3 ms·

Why do you say Vanguard will collapse?

faitswulff 10y ago
I assumed OP was talking less about Vanguard and more about the breathless tone of the article.
debatem1 10y ago
Post hoc ergo propter hoc. Articles like this showed up for Enron and MCI/WorldCom and all the others, extolling one virtue or another and showcasing their success. Now we have one for Vanguard, ergo it will fail. I'm not serious, of course. But pride does seem to come before the fall, and just out of an excess of caution I might move some money out of my vanguard funds next week.
- tim333 10y ago
  You've got to take in to account that Vanguard doesn't actually do much - just buy stocks on your behalf and charge 0.12% for doing so. If it stopped doing that because some other operator was doing it for 0.08% it wouldn't be a big deal. The bigger deal would be if the general market collapsed for some reason but that would affect everyone, not just Vanguard.
  - debatem1 10y ago
    Ok. I'm curious why you're telling me this. What's your motivation? There's certainly no point in arguing with me, since I'm both reasonably poorly informed and aware of it; I have made no bones about the fact that my post was unserious. Yet you leap to the defense of what should, after all, be a very unexciting thing. And you aren't alone in doing so. That, like this breathless article, is mildly troubling to me. These institutions should engender no loyalty, embody no attributes; only then does the market actually work. Evidence of those tendencies suggests the distorting effect of human psychology. And in tone it is too much like what we saw before the collapse for my liking.
    - askafriend 10y ago
      > Yet you leap to the defense of what should, after all, be a very unexciting thing. I actually think finance is interesting to read about and it can be exciting to try to make sense of the chaos. If all of this really was that boring, you probably wouldn't have even clicked to read the comments!
    - icebraining 10y ago
      You're reading way too much into the motivations for comments. The simplest explanation is usually the best: https://xkcd.com/386/ https://xkcd.com/386/
    - tim333 10y ago
      Well I've known Vanguard for about 30 years and am a fan as it's saved the investing public many billions over that time, certainly if you compare them to normal fund management companies even if just buying and holding shares directly is probably cheaper still. But I was just pointing out they offer a rather dull, value for money service and are not going to collapse Enron style. They could decline Sears style however.
  - deleted 10y ago
    [deleted]
- pocketsquare2 10y ago
  You're comparing Vanguard to Enron & MCI / WorldCom. Would you mind explaining your analogy? It doesn't make sense to me. I don't think, for example, my investments in Vanguard funds are precarious because they are over-leveraged in bespoke weather derivatives.
- sunnyps 10y ago
  You know that post hoc ergo propter hoc is a logical fallacy, right?
etherael 10y ago
Thought experiment. Imagine you have a class full of studious and competent students, they do well on exams and generally display the performance characteristics and output you'd expect from a class full of studious and competent students. Then the rules change. From here on in, plagiarism is no longer a code violation. The obvious happens, everyone copies from the smartest kid in the class, measured by the heretofore pretty reliable indicators of proficiency built up in the previous system. But the next year comes along, and everyone's just that little bit less certain who the smartest kid in the actual class is, so instead they start measuring by how rich his father is, or how confident he sounds when he makes his declarations. Iterate the system a few generations, and although the first iteration will indeed result in better results across the board for all students, as people become more and more unhinged from the underlying realities of scholastic performance for students as they come and go through the system, would it not stand to reason that eventually you're just going to have a bunch of idiots copying people who yell the loudest, and seem the most like they're successful?
- harry8 10y ago
  This analogy has its limitations but let's go with it a small way. Everyone has the choice to copy who they think is smart or write their own answer. Each person compares the expected value of writing their own answer with copying whoever they think is smart. Some win, some lose. As it gets harder to work out who is smart yet everyone is copying, beating that average becomes easier. That proportion of the class who are capable of beating that average have an incentive to try it. Stock picking has been massively overvalued for a long time. The costs people have paid for that value have been far too high. The index wins because it is /cheap/, the costs of investing in the index are low. As the market is now adjusting to that mispricing, among those stock pickers who can actually do it, there will be some good opportunities. Stock picking, whether buy someone like Buffet, or by an algo shop or whatever isn't going to go away. Every time the market is mispriced there's an opportunity. Price will end up somewhere close to value in the long run. It's amazing that with index funds it took so very long to happen. Malkiel pointed it out pretty clearly in a popular book that hasn't been out of print since, what, 40+ years ago. It's great, everyone should read it for its market insights, especially if you want to pick stocks. https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
puranjay 10y ago
Stretch the timescale long enough and everything will collapse. In the case of financial institutions, this timescale is often within a human lifespan. So you might be wrong today, might be wrong tomorrow, but if you bet on failure, you will eventually be right.
- tonyedgecombe 10y ago
  In an apocalypse type scenario all bets are off anyway so you might as well ignore it.
- spinchange 10y ago
  Your bet can remain wrong longer than you can remain solvent.

