This is HUGE bull market
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per philosopher PT Barnum...
there's a sucker born every minute, you just happened to be coming along at the right time.
there's a sucker born every minute, you just happened to be coming along at the right time.
I already saw RSP, and charted it earlier. I forgot to mention that. I don't see a huge difference frankly.
Yes, it did not do the giant bubble of 98-2000, and the subsequent 01-03 fall of the $SPX, because it gives equal weighting..... but what's the point of equal weighting? The REASON that the bubble occurred (and the wealth occurred), was because of the weighting of the higher valued stocks in the SPX... the very thing you were complaining about.
I just took a look at the chart for both. In a 10 year chart, from the end of 1997 to today, the S&P went from approx 750 to 1379. If you invested say 10K in the S&P in Nov 1997, today you'd have around 20K roughly. In RSP, it went from around 25 to 46... so if you invested 10K at the end of 1997, you'd have nearly 20K today too. All it did was take out the bubble that was 1998-2003.
I cannot see the notes as I reply (I guess that's one way of keeping replies short here..), but as I recall, you said that it was more 'real' because it weighted all stocks the same... er... stocks go up for various reasons.
The fact that it goes up... or down... is why we trade in the stock market. There is no reason to take the 'gamble' at all if we wanted a steady 6% investment. That's why there are bonds and treasuries and CDs, muni's and whatever other fixed rate options. Over that time frame, it was possible to lock in a return of 6% relatively easily, with no risk.
Why on earth would anyone bother playing the stock market, and yes, I meant the word 'playing', if they were looking for stability?
To weigh the stocks 'evenly' means the slow and poorly performing stocks are weighted the same as the profitable and popular stocks. In the real world, they are valued differently, that's why we pay more for say... Google... than we do for Microsoft. Microsoft is on 90% of the computers in the world... and Google is absolutely not. There's plenty of people who have never even HEARD of google, even today. NO ONE has not heard of Microsoft. Or GE... who hasn't heard of GE? More people around the world have heard of GE than Google. Why is Microsoft $28, GE $35, and Google $476?
Are they the same? No... so why should they be weighted the same?
Yes, it did not do the giant bubble of 98-2000, and the subsequent 01-03 fall of the $SPX, because it gives equal weighting..... but what's the point of equal weighting? The REASON that the bubble occurred (and the wealth occurred), was because of the weighting of the higher valued stocks in the SPX... the very thing you were complaining about.
I just took a look at the chart for both. In a 10 year chart, from the end of 1997 to today, the S&P went from approx 750 to 1379. If you invested say 10K in the S&P in Nov 1997, today you'd have around 20K roughly. In RSP, it went from around 25 to 46... so if you invested 10K at the end of 1997, you'd have nearly 20K today too. All it did was take out the bubble that was 1998-2003.
I cannot see the notes as I reply (I guess that's one way of keeping replies short here..), but as I recall, you said that it was more 'real' because it weighted all stocks the same... er... stocks go up for various reasons.
The fact that it goes up... or down... is why we trade in the stock market. There is no reason to take the 'gamble' at all if we wanted a steady 6% investment. That's why there are bonds and treasuries and CDs, muni's and whatever other fixed rate options. Over that time frame, it was possible to lock in a return of 6% relatively easily, with no risk.
Why on earth would anyone bother playing the stock market, and yes, I meant the word 'playing', if they were looking for stability?
To weigh the stocks 'evenly' means the slow and poorly performing stocks are weighted the same as the profitable and popular stocks. In the real world, they are valued differently, that's why we pay more for say... Google... than we do for Microsoft. Microsoft is on 90% of the computers in the world... and Google is absolutely not. There's plenty of people who have never even HEARD of google, even today. NO ONE has not heard of Microsoft. Or GE... who hasn't heard of GE? More people around the world have heard of GE than Google. Why is Microsoft $28, GE $35, and Google $476?
Are they the same? No... so why should they be weighted the same?
When you are trying to determine how the overall economy is doing you certainly want to look at an equally weighted index. This lets you know the overall health of the stockmarket and the economy. (at least as perceived by investors)
This is why the 2000 crash happened. People saw the indexes going up but fewer and fewer stocks participated in the rally. This is why it was easy to determine when to get out before the crash. When 30 or 40 stocks are rising near the end of a bull market and the rest of the market is going down you can be certain those 30-40 will drop as well.
"Yes, it did not do the giant bubble of 98-2000, and the subsequent 01-03 fall of the $SPX, because it gives equal weighting..... but what's the point of equal weighting? The REASON that the bubble occurred (and the wealth occurred), was because of the weighting of the higher valued stocks in the SPX... the very thing you were complaining about."
the "point of equal weighting" is that it does not allow a small group of stocks (out of the entire 500) to dominate the results in the index.
iirc, there are about 10 stocks (out of 500) that make up about 20% of the capitalization of the index
so (again, this is from memory) 2% of the stocks account for 20% of the move
with the equal weighted index, that is not the case
HISTORICALLY speaking, the RSP has performed "better" in terms of smoothness of an equity curve AND overall performance.
