4 ms·

While I try not to comment to 'defend my views' because it's a bit lame, I have to plainly say I am not "just opening my eyes to the huge role central banks pla

While I try not to comment to 'defend my views' because it's a bit lame, I have to plainly say I am not "just opening my eyes to the huge role central banks play in the economy." I have been following markets many years, both as an investor and because I enjoy reading about economic history (also as part of my study). My whole point with that sentence was - did you ever pay attention to a Jackson Hole conference before say 2022/2021, which was previously a relatively bureaucratic non-event? I certainly didn't, and now suddenly so many people around me were trying to trade it and the S&P500 moves 5% a day on it. That's the only point of that sentence, but you seem to be extrapolating much more from it... including whether or not I even deserve to write. And are you really saying that not knowing of a Jackson Hole conference is indicative of 'not knowing anything about the past?' or whatever it is you meant there. Either way, that's just ridiculous gatekeeping of knowledge of financial markets and history based on a useless, pidgeonholed criterion - like whether or not someone is familiar with Jackson Hole. If you didn't like the article, that's totally okay, but don't be so arbitrarily dismissive.

jsmith99 4y ago
Are you the writer? In what way was the rise of Vanguard driven by cheap credit?
- antonomon 4y ago
  You can't say 1:1 directly that cheap credit = rise of Vanguard, but index funds have gotten really popular since 2008. The near-zero interest rate was the environment, and that environment was built on the Fed's policy goal of the Wealth Effect (belief of growth of assets boosts demand & spending). So, given that you could pretty much throw anything at the dart board among the giants and it would go up, indexes performed exceptionally well and capital poured into them. They were also initially seen as 'safer' post 2008 meltdown, but I think as the years passed it became less about this But their growing concentration (esp. regarding Vanguard) has also worked to naturalize some of the largest companies as a 'group.' This kind of frame became sort of unavoidable amid all of them rising, so it's hard to separate the 'cheap money' environment from Vanguard's influence growing - especially since this macro environment also allowed for their entry into other ballooning assets like real estate w/ their ETF (which has been controversial) The problem with this growing concentration is that, as Vanguard becomes a major holder of every top stock, then all those grouped assets are going to start moving more and more in lockstep the further the concentration grows. And that's less and less of a market to me, and more just a artifice unrelated to actual profitability. In all, this is another child of the post-Great Recession cheap money environment, although how directly you want to tie them together is debatable
  - chrisjc 4y ago
    Hmm, I guess I missed the point you were trying to make and assumed you were suggesting the rise of Vanguard was a result of it managing all of the investments for many of these companies prospering from all of this cheap credit.
- Jommi 4y ago
  "Index funds are a sure way to get stock-like returns with low volatility!" When cost of credit < index fund return, it just makes sense to borrow and invest in those until the gap is smaller
  - jsmith99 4y ago
    I don't think that's the issue - if you expect returns in a healthy economy to be below the cost of capital then we have bigger issues.
mjburgess 4y ago
If it helps, they weren't talking to you. As soon as you put something out there in the world people are going to have conversations about it, with their own temperaments, that they'd never have with you. You can take that personally, or realise that their comment really has nothing to do with you nor is meant for you to read it.
- antonomon 4y ago
  Yeah, that’s a good point. Thanks for mentioning it

jsmith99 4y ago

Are you the writer? In what way was the rise of Vanguard driven by cheap credit?

antonomon 4y ago
You can't say 1:1 directly that cheap credit = rise of Vanguard, but index funds have gotten really popular since 2008. The near-zero interest rate was the environment, and that environment was built on the Fed's policy goal of the Wealth Effect (belief of growth of assets boosts demand & spending). So, given that you could pretty much throw anything at the dart board among the giants and it would go up, indexes performed exceptionally well and capital poured into them. They were also initially seen as 'safer' post 2008 meltdown, but I think as the years passed it became less about this But their growing concentration (esp. regarding Vanguard) has also worked to naturalize some of the largest companies as a 'group.' This kind of frame became sort of unavoidable amid all of them rising, so it's hard to separate the 'cheap money' environment from Vanguard's influence growing - especially since this macro environment also allowed for their entry into other ballooning assets like real estate w/ their ETF (which has been controversial) The problem with this growing concentration is that, as Vanguard becomes a major holder of every top stock, then all those grouped assets are going to start moving more and more in lockstep the further the concentration grows. And that's less and less of a market to me, and more just a artifice unrelated to actual profitability. In all, this is another child of the post-Great Recession cheap money environment, although how directly you want to tie them together is debatable
- chrisjc 4y ago
  Hmm, I guess I missed the point you were trying to make and assumed you were suggesting the rise of Vanguard was a result of it managing all of the investments for many of these companies prospering from all of this cheap credit.
Jommi 4y ago
"Index funds are a sure way to get stock-like returns with low volatility!" When cost of credit < index fund return, it just makes sense to borrow and invest in those until the gap is smaller
- jsmith99 4y ago
  I don't think that's the issue - if you expect returns in a healthy economy to be below the cost of capital then we have bigger issues.

mjburgess 4y ago

If it helps, they weren't talking to you. As soon as you put something out there in the world people are going to have conversations about it, with their own temperaments, that they'd never have with you. You can take that personally, or realise that their comment really has nothing to do with you nor is meant for you to read it.

antonomon 4y ago
Yeah, that’s a good point. Thanks for mentioning it