MARKET COMMENT
Spotting Market Tops

By Maynard Paton (TMFMayn)
February 10, 2004

A sure sign that a market is forming a top is when an index or fund is launched that tracks its performance.

When it comes to shares, the classic example is the techMARK. Formed in November 1999, the technology index managed to catch only the last four months of the late 1990s Internet bubble before it all went sour. There was also the launch of the iShare exchange traded fund during February 2000, which started tracking the FTSE 100 just two months into the longest bear market for a generation.

With the stock market in the doldrums, investors have been inundated with alternative yardsticks and trackers. These include two new property market indices (from the Financial Times and the Office of the Deputy Prime Minister, no less), the Gold Bullion Securities (LSE: GBS) exchange traded fund, the FTSE Hedge index and even the Stanley Gibbons (LSE: SGI) Stamp Index. The common theme, of course, is that house prices, gold, hedge funds and stamps have all done particularly well in recent years.

The plethora of new market benchmarks and funds is not surprising. Sadly, most investors have the unfortunate habit of following the current crop of outperforming asset classes (also know as 'recent event syndrome'). Promoters of financial information and products are only too pleased to oblige though, since the associated marketing can help pump fresh money in to that particular market and generate just that little bit more profit.

How long in the limelight the aforementioned alternatives to shares -- and their related indices and funds -- will spend is anybody's guess. But the additional interest should not encourage sensible investors to climb on board. In fact, the best time to buy is when organisations give up following particular markets. Don't forget, all the major tech indices have doubled following Deutsche Borse's announcement in September 2002 that it planned to scrap its tech-focused Neuer Markt.