13 ms·

Nasdaq's Shame

425 points by imichael 7mo ago

readthenotes1 7mo ago
Two things I learned in this article: 1. Garage 2. Buy SpaceX on Day 1.
- zug_zug 7mo ago
  I learned: sell all my Nasdaq etfs prior to June.
  - tartoran 7mo ago
    The problem is that it's very hard to avoid if you have a pension plan, and millions of Americans will subsidize Elon Musk without knowing. This is really messed up.
    - MPSimmons 7mo ago
      Honestly, they're probably subsidizing Elon already via Tesla, but the super disturbing part here is what the author nails when he says the tail is wagging the dog. Indices should reflect market investment, they shouldn't drive it like this.
    - bagacrap 7mo ago
      What pension plan invests in QQQ specifically? And "pension" in the US usually implies defined-benefits, meaning you don't actually care what it invests in. If you're talking about defined-contribution retirement plans like 401k, you are very unlikely to be invested in QQQ without consciously making that decision on your own.
- Groxx 7mo ago
  Garage -> Gavage?
  - tartoran 7mo ago
    Yes, probably a typo. gavage American [guh-vahzh, ga-vazh] / gəˈvɑʒ, gaˈvaʒ / forced feeding, as by a flexible tube and a force pump.
mcs5280 7mo ago
It's a small club and you ain't in it
tartoran 7mo ago
Obligatory video from Patrick Boyle https://www.youtube.com/watch?v=8rS3fTbC7TE https://www.youtube.com/watch?v=8rS3fTbC7TE Edit: someone posted it on HN, there's already a thread for it : https://news.ycombinator.com/item?id=47388640 https://news.ycombinator.com/item?id=47388640
- alecco 7mo ago
  I don't see him even bothering to link to the original research (AFAIK Reuters and expanded by this thread's substack post who links to Reuters). His video description is all about self-promotion. And from the bits I've seen he posts it like he made the finding. That's not neighborly. I mean, it seems he is a decent content producer and presenter, but if we incentivize ripping off original research things will go bad. https://www.reuters.com/business/finance/elon-musks-spacex-weighs-nasdaq-listing-after-seeking-early-index-entry-sources-2026-03-10/ https://www.reuters.com/business/finance/elon-musks-spacex-w...
paultopia 7mo ago
Uh, can someone explain this to me like I’m 5, but somehow still have money invested in index funds? It makes me sound like my invested-in-vanguard-total-market-indexes-and-fidelity-target-date-funds money is going to be mechanically dumped into Elon Stock because of FinanceWord FinanceWord FinanceWord gobbledgook FinanceWord but is that the correct reading?
- skybrian 7mo ago
  Good question. I don't know, but I'll point out that different indexes have different rules, so someone would need to check if a change to the rules for Nasdaq indexes affects the others you mention. (Perhaps they follow what Nasdaq does somehow?)
- konaraddi 7mo ago
  My understanding: It depends on what index the fund is tracking. QQQ tracks the Nasdaq-100 so QQQ is vulnerable. VT tracks the FTSE Global All Cap Index so VT is not directly affected by Nasdaq’s choices but is still exposed to some extent because spacex is likely going to be in the aforementioned FTSE index, Nasdaq’s actions impact spacex’s market cap, and thus Nasdaq’s actions impact spacex’s position in the aforementioned FTSE index which in turn affects VT’s composition (to a smaller extent than QQQ’s). EDIT: to be clear the above are just examples with two funds (QQQ and VT)
  - mpercival531 7mo ago
    FTSE Russell is proposing changes similar to Nasdaq, with the consultation ending 18 March.
  - the__alchemist 7mo ago
    VIFAX?
    - konaraddi 7mo ago
      I think it’d be a rinse and repeat of the line of thinking for VT but more exposure than VT. From VIFAX fund’s description on vanguard: > The fund offers exposure to 500 of the largest U.S. companies
paseante 7mo ago
[flagged]
- nly 7mo ago
  Simple solution is to not invest in funds that track NASDAQ indices. There are plenty of other funds out there that track other indices from other providers.
  - mlyle 7mo ago
    Diversifying away from NASDAQ-tracking index as a component of my investments will be extremely tax costly. Maybe more costly than the gavage (as the NASDAQ/SpaceX folks seem to be betting). And most people won't even be informed that this is happening. Large markets need to be run in the public interest...
  - donkyrf 7mo ago
    This is not a simple solution if one purchased QQQ a decade or two ago.
  - paseante 7mo ago
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  - paseante 7mo ago
    [dead]
- 0xsn3k 7mo ago
  this account is obviously an LLM...
  - deaux 7mo ago
    The comment is indeed, the account as a whole hasnt seemed to be in the past.
    - InitialLastName 7mo ago
kleene_op 7mo ago
Does this only affect money invested after June 15th, or does this also devalues money invested before this date? If you don't invest anymore money in the index during the interim rebalancing period refered to by the author, then one should be alright. Right? It's really expensive to get all your marbles out, I'd rather not do it if I don't have to.
- konaraddi 7mo ago
  QQQ rebalances on a schedule. Existing holders are affected because the fund’s underlying composition will change.
  - stanislavb 7mo ago
