thamsenman wrote:
- quote -


My suggestion is to ignore the Nasdaq composite, both as an indicator of
"how the market's valued" and as a possible vehicle for investing (via
QQQQ).

Indices are supposed to be representative of something. The Wilshire
5000 is an excellent indicator of "the US stock market" because it
reflects the current market value of most publicly traded companies
(close to 7000 are factored into the index value). Similarly the S&P 500
is a very good indicator of how larger US stocks are doing, as it
includes most of them in its calculation. Even the Dow, with only 30
stocks, is a pretty good proxy for "large US stocks" and its performance
is actually quite correlated to the S&P 500. If you pull up the actual
stock lists for these indices you can see why -- they include all of the
important companies, in an assortment of industries that produce and
sell most stuff.

And by extension, an investment in vehicles that track these indices has
some significance, and is rational to do - you're investing in the
collective earnings power of US industry, allocated according to the
market's value placed on each enterprise (so GE, which sells a heck of a
lot of stuff, gets more of your dollars than Bed Bath & Beyond, which
does not).

And if you're interested in industry sectors for some reason, the index
publishers break down the market by sectors into sub-indices (see the
S&P and Dow Jones sector industries all of which have ETFs for them).

OK now for the Nasdaq. It's a really arbitrary group of stocks. Just as
an exercise pull up the list of the stocks in QQQQ, or its
industry-sector breakdown, and you'll see what I mean. The Nasdaq
Composite reflects the collective value of stocks that happen to be
listed for trade via NASDAQ rather than NYSE. It contains a lot of
smaller stocks, but it doesn't contain all of them (the Russell 2000
index, which ignores whether a stock is NASDAQ or NYSE listed, is a
decent proxy for small stocks). It contains a lot of tech stocks, but
it's not really a tech-stock index - it excludes a few of the most
important ones (IBM and HP for example) and a big portion of it is
non-tech (almost half is other stuff). And it excludes some very
important sectors of our economy - Finance & Energy for example. So it's
not a small-cap index, it's not a tech-stock index, and it omits some of
the most important industries entirely.

So what is it? An arbitrary list of mostly-smaller companies, dominated
by a few mega-cap tech names. Why put money into an arbitrary list of
stocks, or even address whether that arbitrary list is over- or undervalued?

Among many professional investors, the Nasdaq isn't followed -- it just
doesn't have much significance. It's volatile so is more headline-worthy
but doesn't matter much at the end of the day. Qube-Caveat Emptor!

-Tad

"bo peep" <cowartmisc1[at]yahoo.com> wrote in message
news:1166222820.973223.22380[at]t46g2000cwa.googlegroups.com...
- quote -

Ah, yes, but the number of buyers and sellers doesn't usually equal the
number of shares sold. A buyer can purchase the shares of several sellers,
or a seller can sell to more than one buyer.

Elizabeth Richardson

In article <1166222820.973223.22380[at]t46g2000cwa.googlegroups.com> ,
"bo peep" <cowartmisc1[at]yahoo.com> wrote:

- quote -

But when that happens, the price changes. If there are more
buyers than sellers, the price goes up. More sellers than
buyers, and the price goes down. Since the price has been
in the same trading range of $35 to $40 (recently moved up
towards $45) for 3 years, there must be just about the same
number of buyers and sellers. If a price goes 3 years with
no substantial change, that pretty much must be the fair price.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

John A. Weeks III wrote:
- quote -

No, there must always be *exactly* the same number of shares bought as
the number of shares sold. If you place a sell order for an extremely
large number of shares, it may be only partially filled, if an
insufficient number of corresponding buy orders have not been placed.
The exchange's market makers can handle some misalignment by buying or
selling shares themself, but they have limits.

Been there, done that, got the T-shirt...

John Cowart

John A. Weeks III wrote:
- quote -

Your definition of "fair value" makes sense for a professional
market-maker, but an investor obviously has a longer time horizon, for
which it is NOT true by definition that the market is always fairly
valued. Whether one can use publicly available data to determine if the
stock market is fairly valued has been the subject of countless
academic papers, yielding conflicting results.

In article <1166151937.110971.165920[at]t46g2000cwa.googlegroups.com> ,
"thamsenman" <KRamanujam[at]gmail.com> wrote:

- quote -

By definition, isn't it exactly fairly valued? There are a nearly
equal number of buyers and sellers at the current price. The
buyers are willing to pay the price, and the sellers are willing
to sell at that level. That seems about as fair as it can get.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

thamsenman wrote:
- quote -

The financial expert I listen to thinks that the market is quite
over-valued. Make your own judgement:

http://www.hussmanfunds.com/

"thamsenman" <KRamanujam[at]gmail.com> wrote:

- quote -

Giggle. What about it makes it undervalued? Is just that it is 1/4 of bubble
peak? Or are there some fundamental value measures that are lower than their
mean?

As with any market tip, it is just rumor and speculation unless you can
independently convince yourself of the validity.

-- Doug

Hello,

I've been hearing from some financial experts that I seem to trust that
the NASDAQ is considerably undervalued. If you are a young investor,
is it time to start putting some money to work in the NASDAQ (i.e.
QQQQ) with the assumption that tech stocks are poised for a colossal
rebound?

Just a question for giggles.