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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: marc ultra who wrote (4248)	4/3/1999 1:28:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 15132

How about Dow 100,000?!!! April 5, 1999 Everything That Rises Must Converge, and Rise Again How Now, Raging Dow? Edited By Robin Goldwyn Blumenthal And you thought Dow 10,000 was a big deal. According to the professor who called Dow 10,000 by the year 2000 back in 1974, when the Industrials were well below 1000, the DJIA may very well rise to a cool 100,000 in the year 2024. It may sound wacky, but skepticism isn't new to Roger Ibbotson. The Yale finance professor recalls that people "were pretty shocked" in 1974, when he first spoke about results of a study he had done with Rex Sinquefield. The pair had concluded that, over time, stocks would produce a total compound return of 14.8%, versus long-term Treasuries' 8%. And don't forget, their forecast was made during one of the worst bear markets in history, with the Dow at 857 at yearend 1973. His latest prediction is still "based on the presumption that markets are fairly priced and the past is representative of the future," says Ibbotson. The academic, who also heads Ibbotson Associates, an investment consulting firm, foresees a continuance of the same 10% compound rate of return (absent the current 1.6% dividend yield) that he did in 1974 (when the dividend yield was 4.8%). Of course, Ibbotson doesn't rule out "surprise events" like that seen in October 1987, when the market suffered a record one-day crash of 22.61%, or 508 points, on Black Monday. But overall, he thinks the odds are in favor of everything turning out fine. How confident is he? One need only look at his portfolio to get an answer. He's still primarily invested in stocks and has been ever since he made that forecast in 1974.

To: marc ultra who wrote (4248)	4/3/1999 9:29:00 PM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

Marc; Yes, Biderman seems to take the opposite scenario -- small caps will catch up to the large caps. I would give that scenario a higher probability but for the high sentiment indicators. I mean, if people are so wildly enthusiastic about stocks as evident by Brinker's sentiment indicators, why hasn't it carried over to the small caps by now? I would like to see a study to show the sentiment indicators graphed with the performance of the small caps to see if there was ever another time when people were highly bullish but with the small caps underperforming in the flat to negative zone. I would doubt that there is any other time in recent history when this has been the case. The whole thing is a huge enigma. And the liquidity argument by itself does not work for me anymore. I will add the laziness argument to the mix. I think the institutions are too damn lazy now to go down the capitalization chain. The large companies spoon feed the analysts. There is no need for them to do independent research if that is their choice. When I went to a recent analyst meeting, two analysts from the same firm were talking. One wanted the other to take over research on a smaller cap company for her. Why? She did not "have the time" to do the research on the smaller company. Too much work; not enough time. Yeah, sure, if the stock was performing that analyst would be making the time to cover it. And then there is the performance chaser argument. Why else has AOL drawn so much institutional money the past month? It was the top performer for the quarter in the large cap arena. Gotta have it say the big boys no matter what the cost. Biriyni loves it for that reason alone -- the money flow. Yeah, these guys are all over the TV saying that the internet is a bubble while they are buying AOL like it is heyidiot.com. And tell me that the correction this past fall and the rocket ship recovery has not made momentum investors and performance chasers out of all of them? It did not pay to be cautious after October 8th and these guys have been playing catch up ever since. Too bad they have not stopped to check their valuation meters now. THE LIQUIDITY ARGUMENT FAILS BECAUSE IT IS CIRCULAR. THE WALL STREET BRAINS SAY THE SMALL CAPS LACK LIQUIDITY WHICH THE LARGE CAPS HAVE IN SPADES. DUH? WHEN IN HISTORY HAS THIS BEEN A HUGE CONCERN? IT IS LIKE SAYING ONE DOES NOT LIKE SMALL CAPS BECAUSE THEY ARE NOT LARGE CAPS. DUH AGAIN? I THINK IT IS MORE ACCURATE TO SAY THAT INVESTORS AND PORTFOLIO MANAGERS DON'T LIKE SMALL CAPS BECASUE THEY HAVE NOT PERFROMED AS WELL AS LARGE CAPS OF LATE; THAT IS, THEY DON'T LIKE SMALL CAPS BECAUSE THEY ARE NOT LARGE CAPS. THE LIQUIDTY ARGUMENT IS JUST AN AD HOC RATIONALIZATION FOR THE OBVIOUS PERFORMANCE CHASING MOTIVATION UNDERLYING THE LIQUIDITY ARGUMENT. ONE MUST REALLY EXAMINE THIS LIQUIDITY ARGUMENT. HAS ANYONE EVER HEARD ANY MEDIA PUNDIT DIG A LITTLE INTO THIS LIQUIDITY ARGUMENT? NOT ME. THEY ACCEPT IT AT FACE VALUE. WHAT A JOKE. HERE IS A LITTLE TEST FOR THE TRUTH. DURING THE GREAT SMALL CAP RUNS EARLY IN THIS DECADE, CAN ANYONE EVER RECALL ANY PORTFOLIO MANAGER MISSING THE OUTPERFORMANCE PERIOD BECAUSE THEY WERE CONCERNED ABOUT LIQUIDITY? HELL, NO. THEY WERE TOO BUSY PILING IN TO CARE. Woops, sorry for shouting <g>. I do not know about anyone else on this thread, but while acknowledging that the S & P 500 is diversified and has many fairly valued companies, the thought of going into an S & P index fund now and paying one dime for silly multiple stocks makes me ill.