I assumed OP was talking less about Vanguard and more about the breathless tone of the article.

Post hoc ergo propter hoc. Articles like this showed up for Enron and MCI/WorldCom and all the others, extolling one virtue or another and showcasing their success. Now we have one for Vanguard, ergo it will fail. I'm not serious, of course. But pride does seem to come before the fall, and just out of an excess of caution I might move some money out of my vanguard funds next week.

tim333 10y ago
You've got to take in to account that Vanguard doesn't actually do much - just buy stocks on your behalf and charge 0.12% for doing so. If it stopped doing that because some other operator was doing it for 0.08% it wouldn't be a big deal. The bigger deal would be if the general market collapsed for some reason but that would affect everyone, not just Vanguard.
- debatem1 10y ago
  Ok. I'm curious why you're telling me this. What's your motivation? There's certainly no point in arguing with me, since I'm both reasonably poorly informed and aware of it; I have made no bones about the fact that my post was unserious. Yet you leap to the defense of what should, after all, be a very unexciting thing. And you aren't alone in doing so. That, like this breathless article, is mildly troubling to me. These institutions should engender no loyalty, embody no attributes; only then does the market actually work. Evidence of those tendencies suggests the distorting effect of human psychology. And in tone it is too much like what we saw before the collapse for my liking.
  - askafriend 10y ago
    > Yet you leap to the defense of what should, after all, be a very unexciting thing. I actually think finance is interesting to read about and it can be exciting to try to make sense of the chaos. If all of this really was that boring, you probably wouldn't have even clicked to read the comments!
  - icebraining 10y ago
    You're reading way too much into the motivations for comments. The simplest explanation is usually the best: https://xkcd.com/386/ https://xkcd.com/386/
  - tim333 10y ago
    Well I've known Vanguard for about 30 years and am a fan as it's saved the investing public many billions over that time, certainly if you compare them to normal fund management companies even if just buying and holding shares directly is probably cheaper still. But I was just pointing out they offer a rather dull, value for money service and are not going to collapse Enron style. They could decline Sears style however.
- deleted 10y ago
  [deleted]
pocketsquare2 10y ago
You're comparing Vanguard to Enron & MCI / WorldCom. Would you mind explaining your analogy? It doesn't make sense to me. I don't think, for example, my investments in Vanguard funds are precarious because they are over-leveraged in bespoke weather derivatives.
sunnyps 10y ago
You know that post hoc ergo propter hoc is a logical fallacy, right?

etherael 10y ago

Thought experiment. Imagine you have a class full of studious and competent students, they do well on exams and generally display the performance characteristics and output you'd expect from a class full of studious and competent students. Then the rules change. From here on in, plagiarism is no longer a code violation. The obvious happens, everyone copies from the smartest kid in the class, measured by the heretofore pretty reliable indicators of proficiency built up in the previous system. But the next year comes along, and everyone's just that little bit less certain who the smartest kid in the actual class is, so instead they start measuring by how rich his father is, or how confident he sounds when he makes his declarations. Iterate the system a few generations, and although the first iteration will indeed result in better results across the board for all students, as people become more and more unhinged from the underlying realities of scholastic performance for students as they come and go through the system, would it not stand to reason that eventually you're just going to have a bunch of idiots copying people who yell the loudest, and seem the most like they're successful?

harry8 10y ago
This analogy has its limitations but let's go with it a small way. Everyone has the choice to copy who they think is smart or write their own answer. Each person compares the expected value of writing their own answer with copying whoever they think is smart. Some win, some lose. As it gets harder to work out who is smart yet everyone is copying, beating that average becomes easier. That proportion of the class who are capable of beating that average have an incentive to try it. Stock picking has been massively overvalued for a long time. The costs people have paid for that value have been far too high. The index wins because it is /cheap/, the costs of investing in the index are low. As the market is now adjusting to that mispricing, among those stock pickers who can actually do it, there will be some good opportunities. Stock picking, whether buy someone like Buffet, or by an algo shop or whatever isn't going to go away. Every time the market is mispriced there's an opportunity. Price will end up somewhere close to value in the long run. It's amazing that with index funds it took so very long to happen. Malkiel pointed it out pretty clearly in a popular book that hasn't been out of print since, what, 40+ years ago. It's great, everyone should read it for its market insights, especially if you want to pick stocks. https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

puranjay 10y ago

Stretch the timescale long enough and everything will collapse. In the case of financial institutions, this timescale is often within a human lifespan. So you might be wrong today, might be wrong tomorrow, but if you bet on failure, you will eventually be right.

tonyedgecombe 10y ago
In an apocalypse type scenario all bets are off anyway so you might as well ignore it.
spinchange 10y ago
Your bet can remain wrong longer than you can remain solvent.