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

To: wooden ships who wrote (2838)	1/16/1998 9:50:00 AM
From: James F. Hopkins	Read Replies (1) \| Respond to of 42834

HI Truman; Well the sneaky bear market , is a bear market just the same. IF the indexes just hover, and dance around and don't really go up people lose money. (1) Bonds bought back in June, are now worth more than the gains made by the S&P since June. ( Bonds bought back in 1980 at 10 1/2 % have doubled in value every 7.02 years ) that's the 10K=20K=40K=80k kind of doubling; for some reason the pundets never compare the market to "if" you entered bonds at such and such a time. And then pick the high interest rate times as a take off point. --------------------- (2) AS you likely know Less than 15% of Mutual Funds beat the S&P..( and that's in good times right now it's a lot lower, I would say less than 5% are ahead of the S&P since OCT..and the S&P has gone nowhere. Why is it so hard that so few Funds can ever keep up with it, and many fall way behind it ? To start with the S&P is a paper Tiger, it looks a lot better on paper than if you put real money into the same stocks. There is built in Hot air in the S&P and the DOW. As they roll stocks out of the index and bring in new ones , here is what goes unnoticed and the stock experts keep mum about. xyz is rolled out, (because it's a loser ) and a simular priced recent winner is brought it, ( this happens over and over more than people seem to count ) Here is the catch..hot air If I'm buying only S&P stocks, I have to sell the roll out ( at a loss ) and use the money to buy the new one. Every roll out causes me a loss, that then has to be made up for by gains in the S&P. When ever you have a loss, say even 5% it takes a gain of 5.26 % to get back even , these add up ! Over the years if you ( and it does happen suffer 20% losses, the gains have to be 25% to stay even with the S&P. BUT the S&P does not itself factor that in, on paper it just marches ahead and does not allow for the ( loss% takes more gain% ) whenever it dumps a stock out of it's index; this makes it look better than it is if you had real money in the stocks. Every Fund trying to keep up with it is handicapped by that anomoly, the ones who understand it don't call attention to it, after all they are trying to sell you stocks. The stocks they buy for you and rake in a % for managing you money. Over the years The S&P and the DOW builds up a lot of HOT air that no-one wants to calculate. Yet these are the yard sticks that brokers and anal-cyst use ? What a farce. Jim