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The discussion of this on the Bogleheads forums, a community dedicated to low-cost investing primarily via indexing, provides an interesting counter-point to Bu

The discussion of this on the Bogleheads forums, a community dedicated to low-cost investing primarily via indexing, provides an interesting counter-point to Burry's opinions: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=289284 https://www.bogleheads.org/forum/viewtopic.php?f=10&t=289284

0xcafecafe 7y ago
This is a good point: Post by ltlurker » Thu Aug 29, 2019 1:24 pm I'm an index investor, like most Bogleheads, and I subscribe to Bloomberg digital so I can read articles such as this and did see this one at lunch (EDT). I'm open to various perspectives especially if there appears to be a rationale behind them. And of course this individual was behind the "big short" so that intrigued me. If I recall correctly, I believe his position is that Index funds tend to favor the largest companies - naturally - as they're mostly market cap weighted. The S&P 500 as we've noted is widely invested in, but the Total Stock Market also has an average weighting that makes it a Large Cap Fund - by Vanguard's standards. Relatively few people directly invest in the Russell 2000 Index or even have those options in their employers' retirement plans. (I have the opportunity to invest in the Completion Index in my retirement plan so that's partway there). I think Burry sees this as an opportunity to look at small cap value, which has been out of favor and not had a good run for some time. I think he must be thinking that a reversion is going to start at some point. None of us can know when, of course. And of course others are looking at the ratio of stock valuations to GDP (apparently one of Warren Buffet's key measures) and believe that there's significance to that, as well.
- lotsofpulp 7y ago
  There are fewer publicly listed companies than ever before: https://www.nytimes.com/2018/08/04/business/shrinking-stock-market.html https://www.nytimes.com/2018/08/04/business/shrinking-stock-... >In 2015, for example, the top 200 companies by earnings accounted for all of the profits in the stock market, according to calculations by Kathleen Kahle, a professor of finance at the University of Arizona, and Professor Stulz. In aggregate, the remaining 3,281 publicly listed companies lost money. I'd love to see 2016 to 2019 stats on that, but I think there are structural advantages (proliferation of databases, price transparency) that large corps are enjoying right now with which small companies just can't compete. Technology is obviating many people (and therefore businesses), and allowing the big to get bigger with no marginal cost. Would you bet against the top ten holdings in VTI, which take 1/5th of all investments? https://investor.vanguard.com/etf/profile/portfolio/vti https://investor.vanguard.com/etf/profile/portfolio/vti And also, we know the government will bail out all large entities, especially if many voters are invested in them (which they are due to 401k/pension funds being invested in the very same companies). Who is going to outcompete the few big airlines, telecom providers, FAANG, hotel brands, car rental brands, banks, pharma companies, etc that have national and worldwide reach? I'm sure a few companies here and there might, but by and large, I bet the big players are here to stay (until the whole system breaks down, but then you have bigger problems).
- lukewrites 7y ago
  Not sure if it's mentioned in that thread yet or not (I've been meaning to post it), but Jack Bogle himself said the markets would start to get weird if 75%+ of investments were indexing: https://www.marketwatch.com/story/john-bogle-has-a-warning-for-index-fund-investors-2017-06-01 https://www.marketwatch.com/story/john-bogle-has-a-warning-f...
piker 7y ago
> a community dedicated to low-cost investing primarily via indexing Right or wrong, that must be one boring place. [Re: downvotes, The post was just intended to convey that the thesis of "put your money in the lowest cost index funds using an allocation formulatically dictated by modern portfolio theory, and don't touch it for the next 35 years" would be unlikely to provide much fresh content.]
- 0xcafecafe 7y ago
  Depends on where your interests lie. Personally I find that forum insightful.
- beat 7y ago
  A community consisting of people patting each other on the back for being so much more clever than everyone else is rarely boring to the participants. The fact that this explains a majority of self-selecting communities is purely coincidental, of course.
  - greenshackle2 7y ago
    Including Hacker News, no doubt.
    - beat 7y ago
      NO SHIT.
- lukewrites 7y ago
  You would think so, but I've been surprised at the diversity of topics on there. There's especially good stuff for folks who are interested in some of the ideas of people like William Bernstein[0], who advocate for index-based portfolios that are more complicated than the bog standard two- or three-fund ones. [0] https://www.bogleheads.org/wiki/William_Bernstein https://www.bogleheads.org/wiki/William_Bernstein

