tradeking13

Expect Further Rise in the S&P 500

So what happened to that $300bln? Did it disappear? Will it reappear when people sell? No. A stock trade (in a secondary market) has two parties: a buyer and a seller. When Party A uses MMF proceeds to buy stock from Party B, they make an exchange. After the trade, party A now is holding stock and Party B has funds held in an MMF. So, was there a withdrawl from MMFs in aggregate? No. Each party is holding each others previous position. This is why it is called trading.

The $300bln was most likely drawn down to buy shares in the multitude of secondary offerings that were done this spring/summer, to buy shares in IPOs, to buy the massive amount of new corporate bonds and Treasuries issued, among other things.

Specious arguments like these (cash on the sidelines, stocks cheap according to the IBES/Fed model, etc.) usually come toward the end of rallies when the fundamentals no longer justify the valuation.

www.hussman.net/wmc/wm...
www.hedgefolios.com/re...

4 Steps to 1050 for the S&P 500

"...the $3.5 trillion still sitting in money market funds moves off the near zero percent interest rate sidelines."

Obviously you are not familiar with the concept of a secondary market. When I take my "sideline cash" and buy stock, the seller now has that cash, so the net effect is zero. That is, the seller who formerly held the stock is now on "the sidelines".

According to Tobin's Q the Bear Market Isn't Over Yet

To get to a q-ratio below 0.40, what level would the S&P have to get to?

Long Term Investors Should Avoid Leveraged ETFs

Actually, I thought about it further. The problem is gains/losses are compounded daily since the security tries to match 2x the percentage move of the underlying index. Your situation of "If the DIA gets back to $137.90 a share, DDM will be somewhere under $66 a share, still down some $30" would only be true if the DIA got back to $137.90 in a single day (highly unlikely).

For example, if the DIA increases 4% for 12 days straight, it will go from $86 to $139 and DDM (increasing 8%) will go from $30 to $78 -- an increase of 152% vs. 60% for DIA.

It seems like the choppy up and down price action that is causing DDM to lose more of it's value than it seemingly should.

Long Term Investors Should Avoid Leveraged ETFs

Thanks for the knowledge. Most (including me) thought of these as leveraged ETFs, the same as using margin to buy the DIA. Obviously, not this is not the case.

Case in point:

10-Oct-08:
DIA: $83.60
DDM: $34.00

4-Dec-08:
DIA: $83.74
DDM: $29.42

DIA is basically flat while DDM is down 13%.

These ultras should only be used for daytrading.

Where's the Bottom?

When everyone stops asking "where's the bottom?", that's when we'll see the bottom.

They Said Housing Prices Couldn't Fall. They Lied.

The NAR is a bunch of con artists. I saw a commercial of theirs this weekend that stated that on average home prices double every 10 years. I almost fell out of my chair.