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The Changing Of The Trash


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#1 DrStool

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Posted 14 December 2002 - 10:18 AM


Many of those being added have gained from operating stores Whole Foods Market, Petsmart and Ross Stores or such old-economy businesses as oil services (Patterson-UTI Energy) or industrial fasteners (the Fastenal Company). To be added, in addition are Expeditors International of Washington, Dentsply International, the Lamar Advertising Company, the First Health Group Corporation, Pixar, the American Power Conversion Corporation, C. H. Robinson Worldwide, the Gentex Corporation, Henry Schein and Ryanair Holdings.

The companies to be deleted are Abgenix, the Andrx Group, the Applied Micro Circuits Corporation, the Atmel Corporation, Charter Communications, the Conexant Corporation, the Cytyc Corporation, Integrated Device Technology, ImClone Systems, i2 Technologies, Protein Design Labs, PMC-Sierra, the Rational Software Corporation, Sepracor and the Vitesse Semiconductor Corporation.


{Goodbye tech.}


This week, the 15 stocks being removed fell an average of 10.9 percent, far worse than the 5.6 percent decline in the Nasdaq 100 index. The stocks being added rose an average of 1 percent.

Since Oct 31, 2001, the last time stocks were priced for inclusion in the Nasdaq 100 index, the companies being removed have fallen an average of 68.9 percent, with the worst performer, Charter Communications, down 90.9 percent. The index is off 26.3 percent over the period.

The 15 stocks being added rose an average of 45.2 percent over that period, but such are the fortunes of many stocks in the Nasdaq 100 that a big rise was not needed. First Health Group is down 10 percent from its level at the end of October 2001, but is still being added to the index.

The above was taken from Floyd Norris's article in the Times. except for Doc's comment in brackets.

See this is how they fix the indexes to make it look like stocks always go up. Anybody know how many of the original stocks in the Sphincters Index are still around? I don't. The Dow, I know. There's one. What would the Dow be today if only the original 30 stocks were included, and all the ones that went to zero had to stay in the index.

Now there's a stat that I bet Ibbottson won't give you, the crooked bastards.

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#2 Yoshaviah

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Posted 14 December 2002 - 10:56 AM

Doc, you know the FEED buys the index funds to pump the markets. You don't expect them to buy stocks in companies that are going out of business do you? Just another reason I closed my short position in the Qs before scam week.

#3 DogBoy

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Posted 14 December 2002 - 12:12 PM

Isn't the fact the the stocks being added have ALREADY gone up dramatically BEARISH and not bullish for the index ?

Won't these stocks (the one being added) be the most likely to be sold next year since people will have large profits in them ?

Couldn't this actually have the effect of accelerating the next down turn ?

#4 DrStool

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Posted 14 December 2002 - 02:28 PM

Absatively posolutely! That's the way it works in a bear market.

Doesn't change the fact that most of these indexes would be near zero if it weren't for this little bullshit game. They do this all the time. In a bull market the leverage is to the upside. Most of the companies removed from the indexes end up disappearing. Think what a drag they'd be on the indexes if all those big fat zeros were included. Think GE plus 29 zeros, divided by 30.

The indexes are frauds. The mutual fund industry is a fraud, and Ibbotson Associates are the greatest criminal con artists of all time.

Put your money in medium term T-notes and just keep rolling. The gummit will even handle the safekeeping and bookkeeping. Zero transaction costs. Zero management fees. No risk. No muss. No fuss. No bother. And don't give me the inflation argument. The Notes almost always have a positive real rate of return with the exception of a couple years here and there. Sure beats the negative long term returns on stocks.

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#5 Flaming Turds

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Posted 14 December 2002 - 05:31 PM

Why do people always encourage other people to buy US government paper, thus encouraging the government to spend more and increase our overall tax burden? Is this really sound 'investing'? I think not. I'd rather blow my money on crack than give it to the government to 'handle the safekeeping and bookkeeping' Hell, I'd rather put it on Wall St...

#6 Goldmember

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Posted 14 December 2002 - 06:10 PM

So much for the 54% weighting in technology. I'm going to look at this a little more before coming up with a strategy, something that will work within our beloved cycles. If we have an early termination of the current 10-13 week cycle down phase and a fresh cycle begins it's up-phase I think it may be prudent to wait for the next 10-13 week cycle top. Then again the new additions, after mutual funds have exhausted their buying orgy of the replacements,may cause shorter cycles to carry the day on downdrafting these replacements. Then It remains to be seen if the fundies will be in a frantic hurry to include these replacements now before the year ends, even though their year end is October. Perhaps in their rush for Christmas bonuses trading departments may want to capture as much rise as possible as early as possible. Next week should be interesting to see how it plays out. Another educational lesson coming our way real soon. Mr Market never stops throwing us things to learn about. Perhaps the next 8-13 day cycle peak, due approximately ? Crap! Doc!! Does the 8-13 day cycle include weekends? I should know this already, but damn, I never thought of that till now. Doc?? I am in a quandary! My train of thought wants to calculate the next approximate peak of the 8-13 day cycle, or at least whether weekends are included in that cycle. The longer cycles certainly appear to include weekends but the shorter cycles? So much to learn! So little time! Thank the lord for STOOL! I gotta buy Hurst's book and get some software. Sigh..... :grin:
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#7 DrStool