0xcafecafe 7y ago

This is a good point: Post by ltlurker » Thu Aug 29, 2019 1:24 pm I'm an index investor, like most Bogleheads, and I subscribe to Bloomberg digital so I can read articles such as this and did see this one at lunch (EDT). I'm open to various perspectives especially if there appears to be a rationale behind them. And of course this individual was behind the "big short" so that intrigued me. If I recall correctly, I believe his position is that Index funds tend to favor the largest companies - naturally - as they're mostly market cap weighted. The S&P 500 as we've noted is widely invested in, but the Total Stock Market also has an average weighting that makes it a Large Cap Fund - by Vanguard's standards. Relatively few people directly invest in the Russell 2000 Index or even have those options in their employers' retirement plans. (I have the opportunity to invest in the Completion Index in my retirement plan so that's partway there). I think Burry sees this as an opportunity to look at small cap value, which has been out of favor and not had a good run for some time. I think he must be thinking that a reversion is going to start at some point. None of us can know when, of course. And of course others are looking at the ratio of stock valuations to GDP (apparently one of Warren Buffet's key measures) and believe that there's significance to that, as well.

lotsofpulp 7y ago
There are fewer publicly listed companies than ever before: https://www.nytimes.com/2018/08/04/business/shrinking-stock-market.html https://www.nytimes.com/2018/08/04/business/shrinking-stock-... >In 2015, for example, the top 200 companies by earnings accounted for all of the profits in the stock market, according to calculations by Kathleen Kahle, a professor of finance at the University of Arizona, and Professor Stulz. In aggregate, the remaining 3,281 publicly listed companies lost money. I'd love to see 2016 to 2019 stats on that, but I think there are structural advantages (proliferation of databases, price transparency) that large corps are enjoying right now with which small companies just can't compete. Technology is obviating many people (and therefore businesses), and allowing the big to get bigger with no marginal cost. Would you bet against the top ten holdings in VTI, which take 1/5th of all investments? https://investor.vanguard.com/etf/profile/portfolio/vti https://investor.vanguard.com/etf/profile/portfolio/vti And also, we know the government will bail out all large entities, especially if many voters are invested in them (which they are due to 401k/pension funds being invested in the very same companies). Who is going to outcompete the few big airlines, telecom providers, FAANG, hotel brands, car rental brands, banks, pharma companies, etc that have national and worldwide reach? I'm sure a few companies here and there might, but by and large, I bet the big players are here to stay (until the whole system breaks down, but then you have bigger problems).
lukewrites 7y ago
Not sure if it's mentioned in that thread yet or not (I've been meaning to post it), but Jack Bogle himself said the markets would start to get weird if 75%+ of investments were indexing: https://www.marketwatch.com/story/john-bogle-has-a-warning-for-index-fund-investors-2017-06-01 https://www.marketwatch.com/story/john-bogle-has-a-warning-f...

piker 7y ago

> a community dedicated to low-cost investing primarily via indexing Right or wrong, that must be one boring place. [Re: downvotes, The post was just intended to convey that the thesis of "put your money in the lowest cost index funds using an allocation formulatically dictated by modern portfolio theory, and don't touch it for the next 35 years" would be unlikely to provide much fresh content.]

0xcafecafe 7y ago
Depends on where your interests lie. Personally I find that forum insightful.
beat 7y ago
A community consisting of people patting each other on the back for being so much more clever than everyone else is rarely boring to the participants. The fact that this explains a majority of self-selecting communities is purely coincidental, of course.
- greenshackle2 7y ago
  Including Hacker News, no doubt.
  - beat 7y ago
    NO SHIT.
lukewrites 7y ago
You would think so, but I've been surprised at the diversity of topics on there. There's especially good stuff for folks who are interested in some of the ideas of people like William Bernstein[0], who advocate for index-based portfolios that are more complicated than the bog standard two- or three-fund ones. [0] https://www.bogleheads.org/wiki/William_Bernstein https://www.bogleheads.org/wiki/William_Bernstein