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Technology Stocks : SAP A.G. -- Ignore unavailable to you. Want to Upgrade?

To: mauser96 who wrote (2499)	9/9/1998 2:40:00 PM
From: MulhollandDrive	Read Replies (2) \| Respond to of 3424

Lucius OTOT >>for all practical purposes big money managers can't invest in small caps stocks because their buying and selling results in drastic price changes, and because even if they are right, the profit as a percent of their total assets is too small.<< Exactly my point. If the lion share of funds are are simply going back into the same top tier stocks over and over again at some point the valuations will be so lofty that new money will be sidelined "waiting for the next correction" and the equity market will basically amount to not much more than a bunch of momentum players riding the same stocks up and down. That can't be good for investor psychology. People buy into mutual funds because they think they are getting diversification. I'm saying this scenario has played itself out enough times already that at least from the people I talk to, there is a sense of wariness as it relates to entering the market. If these top tier stocks price themselves "out of the market" so to speak, what's going to happen when investors decide that the last "little dip" doesn't warrant the risk to re-enter. It's well and good for fund managers to be concerned about relative performance, but like I said in my previous post, if they are all basically indexing anyway, they may be creating a situation whereby they are "killing the goose that lays the golden egg". This market imo, is terribly unhealthy if the majority of investors just decide it makes more sense to "index" their money. Sooner or later the disparity of valuation will be so extreme that once it is perceived that the indexes have run realistically run their course and people start pulling the plug based on valuations, what are we left with? I'm saying that when those stocks crash big time, the ripple effect on the overall market may be so severe, that it could be years and years before investor confidence is sufficiently restored to venture in again. We are seeing this play out in the small caps now. There's an attitude which seems to be pervasive that the small caps will never outperform the indexes so why bother? Nobody wants to be the first guy in. Understandable when you've seen 50, 60, 70, 80 percent retracements off the old highs. Again, I'm not saying I know what the solution is. Eventually the law of supply and demand will win out, but I'm not sure what it will take to create a "demand" mentality for these decimated stocks. bp