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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (6706)	4/10/1998 11:02:00 AM
From: Dale Baker	Read Replies (2) \| Respond to of 18691

Pancho, I will break my copyright rule to post an excerpt from the WSJ article you cited, since it seems like a frightening recipe for a major bubble-bursting party: Where is all this mutual-fund cash coming from? A lot is being salted out of paychecks into individual retirement accounts and corporate retirement plans. But some of it may be coming from investors who are selling closely held businesses and investing the proceeds in the stock market via mutual funds. Melissa Brown, director of quantitative research at Prudential Securities, noted that investors sold some $340 billion of directly owned stocks last year, according to U.S. statistics. That's more than the $227 billion that the ICI says went into stock mutual funds last year. All that selling would appear to raise the question of whether individual investors are truly pushing up stock prices with their fund purchases, or merely mitigating the gale-force selling of stocks by other individuals. But Ms. Brown said that much or most of the $340 billion in stocks sold by individuals last year were of closely held enterprises -- for instance, the owner of a closely held shoe chain who sells out to a corporation. And a significant amount of that money may be going into mutual funds. In effect, those individuals are transferring their money from private equities into the public market. Investors may be able to realize more money in the public market than the private value of their businesses. COMMENT: Can these folks take the pain when they lose 20 - 30% of that hard-earned equity? The thought of mom and pop dry cleaners playing stocks with their capital is frightening.