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To: Patrick Slevin who wrote (6650)	10/17/1998 2:07:00 PM
From: SE	Read Replies (3) \| Respond to of 44573

I have been reading some places on SI where people talk about mutual funds exiting the market. By this I assume they mean mutual funds rotating out of the big caps and into something else...however, that could be a mistaken assumption. Isn't it true that usually, by definition, mutual funds are fully invested (or close to it) in the markets at all times? A mutual fund manager is really between a rock and a hard place. They are expected to be fully invested. If they are not, then they are chastised by their holders as a market rallies. If they are and the market goes down they are chastised for not being out. They cannot win and if I am right most charters call for near full investment most of the time. I think Foster Freiss of Brandywine went to a large cash position prior to the latest run-up in July, got chastised and then re-invested near the top and now was spanked. I heard this third hand, so it may not be accurate, but whether or not it is true, this is the problem they have. So how does a mutual fund exit the market? Only if the fund holders...primarily individuals exit the fund. Hedge funds are a different thing and may cause a blow-up of sorts, but seems to me that if we have a blow-up, or should that be blow-down, it will be caused by panic by individuals. To date, I guess I have not seen that. It is possible that this latest tanking was the warning shot across the bow. What does it do to individual investors thinking? Now that we are rallying, are they all comfortable again? If the markets tank again and we have headlines about it what does that do? Does that then get these guys to exit thinking they are tired of this shit? From whence will the next shoe drop, if there is another shoe to drop? For most, I don't think they care if the P/E on the S&P 500 is over 20. I don't think they know whether or not corporate earnings are dropping and what that might do to stocks. How about pension fund managers? Are they fully invested at all times? Most 401(k)'s etc are in mutual funds. I wonder what percentage of mutual fund holdings are held by 401(k) funds where most individuals don't even follow the dollars.... Some Sat ramblings.... -Scott