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This guy is making all kinds of assumptions to get his results that can't possibly be true. On a first read it looks like he's assuming: Stocks in the passive

This guy is making all kinds of assumptions to get his results that can't possibly be true. On a first read it looks like he's assuming: Stocks in the passive investment category stay that way forever- they are never sold at any price. Money never enters or leaves the stock market Companies never issue or buy back stock. I mean with bat crazy assumptions like these, you can come up with any conclusions you want!

fallingfrog 9y ago
For one thing: as soon as the price of an asset drops far enough in the active market, all those people in the passive market holding the stock are going transition from "passive" to "active" in a hurry. So that breaks the assumption set right there: passive stocks are never truly passive.
- kgwgk 9y ago
  What do you mean? An ETF tracking the S&P 500, for example, is not going to sell a stock no matter how much does it drop (until it gets excluded from the index, of course).
  - fallingfrog 9y ago
    People can sell their shares of the ETF, and as you say, stocks can get excluded from an index.
- OscarCunningham 9y ago
  That's just not true. If I see that one of my stocks has just dropped by a huge amount that doesn't mean that it's going to carry on dropping. There's no "momentum" (at least on a short timescale).
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sova 9y ago
Such a blanket statement. I could be selling people's thumbs and toes out of my basement as part of an index fund. Not that I know anything about what it requires to become an indexed fund, but I am fairly certain there is no ethical or moral obligation to benefit the world or humanity.
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olau 9y ago
How far did you read? The author is starting from a basic state and working up from that with simple examples. Approximately halfway down the article starts considering "The Impact of Net Fund Flows".
cs702 9y ago
fallingfrog: I'm downvoting you because you clearly read only the very beginning of the OP, which goes on to address all these points head-on later on in the text. Please refrain from criticizing OP's without fully reading them!

fallingfrog 9y ago

For one thing: as soon as the price of an asset drops far enough in the active market, all those people in the passive market holding the stock are going transition from "passive" to "active" in a hurry. So that breaks the assumption set right there: passive stocks are never truly passive.

kgwgk 9y ago
What do you mean? An ETF tracking the S&P 500, for example, is not going to sell a stock no matter how much does it drop (until it gets excluded from the index, of course).
- fallingfrog 9y ago
  People can sell their shares of the ETF, and as you say, stocks can get excluded from an index.
OscarCunningham 9y ago
That's just not true. If I see that one of my stocks has just dropped by a huge amount that doesn't mean that it's going to carry on dropping. There's no "momentum" (at least on a short timescale).

deleted 9y ago

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sova 9y ago

Such a blanket statement. I could be selling people's thumbs and toes out of my basement as part of an index fund. Not that I know anything about what it requires to become an indexed fund, but I am fairly certain there is no ethical or moral obligation to benefit the world or humanity.

deleted 9y ago

[deleted]

olau 9y ago

How far did you read? The author is starting from a basic state and working up from that with simple examples. Approximately halfway down the article starts considering "The Impact of Net Fund Flows".

cs702 9y ago

fallingfrog: I'm downvoting you because you clearly read only the very beginning of the OP, which goes on to address all these points head-on later on in the text. Please refrain from criticizing OP's without fully reading them!