WEEKEND AMUSEMENT

Some interesting articles in Barrons this weekend but my favorites discussed Big Caps and why they continue to lag and underwhelm investors. Just remember they are the favorite of just about each and every CNBC guest portfolio manager.

Byron Wien's take was interesting and I will quote "Large cap stocks are in a secular decline, on a relative basis, they look attractive because their price/earnings multiples seem low versus where they have been. But their prospects seem diminished compared to what they were. The critical mass of these large cap companies is based in a slow growth economy. It will be hard for them to grow at more than the nominal rate of GDP."

Henry McVey at MS with a little different take "For the large caps to lead, two things have to happen, Credit spreads have to widen and companies have to prove that they are willing to better manage their capital." He also mentions that small/mids have a bid because of leveraged buy outs in that space.

I will go with this, small/mid caps continue to outperform because of better growth prospects and a private equity put. Obviously if one were to take out a public company, the likelihood is it will be a small/mid; back to my original thesis through out the many months of this blog- if you think the markets are going higher buy the small/mids if you think the markets are going lower - go to cash.

So how much have the Big Caps underperformed in 2007:

OEX FLAT

DJIA +1.2%

NDX +3.4%

SPX +2.4%

MID + 8%

RUT +4%

That is some pretty ugly underperformance by the big caps and it is fed by the following:

MSFT -4.2%

GE -4.9%

C -7.4%

XOM +1%

BAC -5.6%

And which sectors have been the places to be invested for 2007:

The Aussie EWA index is up 17.3%, the HHH internet holder ETF is +10.6%, trannie index up 10.4%, OIH oil service holder +10.3% while the XLE oil ETF is +7.5%.

The silver stocks have again been a great place with SSRI +28.7% and PAAS + 25.5%.

RWX is an ETF that tracks Non US Real Estate equities and it is +8.3% for 2007 while the IYR is +3.2%.

Tech has also done pretty average on a relative basis as the SMH is +2.4%; GOOG +1.3% and the XLK tech ETF is +2.7%.

Finally, small cap growth is now the outperformer with a fat gain of +8.8% for 2007 while large cap growth lags at +2.5%; small cap value still red for 2007 while large cap value underwhelms at +1.7%.