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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Vitas who wrote (22103)	7/22/1998 11:40:00 PM
From: James F. Hopkins	Read Replies (2) \| Respond to of 94695

Vitus; Thanks for that post, I have noticed a few times some ideas I'm sure were original with me come back. It don't bother me not to get the credit as I just wanted to get the idea out any way, and they can write better than I can. Also that article takes it a step or two beyond what I've tried to explain. It makes it clearer. Unfortunately is they omit pointing out the huge increase in the number of index funds , and they give almost no time to the ramifications of all these index funds , or how they are the ones primary causing the big bubble in the PEs, ie > Since the price is inflated, so is the market cap. A company like Microsoft is nowhere near the size of General Electric, but in market cap MSFT ranks a close second to GE. MSFT, you see, sports a PE over 70, twice that of GE. Stocks such as Cisco (PE 113), Dell Computer (PE 81), Worldcom (PE 300+) and Lucent (PE 181+) wag the S&P 500, not because they are truly the highest capitalized, but because they are truly absurdly priced. And the more absurdly priced they become, the more power they wield. They, in fact, become the market. and as they go up in price the weighting goes up and it's causing the index funds to have to buy even more , and the earnings analyst have to devise new ways to justify this. I'm positive we have never had this many index funds before as I've checked many of them that are new to the market. Index Funds are and have been creating a phenomena in our market for the last two years that has no precedent in our market history so those people who are so baffled at trying to understand it ( like Greenspan ) had better stop just counting on history to give them an answer -------------------- Something needs to be done to check this, but they are to damm scared to take action, as to try and pass any kind of regulation on Wall Street is like political suicide. Wall Street keeps coming up with the old proverb that the market will solve it's own problems, what hog wash ! , the unmitigated greed they have has no bounds and history shows that proverb to be a false one and that if adhered to long enough shoves any nation into abject chaos and poverty which is the breeding ground for wars and revolutions To do something about the Indexers need not be so dramatic as to do them in. There are ways to throttle them back via A Capital gains Tax , or forcing a percentage of distributions every six months to a year that would be subject to capital gains tax. While Wall Street and most people hate the word Tax ( particularly the rich ) without it we may as well go to communism. If people had to pay taxes on not just what they sold but what the gain in value was each year they would be a lot more prudent in how they invest, and the market would be a lot more logical. That this type of tax would effect the more well to do, than the underclass means it wouldn't have a snowballs chance in hell of surviving to ever get passed. Jim