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Posted 14 December 2002 - 06:24 PM

FT- Look at it this way. It's one way of getting some of your tax dollars back. Paying interest and paying back your principal is one thing they're good at. And unlike Wall Street, they won't try to steal it from you.


GM-

I am only counting trading days. Have'nt made up my mind about holidays and half days though. :lol:

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#8 Goldmember

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Posted 14 December 2002 - 06:28 PM

From the article: The replacement of shares in the QQQ trusts must be made within three business days of the changes in the index. That will lead to substantial sales of the stocks being dropped, and to substantial purchases of shares being added.

This would apply to the trust but how would mutual funds that track the index do their rebalancing? Are they compelled to the same three day period, or can they play cat and mouse with this one?
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#9 Goldmember

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Posted 14 December 2002 - 06:42 PM

Thanx Doc. The shorter cycles have captured more of my interest lately since I have more time on my hands. The 5 hour and 1 day cycles are looking interesting for the old "in out, in out" as Stanley Kubrik would write, and lately I've seen a little success with multi-day ventures in and out of the game. I have to learn the shorter cycles a little better but the main thing is I AM LEARNING!

And that's a blatant pump to the lurkers, of which I was one for months, to buck up and get with the program! Subscribe today!!!!! You'll never regret it!!!

Doc my renewal is coming up around the end of the month and I'll be sure to renew!!! YA bABY!!
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here

#10 Injured Grizzly

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Posted 14 December 2002 - 07:19 PM

Why would this make the NDX go higher? If they have to sell 100 shares of a beaten down tech stock to buy 1 share of these expensive replacements there would be less money to pump the prices higher. Would this not cause the averages to drop? I am a simpler guy than simple guy is. IG

#11 PileDriver

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Posted 14 December 2002 - 08:14 PM

this is precisely why I never short the cubes but short my own "index" of hand picked turds. You'll do much better since the former is designed to perform whereas your's aren't. Its also why I choose BEARX over RYAIX, risk-adjusted BEARX is better than RYAIX.

Think about it:

What has a better chance of going to zero, QQQ or IMMU ?
What is more likely to get jammed by da boyz: QLGC or CPTS ?

IMMU and CPTS are in my shortfolio, I sleep at night and will make tons more money than anyone shorting QQQ or QLGC, guaranteed. :grin:

Live with the reality that intervention jams will happen - you can't predict them, you can't prevent them but you don't have to trade jammable stocks and ETFs and therein is the solution. Stop wasting time combating jams and spend more time picking turds and trading - you'll be alot better off.

#12 DogBoy

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Posted 14 December 2002 - 08:29 PM

"The indexes are frauds. The mutual fund industry is a fraud, and Ibbotson Associates are the greatest criminal con artists of all time."

Doc, please don't start acting like a meely-mouthed politician on me, now.


:grin: :grin: :grin:

#13 wndysrf

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Posted 14 December 2002 - 09:37 PM

Anybody got the list of stock added to NDX last October 2001? I think most were biotechs.
We should see how many of them were torched the last 12 months.

By the way, wasn't IMCL one of them? Dropped after only one year?
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#14 Flaming Turds

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Posted 14 December 2002 - 09:42 PM

Lol Doc, call me pessimistic but I just see it as costing me more in the long run. I also try to think of where the money goes, like senseless war, pork projects, and other things that then require more money in an ever increasing circle that eventually bankrupts us all. Everyone complains about government largesse and then turns around and willingly gives them more to play with. I just cant see any worthy rationale for doing that. I have gone through my own cash flow and accounted for every penny various forms of government have sucked out of me in a given year and it disgusts me. Giving them more to look after for me is something I cant even consider. The government should hook up with AMZN and YHOO and really rake in some suckers.

#15 Goldmember

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Posted 14 December 2002 - 09:52 PM

I may be tempted to look at Imclone after the stool has been sqeezed out of it. Bristol Meyers IS doing fresh European trials and they DO have the ability to fund Herbitux further if these trials are favorable. Bristol Meyers NEEDS the revenue from a drug like this. I think the FDA will be more responsive as long as proper steps and due process are honoured. It wouldn't surprise me if casting this out of the index is merely an accumulation play for some deep pockets. I want to be on THEIR side on this one. $5 and I'm all over it!
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here





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