• XLK or QQQQ?
    Posted by on October 24th, 2007 at 10:51 am

    I was recently asked what’s the difference, in trading terms, between the Nasdaq 100 (QQQQ) and the S&P 500 Tech Spyders (XLK).
    The short answer is nothing. For most circumstances, both ETFs will behave very similarly. As a proxy for the tech sector, I prefer using the XLK.
    The longer answer is that there are some differences and if you use these ETFs for trading you might want to be aware of them
    First, let me explain that the Nasdaq 100 is an index of the 100 largest nonfinancial stocks on the Nasdaq. For many years, this has been used as a proxy for large-cap tech stocks. The S&P 500 Tech index is simply a grouping of all the tech stocks in the S&P 500.
    The important thing to keep in mind about the Nasdaq is that it’s very oligarchic, meaning there are a small number of very, very big stocks, and tons of teeny, weeny stocks. The NYSE is like that as well, but it’s much more pronounced on the Nasdaq. I don’t think most investors realize how important this is. Outside of the big tech names, the NYSE still has a huge advantage over the Nasdaq.
    Not only do a few very large tech stocks have a large say in what the Nasdaq 100 does, but they tend to be strongly correlated with one another so their influence is even greater.
    Of the 500 stocks on the S&P 500, only 73 are from the Nasdaq and more than half of those are in the tech sector. Ironically, of the 500 S&P stocks, they categorize 73 as being in the tech sector.
    So for most practical uses, the QQQ and XLK will behave the same. The big difference is that the Nasdaq 100 also had a modest weighting in consumer discretionary stocks. This would be stocks like Starbucks (SBUX) or Bed Bath & Beyond (BBBY). The ETF for this sector is XLY. So while the XLK is highly correlated to the QQQ, you can improve the correlation some by holding a ratio of about 4-to-1, XLK to XLY. You can improve it some more by using a small amount of margin.
    By correlation, I mean that the daily changes are correlated by over 95%. (Note: I got my numbers using the data from the indexes, not the ETFs.) Even with that it’s still a perfect match. The big tech winners this year have come from the Nasdaq (stocks like Google or Apple), so there pushing the QQQQ more than what you might normally expect.
    Let me also add that the Rydex Inverse OTC 2x mutual fund (RYVTX) is designed to do twice what the Nasdaq 100 does each day.

  • The First Day of the Month
    Posted by on October 23rd, 2007 at 2:59 pm

    Here’s a surprising stat. Since the beginning of this decade, all of the market’s gain have come on the first day of the month. The rest of the time, the S&P 500 is down.
    image539.png
    The blue line represents the first day of the month, the black line is the S&P 500. For the decade, the S&P 500 is up 2.52% and the first day is up 33%.
    The last seven first days have all been up. In the decade, there have only been 94 first days out of nearly 2,000 trading days, or about 4.8% of the time.

  • WR Berkley Down on Earnings News
    Posted by on October 23rd, 2007 at 1:34 pm

    Shares of WR Berkley (BER) are down on what I thought were decent earnings. The company earned 93 cents a share compared with 87 cents last year. This is operating earnings as that’s the more important number to follow with insurance stocks. Wall Street was looking for 91 cents a share.
    The stock is going for less than eight times trailing earnings.

  • Does Apple Ever Go Down?
    Posted by on October 22nd, 2007 at 1:00 pm

    Seriously, it can’t go up every day.
    Can it?

  • Old School Grimace
    Posted by on October 20th, 2007 at 3:07 pm

  • Twenty Years Ago Today
    Posted by on October 19th, 2007 at 10:21 am

    image538.png
    On Monday, October 19, the Dow dropped 508 points, or 22.6%, in its worst crash in history.
    Of course, stocks came right back and the economy continued to plow ahead but that wasn’t clear at the time.
    Here’s the cover of the New York Times for the following day.
    (Doncha just love how the NYT asks “Who Gets Hurts?”)
    Here’s their lead article
    Here’s how the Washington Post covered the news.
    I also noticed this article on local reactions. What caught my eye is that at the very end. Malcolm Gladwell’s name is listed.
    What’s interesting is that the articles from two of the most important newspapers in the world don’t mention either the Alan Greenspan or the Nasdaq. It’s hard to imagine a world like that, but the Fed wasn’t considered that important not too long ago. Also, the Nasdaq was a small exchange that wasn’t widely followed.
    How things have changed.

