.bombs. We got deflation in tech prices rather than inflation he predicted. I remember buying 128Meg of memory in August of 2000 from Dell for $220. I think I can buy it now at Frys for $20 or so. This is a crash far more than explained by Moore's law. The collapse really had little to do with the Fed other than the fed made it easier for investors to pump up the telecom and dot.com bubbles and that is why the lowering of rates hasn't turned the economy as we really need to use up the inventory then fill capacity before companies buy new capital equipment. Now we have the inventory pretty much in balance and some capacity is being used, but it could be some time before we need more capacity hence layoffs at AMAT, etc.. He got the market reallocation call right but for the wrong reasons.