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>An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't. At least i
by fauigerzigerk 7y ago
>An account at a bank that lends and kicks some back to you may be the most productive allocation in some circumstances but overwhelmingly it isn't.
At least it's better than putting money in an index ETF, because bankers making loans do actually contribute to the capital allocation process in a meaningful way.
- arcticbull 7y agoI believe thats a decision everyone has to make individually, and that's the point :)
- fauigerzigerk 7y agoOf course, but we are discussing the macroeconomic effects of those decisions. Maybe I misunderstand ...
- arcticbull 7y agoOh no I might not have been clear. I'm just taking the position that allocating capital between cash and even index ETFs is meant to be a voting mechanism of how that capital can be most effectively utilized. You're right that active capital management via the bank represents a choice by someone with experience, but that doesn't mean that it's the best use of capital. Further, even if you invest in broad market ETFs you're still picking winners. We may actually just agree here :)
- fauigerzigerk 7y ago>Further, even if you invest in broad market ETFs you're still picking winners. What you're not doing is provide capital to companies or contribute to the information processing that makes markets efficient (at least not very much). Crucially, bank loans (as well as IPOs, rights issues and bond issues) provide capital. Trading existing stocks doesn't. So when it comes to capital allocation, you're not picking winners and losers by buying an index ETF, because no capital is created at all.
- arcticbull 7y agoThis is a legitimate question, does it not set the rates for any secondary offerings?