Down goes the Dow

interesting big artcle in the WSJ about how passive index investing is growing fast - only 35% of the total so far but screaming up a sharp incline.

I've been passive for 10 years but I'm starting to think that going the other way might start to pay off soon. You can't have everyone indexing...it will just make the big caps scream higher and ignore the small ones. Seems to me a strategy to find the ignored stocks will have to start working at some point soon.

and note that CPI, released today, keep inching up to respectable numbers

all in: +1.5

core: +2.2

those are some healthy numbers, esp compared to the rest of the world.

David Kelly of JPM sees inflation close to 3% in the spring. I'm buying some extra TIPs in advance.

Earnie wrote:

"• Earnings Scorecard: With 7% of the companies in the S&P 500 reporting earnings to date for Q3 2016, 76% have reported earnings above the mean estimate and 62% have reported sales above the mean estimate."

That was 4 days ago! Things have only gotten better since then!

FactCheck:

20 of 33 beat GAAP, 60%

At the start of the year 3rd Quarter non-GAAP EPS were projected to be $32.35 already marked down to a still high of $29.25.

Igy

Great news. Thanx.

agip,

In this environment I would avoid indexing as a fairly obvious choice. For one, the overweight to highly valued components poses increased risks in a down market as we saw in the sell-off earlier this year. Two, the fund managers must stay invested, so during periods of redemption the fund manager cannot hold larger amounts of cash. Three, the popularity of ETFs have created liquidity events in periods of volatility when sponsors have to sell an entire basket of stocks representing the index. Lastly, I see this period as a peak popularity of indexing and ETFs. Investors will find it is never that easy, and in chasing what every one else owns has a risk that is little understood or quantified.

Igy

Ghost of Igloi wrote:

agip,

In this environment I would avoid indexing as a fairly obvious choice. For one, the overweight to highly valued components poses increased risks in a down market as we saw in the sell-off earlier this year. Two, the fund managers must stay invested, so during periods of redemption the fund manager cannot hold larger amounts of cash. Three, the popularity of ETFs have created liquidity events in periods of volatility when sponsors have to sell an entire basket of stocks representing the index. Lastly, I see this period as a peak popularity of indexing and ETFs. Investors will find it is never that easy, and in chasing what every one else owns has a risk that is little understood or quantified.

Igy

yeah - we've seen over and over that when there is an investing fad it usually goes too far and ends badly.

Probably it is self fulfilling...the great relative performance of indexing pulls in more money and makes the hedge funds et al do even worse. I mean hedge funds have been gawdawful for years and years...

agip,

I remember well the value funds that went out of business or managers moved to growth during the Tech Bubble. Today some of the value equities have become more frothy than growth. It is interesting to see pensions turn away from hedge funds at perhaps the moment of outperformance. From a historical basis, I believe the best asset class risk/reward profiles are in managed futures, hedge funds, short term bonds and cash. In equities I prefer active to managed, reduced exposure to small and mid-cap, stay large, split evenly domestic and international.

Igy

edit:

I prefer active to indexing

agip wrote:

interesting big artcle in the WSJ about how passive index investing is growing fast - only 35% of the total so far but screaming up a sharp incline.

I've been passive for 10 years but I'm starting to think that going the other way might start to pay off soon. You can't have everyone indexing...it will just make the big caps scream higher and ignore the small ones. Seems to me a strategy to find the ignored stocks will have to start working at some point soon.

I am amazed by your ignorance. Index funds are available for small caps. Why would more money moving into indexed funds -- which makes a ton of sense if you want to be in the market as you are saving a lot of money by not paying for non-existent expertise from fellows like yourself -- ignore small caps?

Read what he wrote again...thus time slowly and thoughtfully. Maybe then you won't miss the point.

Hello, McFly! wrote:

Read what he wrote again...thus time slowly and thoughtfully. Maybe then you won't miss the point.

'You can't have everyone indexing...it will just make the big caps scream higher and ignore the small ones'.

Looks pretty clear to me.

This clown thinks that buying indexing funds ignores small caps which is complete nonsense.

A piece of advice.

When you disagree with someone but can't really explain why, show some brains and keep your mouth shut.

It was a hypothetical (I know that is a big word for you, so you might want to ask someone with at least half a brain what that means).

Hello, McFly! wrote:

It was a hypothetical (I know that is a big word for you, so you might want to ask someone with at least half a brain what that means).

"You can't have everyone indexing...it will just make the big caps scream higher and ignore the small ones. Seems to me a strategy to find the ignored stocks will have to start working at some point soon."

Someone does not know the meaning of hypothetical.

Morgan Stanley earnings smash expectations! Financials continue to lead an impressive earnings season.

Stock futures traded flat on Wednesday, as investors looked for direction from earnings to come from corporate heavyweights such as Halliburton Co. and Morgan Stanley, as well as housing starts data.

Wednesday marks the 29th anniversary of Black Monday, when on Oct. 19, 1987, stock markets crashed around the world.

Dow Jones Industrial Average futures slipped 0.6 point to 18,063, while S&P 500 futures eased 1 point to 2,131.25 and Nasdaq-100 futures fell 7.5 points to 4,819.50.

Stocks closed higher on Tuesday, buoyed by a batch of upbeat results from Goldman Sachs Group Inc. (GS), UnitedHealth Group Inc. (UNH) and Netflix Inc (NFLX).

Higher oil prices failed to spark stock futures. Crude prices rose atop $51 a barrel on Wednesday, a 1.6% gain. The gains came as Saudi Arabia's oil minister Khalid A. Al-Falih spoke at a London conference. He said improving fundamentals and market rebalancing will continue to aid the market's recovery and that many non-OPEC countries are willing to join a potential deal to cut global oil output.

Data showing U.S. crude inventories likely fell in the week ended Oct. 14 were helping to lift prices. Official data will be released later from the Energy Information Administration.

Data ahead: Housing starts and building permits for September will be released at 8:30 a.m Eastern Time. The Federal Reserve's Beige Book will be released at 2 p.m. Eastern.

Data released Tuesday on inflation and home-builder confidence did nothing to sway opinions that the Federal Reserve will likely raise interest rates in December.

Jeffy Tull wrote:

Hello, McFly! wrote:

It was a hypothetical (I know that is a big word for you, so you might want to ask someone with at least half a brain what that means).

Someone does not know the meaning of hypothetical.

I already said that, but thanks for verifying.

Bull 'trend' intact

http://www.marketwatch.com/story/bull-trend-intact-sp-500-challenges-the-breakdown-point-2016-10-18

B.S. Trend intact, the Dow is below where it was 17 months ago.

Ashbaugh wrote:

Bull 'trend' intact

http://www.marketwatch.com/story/bull-trend-intact-sp-500-challenges-the-breakdown-point-2016-10-18

for the record, the last few years have been ok. Not great, but ok.

Cherry picking "17 months" is not particularly helpful to understand the path of the market. eh?

Vanguard total stock market index fund:

1 year: 6.95%

3 years: 8.30/yr

5 years: 13.95%/yr

10 years: 6.95%/yr

15 years: 7.44%/yr