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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Scando-American who wrote (31484)	8/25/1998 10:50:00 AM
From: Knighty Tin	Respond to of 132070

Scando, Here is The Confuse Us Report for what it is worth: The article is alarmist and kind of silly. Yes, institutions own a large pct of stock, but they do not pull the market's strings over the long haul for several reasons. 1. A lot of that money is indexed. The indices pull the strings of the institutions, such as Vanguard, Wells Fargo, Watermelon Bank, and nearly all the large bank trust depts., not the other way around. 2. These people often go opposite ways and a lot of the trading is Fidelity buying what T. Rowe Price is selling, and vice versa, so they are not a uniform force. They are too homogenized for my druthers, but hardly a thick red line, as the article implies. 3. Yes, large stocks are popular right now. But there are all types of liquid alternatives to buying large US stocks, such as buying large foreign stocks, bonds, real estate, shorting big US stocks, playing options and futures, etc. The article seems to assume that just because the big stocks have been the only game in town recently, they will remain the only game in town. Not true. 4. What the investor giveth, the investor can ungiveth. Purchases of funds will soon stop growing and may even see redemptions. That will put huge pressure on the bloated large growth stocks to not meltdown. These kinds of articles show up about once every couple of years. One thing they do point out is something I've been preaching about for years. Institutional portfolios on average cannot beat the market because they are the market, less expenses. Underperformance by the pros, on average, will continue to be part of the landscape. That is predetermination. Of course, nobody says you have to buy average. MB