Zeev's Turnips Patch-No Politics (ZEEV)

[langostino]

Zeev - that's a tricky call for sure

Trying to separate "real" from "indices" is a tough call indeed. While it's true that they are different, and to some degree unconnected, it's also true that in many ways they are connected.

For example, each month most funds get an early estimate on the amount of inflows (some of the estimates are based on pension plans, 401k plans, etc. that are quite predictable, and others a bit less so). When they get those estimates, they very often wish to get the money into the market (or if necessary, pull it out). It is easier for them to move first by using index instruments and then in a more deliberate fashion to replace them with individual equities (or in the case of meeting outflows, to sell indices short then pick and choose which individual issues to let go of and use the proceeds to cover).

So ... be careful in drawing a hard and fast line of separation between index instruments and "real" equities.