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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: bozwood who wrote (1182)	10/1/2003 4:06:28 PM
From: el_gaviero	Read Replies (1) \| Respond to of 110194

Bozwood, you take this stuff too seriously. I thought Russ asked a good question. A basic one, a simple one, but a good one. Why is the market so high? (“Why are people not stampeding for the exists.”) I’ve been wondering the same thing myself. The answer that I have entertained in the privacy of my own head turns on patterns of ownership. All those mutual fund guys out there. You have to look at them. You have to get inside THEIR heads and think about the problems they face. Take a stock, CREE for example, which I pick at random. (((((I run over to Yahoo, look up the numbers. CREE has a PE = 41. Percent of shares held by institutions and mutual funds = 95. Percent of float held by institutions and mutual funds = 99. One particular larger owner: Oppenheimer funds, 4.6 million shares,6% )))))) CREE. Hum. Let’s assume that I am making decisions at Oppenheimer and have doubts about CREE. Can I dump 6% on the market? No, I can’t. What I’ve got to do is find somebody who will buy CREE in blocks of hundreds of thousands --- i.e. some other mutual fund or institutional guy. Suppose that I helped somebody at Fidelity last month, by buying a few hundred thousand shares of XYZ. He owes me a favor. I call him up. Now, Bozwood, are you telling me that these kind of transactions and these kind of mental processes and this kind of mutual assistance doesn’t go on? I don’t know whether it does or not. I offer my musing as a hypothesis that explains the quite remarkable stability of the stock market over the last three years. It all turns on patterns of ownership --- “mutual fund guys” --- who know that putting blocks of 4 million shares on the market will not help their cause. If the market does crack, I predict that the decline will be fast and furious. The reason I make this prediction: the market will not crack until “mutual fund guys” crack.