SIGNIFICANTLY
in a retirement type fund (dollar cost averaging) this makes a LOT of sense.
a 9% vs. 11% return, for instance, compounded over 20 years makes a phenomenal difference in the bottom line.
it is not a matter that one is "better" for all purposes.
my point was that, just because the S&P is nowhere near its highs, you need totake into consideration that with 2% of stocks making up 20% of the weighting, that can be very misleading if bigcap tech stocks are lagging (which they are)
fwiw, the dow jones isn't cap weighted EITHER. cap weighted is not the "default" but the S&P *happens* to be cap weighted.
there are 3 ways to weight
Cap, Price, and Equal.
the "point of equal weighting" is that it does not allow a small group of stocks (out of the entire 500) to dominate the results in the index.
iirc, there are about 10 stocks (out of 500) that make up about 20% of the capitalization of the index
so (again, this is from memory) 2% of the stocks account for 20% of the move
with the equal weighted index, that is not the case
HISTORICALLY speaking, the RSP has performed "better" in terms of smoothness of an equity curve AND overall performance.
SIGNIFICANTLY
in a retirement type fund (dollar cost averaging) this makes a LOT of sense.
a 9% vs. 11% return, for instance, compounded over 20 years makes a phenomenal difference in the bottom line.
it is not a matter that one is "better" for all purposes.
my point was that, just because the S&P is nowhere near its highs, you need totake into consideration that with 2% of stocks making up 20% of the weighting, that can be very misleading if bigcap tech stocks are lagging (which they are)
fwiw, the dow jones isn't cap weighted EITHER. cap weighted is not the "default" but the S&P *happens* to be cap weighted.
there are 3 ways to weight
Cap, Price, and Equal.
I think I know what you're trying to say.
As a 'predictor', if the market were predictable thru looking at one set of numbers... it would not be again, just so no one could find an edge that way, since anything that worked consistently would immediately be exploited out of existence. I had earlier said that I don't want 6% gains a year. Why would I risk the market at all for the same thing I can get thru bonds?
So what good is this gauge?
The entire point of the S&P is to give people an artificial gauge to see how they're doing relative to the rest of the market. This means the nonweighted one is inaccurate... because the reality is, the entire period between 1998-2003 was ABOUT that bubble. Just how accurate a picture are you painting, how accurate to look at a scale that simply disregards the entire event? All these gauges are really for is rear view mirror checking.. by taking the mountain out of the picture, does that paint a realistic picture or a fake one?
When I said that we had a long way to go to catch Nasdaq 5000, I don't really care about anything other than the psychological reason. The entire stock market is about psychology... not math. Which is why TA's don't typically do any better than monkeys with darts, or contrarians, or momentum investors.
In 1998, when Greenspan said the economy was OK... BOOM! It went to 'irrational exuberance' and kept on going. Greenspan opens his mouth, the market moves. I'm not sure why, but I don't question it. Greenspan said the economy was going to do better today. That's it, the bull market has been confirmed... at least for me. I'm pretty sure a lot of traders still think Greenspan is god.
Give me one valid reason to use a weighted average, other than to gloss over the reality of the market? I don't want to see the line go up steadily to show me the 'market conditions'. I want to see the reality of the market conditions. 2000 was a hard reality I will never forget, and I never want to either. Why doesn't RSP show it even happening? Since it doesn't, what good is it?
The market is overbought? That's been said since September. And it just got more overbought. The last time I saw dire warnings about the market being 'overbought' was in 1998. And it went on to being overbought for 2 more years... doubling and tripling and quadrupling a lot of stocks along the way. What does 'overbought' mean? Absolutely nothing.
As a 'predictor', if the market were predictable thru looking at one set of numbers... it would not be again, just so no one could find an edge that way, since anything that worked consistently would immediately be exploited out of existence. I had earlier said that I don't want 6% gains a year. Why would I risk the market at all for the same thing I can get thru bonds?
So what good is this gauge?
The entire point of the S&P is to give people an artificial gauge to see how they're doing relative to the rest of the market. This means the nonweighted one is inaccurate... because the reality is, the entire period between 1998-2003 was ABOUT that bubble. Just how accurate a picture are you painting, how accurate to look at a scale that simply disregards the entire event? All these gauges are really for is rear view mirror checking.. by taking the mountain out of the picture, does that paint a realistic picture or a fake one?
When I said that we had a long way to go to catch Nasdaq 5000, I don't really care about anything other than the psychological reason. The entire stock market is about psychology... not math. Which is why TA's don't typically do any better than monkeys with darts, or contrarians, or momentum investors.
In 1998, when Greenspan said the economy was OK... BOOM! It went to 'irrational exuberance' and kept on going. Greenspan opens his mouth, the market moves. I'm not sure why, but I don't question it. Greenspan said the economy was going to do better today. That's it, the bull market has been confirmed... at least for me. I'm pretty sure a lot of traders still think Greenspan is god.
