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Sorry for being so tactless Bruce. I wrote that in the wee
hours of the morning after one last check for mail before
turning in. I was prettry worked up about it and fired straight
from the gut there, with the tact having already gone to sleep.
Sorry. It wasn't anything personal, it was the issue itself.
Let's turn this into something constructive. There's three issues
on the table here now.
1) The what and the why of the large cap vs small cap issue.
2) What to do about it
3) Quantification
As to 1:
Yes, you're absolutely right. That the Dow may 'inflate' certainly
supports your position that the disparity may not be as bad or
unnatural as it may seem to be otherwise. There are still more
factors to take into account. The Russell 2000 also has a
variable nature on the low end. Plus I wouldn't be surprised
to see any valid relation between large vs. small also being
influenced by foreign markets either - after all it's a global
economy, and the large caps are perhaps more exposed
overseas than the small caps - a strong dollar depresses sales
overseas and hence earnings for certain sectors. So I think there
are a number of things to take into account - not just one - in
constructing a qualitative argument either way..
As to 2:
I disagree with you that the disparity is of absolutely no relevance,
however if you're intending that to apply only to people who are
day trading on technicals, then I myself would let you have the
point, as I think it would be splitting hairs. However, with a longer
time frame in mind, then I would indeed disagree - I do think there
is a point where the disparity is legitimate cause for worry. Where
that point is precisely, is obviously open to debate - and of course is
being debated all over the place currently.
As to 3:
Determining where that 'point' is, where taking action is justified,
provided one accepts that the issue is of relevance in the first
place, is a *quantitative* issue. Withdrawing from the market when
you can't figure out the odds of a move being successful has its
merits as a methodology. So as far as I can see, if the objective
is to argue that folks should remain bullish long-term, then I think
it has to be gone into in greater detail and with some numbers.
I have to admit though that I can see that there is a limit to how far
one can go into the detail without it becoming a political/philosophical
issue, but nevertheless I don't think that doesn't mean that the surface
can't be scratched a little harder.
To put it in salesmanese - you don't make the sale until you've
actually dealt with all the objections, although there's usually no
harm in asking for the order too soon :-)
Personally, I'm a bear on the issue.
By the way, the weather's been lousy here all summer. LEGOLAND
ain't all that much fun in the rain. On the other hand, there's plenty
of other things to do here - the beer's great and there's lots of taxes
to spend your time paying :-)
Hugh
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