  • Torre Out as Yankee Skipper
    Posted by on October 18th, 2007 at 4:14 pm

    Breaking news: Joe Torre is out as Yankee skipper.
    Is there a market effect? Could be. Twenty years ago tomorrow, Steinbrenner hired Billy Martin for the fifth time. That may have led to the unpleasantness of that day.

  • Odd Stat of the Day
    Posted by on October 18th, 2007 at 3:35 pm

    If you got shares of Google (GOOG) at the IPO price you would have made an average of 5% every four weeks for the last 38 months.

    At this price, if Google goes up $1 a day, that’s a decrease in its growth rate.

  • What the Market Thinks the Fed Will Do
    Posted by on October 18th, 2007 at 9:43 am

    Here’s an interesting tidbit. The Federal Reserve Bank of Cleveland has a site that tracks what the futures market thinks the Fed will do.

  • ‘Mr. Madam’ grilled in Wall Streeter’s death
    Posted by on October 18th, 2007 at 8:41 am

    This is sad and strange, but the investigation into Seth Tobias’ death has taken an odd turn:

    The aftermath of last month’s death in Jupiter of CNBC commentator and Wall Street big Seth Tobias has taken a bizarre turn.
    Billy Ash, a former Lauderdale-based gay pimp who called himself “Mr. Madam,” has become a key figure in the continuing police investigation into the death and the battle for Tobias’ millions.
    And then there’s “Tiger.” That’s the stage name of the go-go dancer at the WPB gay hangout Cupids who was supposed to be deposed in the probate fight.
    What’s going on here?
    Neither Tobias’ widow, Filomena, nor her four — Count ’em! four — high-profile lawyers, including ex-husband Jay Jacknin, are talking.
    But Ash, now based in San Diego, is.
    He told Page Two that Jupiter PD Detectives Danielle Hirsch and Brent Hoosac spent two days grilling him at home in late September.
    Ash — who was arrested at least 11 times in South Florida from 1983 through 1997 for prostitution, bouncing checks and staying in a hotel without paying, according to law enforcement records — says he was the Tobiases’ personal assistant for two years.
    He quit shortly after hedge-fund whiz Tobias, 44, was found floating in the pool of his $3 million home at the Bears Club. Ash e-mailed what appears to be a pay stub showing he received a $3,000 payment from Filomena on Sept. 2, two days before the death.
    “I have intimate knowledge about the inner workings of the couple. I booked their travels, made sure they made appointments on time, watched after their many houses,” Ash said, acknowledging that he has “a past” and that it didn’t disturb the Tobiases when he was hired.
    He said he didn’t witness the death and was flying home when it occurred.
    Jupiter PD has yet to classify Tobias’ death, and a spokesman for the medical examiner said toxicology tests are still pending.
    “At this point, this is just a death investigation,” said JPD spokesman Scott Pascarella. “We did fly to San Diego to interview Mr. Ash. We have the obligation to investigate all information presented to us.”
    The fight for Tobias’ $25 million-plus fortune, meanwhile, is really getting out there, too.
    Filomena — Seth’s wife of two years, against whom he filed for divorce, then had the case closed — is duking it out in a West Palm Beach court with Tobias’ four brothers. They are in his will and Filomena isn’t, but she claims to be the sole heir.
    Ash is scheduled to be deposed in that case Monday in his home city. Tiger the stripper was supposed to be deposed in West Palm on Oct. 4, according to court records.
    In another development Filomena, 41, who once claimed in court documents that she needs nearly $46,000 a month to live, is selling Tobias’ homes here. Two in WPB’s east side are going for a total $3.6 million, and the Bears Club mansion where the death occurred may soon go up for $6 million.