Give me one valid reason to use a weighted average, other than to gloss over the reality of the market? I don't want to see the line go up steadily to show me the 'market conditions'. I want to see the reality of the market conditions. 2000 was a hard reality I will never forget, and I never want to either. Why doesn't RSP show it even happening? Since it doesn't, what good is it?
The market is overbought? That's been said since September. And it just got more overbought. The last time I saw dire warnings about the market being 'overbought' was in 1998. And it went on to being overbought for 2 more years... doubling and tripling and quadrupling a lot of stocks along the way. What does 'overbought' mean? Absolutely nothing.
Whitster, I appreciate your analytical mind... and I see what you are trying to say. Maybe I'm not conveying what I'm trying to say very well.
My point is, what makes the market interesting for me IS the lumps and bumps. I don't want them smoothed out. The lumps are where I make money, and hopefully, I get out before the bumps knock out my profit.
Everyone's different that way. If you want consistent returns, and a more predictable market... then might I suggest a portfolio for your IRA that includes 20% cash equivalents such as a bond index, 40% International (20 large value/20 emerging growth), 20% large cap US, 10% Russell small cap and 10% sector rotation.
I'll stick with my up and down guessing game that I enjoy much more
.
My point is, what makes the market interesting for me IS the lumps and bumps. I don't want them smoothed out. The lumps are where I make money, and hopefully, I get out before the bumps knock out my profit.
Everyone's different that way. If you want consistent returns, and a more predictable market... then might I suggest a portfolio for your IRA that includes 20% cash equivalents such as a bond index, 40% International (20 large value/20 emerging growth), 20% large cap US, 10% Russell small cap and 10% sector rotation.
I'll stick with my up and down guessing game that I enjoy much more
.a weighted average is not More or less of a reality, dood
"Give me one valid reason to use a weighted average, other than to gloss over the reality of the market? I don't want to see the line go up steadily to show me the 'market conditions'. I want to see the reality of the market conditions. 2000 was a hard reality I will never forget, and I never want to either. Why doesn't RSP show it even happening? Since it doesn't, what good is it? "
the point is that indexes, averages, etc. are just ARTIFICIALLY created benchmarks.
they have utility, but they are not magick, except to the extent that certain levels have psychological significance (and of course a huge part of TA is understanding psychology. all price is ultimately OPINION, so psychology is huge)
my point is that just because the S&P (cap weighted) is nowhere near its highs, that does not mean this bull market is less or more real.
it means its DIFFERENT
this bull market is WAY above the highs of the 2000 bull market in SOME benchmarks, and way below the highs in other benchmarks
if you compare THIS bull market with the benchmarks of the last - it sux
if you compare THAT bull market with the benchmarks of this one - IT sucked
the 90's bull market was hyooogely fueld by go-go tech stocks with a lot of "promise" and little current valuations vis a vis earning etc.
this is a "value rally" wherein the stocks that are doing best are of a different nature, sectors, capitalization etc. to a large extent than the last one
every dingdong daytrader looks FIRST at the nasdaq composite, and then at the Q's, and then at the S&P and concludes we are nowehere near the peaks of 2000
on the other hand, a current bull would look at the dow, the SPEWI, the russell, the transports, etc.
regardless, the most "fair" benchmark i guess would be the wilshire - basically the entire market.
but then one still has to decide the cap weighting, etc.
and now that we have stocks for commodities (USO, DBC , etc.) do those count?
etc,
"Give me one valid reason to use a weighted average, other than to gloss over the reality of the market? I don't want to see the line go up steadily to show me the 'market conditions'. I want to see the reality of the market conditions. 2000 was a hard reality I will never forget, and I never want to either. Why doesn't RSP show it even happening? Since it doesn't, what good is it? "
the point is that indexes, averages, etc. are just ARTIFICIALLY created benchmarks.
they have utility, but they are not magick, except to the extent that certain levels have psychological significance (and of course a huge part of TA is understanding psychology. all price is ultimately OPINION, so psychology is huge)
my point is that just because the S&P (cap weighted) is nowhere near its highs, that does not mean this bull market is less or more real.
it means its DIFFERENT
this bull market is WAY above the highs of the 2000 bull market in SOME benchmarks, and way below the highs in other benchmarks
if you compare THIS bull market with the benchmarks of the last - it sux
if you compare THAT bull market with the benchmarks of this one - IT sucked
the 90's bull market was hyooogely fueld by go-go tech stocks with a lot of "promise" and little current valuations vis a vis earning etc.
this is a "value rally" wherein the stocks that are doing best are of a different nature, sectors, capitalization etc. to a large extent than the last one
every dingdong daytrader looks FIRST at the nasdaq composite, and then at the Q's, and then at the S&P and concludes we are nowehere near the peaks of 2000
on the other hand, a current bull would look at the dow, the SPEWI, the russell, the transports, etc.
regardless, the most "fair" benchmark i guess would be the wilshire - basically the entire market.
but then one still has to decide the cap weighting, etc.
and now that we have stocks for commodities (USO, DBC , etc.) do those count?
etc,