LIVE MARKETS-Darts, Tesla and the sad saga of picking stocks for the S&P 500

* Major U.S. indexes higher
* Euro STOXX up modestly, but highest since Feb
* Stimulus, Brexit hopes support mood
* Dollar down; gold, crude up; U.S. 10-Year Treasury yield
~0.90%


Dec 17 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
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DARTS, TESLA AND THE SAD SAGA OF PICKING STOCKS FOR THE S&P
500
The men and women who select the stocks that go into the S&P
500 have cost investors billions of dollars by leaving Tesla
out of the index for years simply by not heeding their
golden rule: passive investing beats active management almost
all the time.
Calculations by Vincent Deluard, global macro strategist at
financial services firm StoneX, also show the S&P 500 has lagged
a truer grouping of the 500 largest U.S. stocks by 2.9% the past
three quarters after the portfolio is rebalanced every month.
The S&P does not track the exact performance of the 500
largest U.S. publicly traded stocks. The index actually holds
505 stocks that are selected by a committee whose poor
decision-making is why the benchmark, which has about $4.6
trillion in investment indexed to it, has recently
underperformed, he said.
"The wise men and women of the S&P index committee are being
beaten by the proverbial monkey throwing darts at the big
board," he said in a research note to investors.
In essence, the committee isn't eating its own pudding,
Deluard argues. S&P Dow Jones Indices, which has tracked active
management versus index investing for years, has long said the
majority of active managers underperform most of the time.
Deluard said criticism is easy and he understood much of the
committee's logic, but decisions should be made by active
investors with a fiduciary duty to their clients.
For example, the exclusion of stocks with multiple shares -
one share class for the public and another for company founders,
family and others - led index funds to miss some of the biggest
rallies of 2020, such as Zoom and Pinterest,
Deluard said.
Tesla's tardy inclusion in the benchmark cost investors
dearly because the S&P would be valued $566 billion more had it
been added the first day the stock traded in 2010, he said.
Tesla's 60% surge since mid-November is mostly due to buying
in anticipation of the stock's entry in the S&P 500 next Monday,
a surge the index didn't participate in. Tesla would probably
still trade in the $300 range if index fund demand had been
spread out over time, he said.
But investors have begun to vote with their wallets, Deluard
said. The largest S&P 500 index-based ETF has seen outflows of
$60 billion since February 2018, with most of the money going
into truly passive total-market index funds, he said.
"It is time to retire the most important equity index in the
world," Deluard said.

(Herbert Lash)
*****

THE YEAR THAT WAS: BLACK SWANS MEETS NEGATIVE OIL SPILL
(1005 EST/1005 GMT)
Whether the pandemic really fits the definition of a black
swan, an unpredictably rare event, remains very much for debate.

What's 100% sure though, was that on April 20, that swan
sounded very real, quacking frantically after being covered in
black crude by a massive spill of negative priced oil.
"I’ve been through the first Gulf War, second Gulf War,
World Trade Center, dot-com crisis, and nothing came close to
this", Bob Yawger, director of energy futures at Mizuho in New
York told Reuters that day.
Indeed, never in history had prices gone below $0.
Our main story went to update 14, which is a sign of the
massive head scratching triggered by traders willing to pay good
money to avoid being physically delivered the goods they had
paid for through a contract for future delivery.
In a nutshell, the coronavirus pandemic had sapped demand
for fuel to such an extent that there was not enough storage for
the massive glut of oil present on U.S. soil.
Many non-specialists had perhaps never fully grasped oil
futures had real and concrete underlying assets.
"Funny how many oil gamblers suddenly realized they will get
the oil actually delivered", a Berlin-based equity trader
commented to Live Markets at the time.
The negative oil shock was a lot to take in for a world
facing the worst economic, financial and sanitary crisis in a
life time?
"Giddy, chatty atmosphere after yesterday’s oil price
implosion kind of like what normal work are like after a really
big Game of Thrones episode", Paul McNamara, an investment
director at GAM, wrote on twitter.
To which one of his follower answered, making a reference to
an infamous and bloody episode of the HBO hit TV show: "Red
wedding: fun for everyone to watch, not so much fun for some of
the participants".
Anyhow, on April 20, the May futures contract hit a whopping
negative of $40 and when the trading stopped, crude oil had
ended the day at a negative $37.63 a barrel, a decline of some
305%.
Here's a chart of the WTI contract year-to-date:

Some background:
UPDATE 14-Oil price crashes into negative territory for the
first time in history amid pandemic
(Julien Ponthus)
*****


NASDAQ 100 FUTURES: OUT OF SPACE AND TIME? (0910 EST/1410
GMT)
CME e-mini Nasdaq 100 Futures have hit a fresh high
in premarket trade. That said, they may be at an important
juncture in space and time. (Click on chart below)
Indeed, since September 24, or just 2 trading days after the
fall equinox turn date, Nasdaq 100 futures
established a low and rallied.
After breaking the support line from September 24 on October
19, the futures then established another trough on November 2,
27 trading days from September 24.
Using the late-September and early-November troughs allows a
rising channel to be drawn (red lines on chart).
The futures rallied into a November 9 high, but were then
repulsed by the channel parallel and the broken support line
(first yellow line) that then acted as a resistance barrier.
After a sharp setback, futures stabilized and rallied again
into a December 9 high that was capped by channel resistance.
The futures then broke the support line from the November 2
trough (2nd yellow line), but have now once again, pushed up to
the combination of the channel barrier and the underside of the
broken support line, which should act as resistance.
Additionally, there is potential for symmetry in time. It
was 27 trading days between the September 24 low and the
November 2 low. Today is the 27th trading day from the November
9 high, and it is also 2 trading days before the winter solstice
on Monday.
Thus, Nasdaq futures may potentially be out of space and
time as they battle these resistance lines which now come in
around the 12,740/12,800 area.



(Terence Gabriel)
*****


FUTURES POINTING TO HIGHER OPEN AS STIMULUS CRAWL CONTINUES
(0841 EST/1341 GMT)
U.S. equity index futures are pointing to a higher open on
Thursday, as lawmakers in Washington continued to inch toward a
new fiscal stimulus deal to support a flagging economy battered
by surging COVID-19 cases.
U.S. congressional negotiators were wrangling over details
of a $900 billion COVID-19 aid bill that leaders have vowed to
pass before going home this year, after months of back and forth
and a weekend deadline approaching.
Futures pared gains somewhat after a mixed bag of economic
data, with a further increase in weekly jobless claims to
885,000 underscoring the need for fresh fiscal support, although
the housing market remained robust.
On Wednesday, the Federal Reserve kept its benchmark
overnight interest rate near zero and pledged to continue
feeding more money into the economy through asset purchases to
combat the recession.
Below is your premarket snapshot:




(Chuck Mikolajczak)
*****

FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE:






(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)