What, Me Worry?

July 19, 2007

Yes, I know all of that's right.  But I guess I just have that sickening feeling you get when you know a bear market is on the way.

I feel like one of those grizzled value investors in about 1994 saying the market looks crazy and value will have its day. (Except value IS having its day too)  But you just don't know when the tumble will happen.  And I may be dour, Matt - but at least I'm not short.  Don Friedman from our company has been short the Dow for the last year and a half.  I want you all to give him grief whenever you see him on the conference circuit...as the Dow eases past $15,000.  Beep beep..beep beep, his horn went beep beep beep. (obscure 50's song reference) 

And on the macro stuff, Matt's right, but you can't help feeling that the U.S. is the next declined empire, with China ascendant. Still, the British seem to be living pretty good in their newfound humility, and the British Pound is POUNDING the dollar.  It costs about $500 a night to stay in a half decent hotel in London these days.  Good lord.

Nice piece by Kelly Haughton, and a bit of a veiled attack - or not so veiled I guess if you're around the industry - on certain other international indexes.

I've got some other wrap-up stuff to throw in here.  The debate we had the other day with Jeremy Siegel, Rob Arnott and Gus Sauter was great.  For all of you Journal of Index readers out there, you're going to love that when it comes out in the September issue.  It got a little testy.  Gus was still a bit wound up about it when I saw him today.

Last bit:  Remember the IWM story?  OK, so I think we figured that one out.  Man, weird how no one wants to tell you their trading strategies.  A bunch of institutional players using futures long the Russell 2000 had been short IWM, and the APs, specialists, etc. holding the shares basically wanted to get out of the way of the index change.  Hence $12 million dollars on rebalance day in what was - and is again - a $11 billion dollar fund.  Cost to BGI in basis points was only about 20 grand over the 2 weeks around rebalance.

Happy indexing... 

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