    This. If you are invested in a Nasdaq index (e.g. QQQ), it will have to sell some of the tail and buy the necessary weighted percentage of Snake Oil. Apart from you buying snake oil, you will realise some extra capital gains/loses due to the rebalancing.
  - sethops1 7mo ago
    And to be clear it's not just QQQ; countless retirement target date funds have a Nasdaq component. That's the real target of this grift, your retirement fund.
- bagacrap 7mo ago
  Right, you are trapped if you are holding QQQ in a taxable account and have substantial gains, so you should do nothing with the shares you already have. But no, ceasing to invest in it will not save you. The rebalancing discussed in the article happens internally with you already invested dollars. But do take this moment to realize QQQ never made sense to invest in, and put your future dollars somewhere else. There are plenty of funds that overweight large cap tech but track an index that doesn't care which exchange the stock is listed on.
yieldcrv 7mo ago
Transparent enough, just trade it based on the new weightings and price direction of the underlying SpaceX The index will have cheaper options contracts than SpaceX while disproportionately subject to the same volatility That’s the biggest and most egalitarian wealth creation engine in history, aside from some government moves this administration with the currency and commodities This is only controversial because A) you’re too married to indexing and told too many people to do it B) you consider indexing to be sacrosanct for some reason, and consider inclusion to be a reward when it means nothing. this is a symptom of prosperity preaching
siavosh 7mo ago
Anyone know if vanguards VTI is immune from such practices?
- cholmon 7mo ago
  VTI just tracks the CRSP US total stock index, see https://investor.vanguard.com/investment-products/etfs/profile/vti https://investor.vanguard.com/investment-products/etfs/profi... The CRSP index itself adds new companies within 5 days of their IPO, see https://www.crsp.org/what-owning-the-market-really-means/ https://www.crsp.org/what-owning-the-market-really-means/ > The CRSP US Total Market Index, by contrast, adds all IPOs ranging from mega caps to small caps—accounting for 98% of the market—within the first five trading days of the stock’s listing. So it sounds like SpaceX will show up in VTI sooner than in the Nasdaq100, even with their new "fast entry" rule.
  - gruez 7mo ago
    The actual scheme described in the OP requires the multiplier to work, though. Otherwise it's just like any other company that's tightly held, in which case only the free float counts and the scheme unravels.
    - stockresearcher 7mo ago
      Yes. As long as the free float is at least 10%, it will get the fast track into VTI. According to their methodology guide, they use free float for weights and total shares for ranking. So this IPO would be a mega cap with a tiny weight. Totally the opposite of what a manipulator would want! https://www.crsp.org/wp-content/uploads/guides/CRSP_Market_Indexes_Methodology_Guide.pdf https://www.crsp.org/wp-content/uploads/guides/CRSP_Market_I... I know that a lot of Vanguard funds track CRSP indexes. Right about now is when I wish they had and ETF that tracks this one: https://www.crsp.org/indexes/crsp-us-total-market-ex-mega-cap-index/ https://www.crsp.org/indexes/crsp-us-total-market-ex-mega-ca...
  - BoggleOhYeah 7mo ago
    [dead]
femto 7mo ago
Why can't an index fund compute and track their own objective index, thus ignoring any distortion introduced by the Nasdaq?
- tverbeure 7mo ago
  Because when I buy QQQ expect it to track the Nasdaq-100, not something else.
- bagacrap 7mo ago
  Vast majority of index funds do not track NASDAQ 100.
  - wredcoll 7mo ago
    This is the detail I'd really like to know more about
    - bagacrap 7mo ago
      The top 3 most popular index fund ETFs track S&P500, which doesn't really pull this kind of shenanigan. Only QQQ tracks the NASDAQ 100 and it's in 5th place by assets under management. You should probably read a book about index investing if you are going to invest.
      - nighthawk454 7mo ago
        Yeah, but the S&P500 is hugely concentrated in MAG7, which are all Nasdaq listed. So when they all get sold to buy SpaceX, you can bet your butt something's gonna happen to a S&P500 ETF.
        deleted 7mo ago
        [deleted]
        bagacrap 7mo ago
        SPY is somewhat concentrated in mag7 (or the other 93 stocks in QQQ), but only a small percent of mag 7 are owned via QQQ, which has 400B aum. (Mag 7 is 19T.) The bottom line is all this fuckery is a tiny blip for most investors. It's far more concerning to me the societal harm that will come from further enriching Elon.
drgo 7mo ago
Let them eat foie gras! It was only a matter of time before they started manipulating index funds too.
- bagacrap 7mo ago
  To be fair, QQQ is not really an index fund. Unless you think that I can make up whatever arbitrary list of stocks I feel like, and call it an index, and create an ETF that tracks it, and still call that an index fund. Vanguard is probably the most principled when it comes to passive index tracking, and they do not have an ETF that tracks the NASDAQ 100 (or any fund that focuses on a single stock exchange for some inexplicable reason).
  - lotsofpulp 7mo ago
    >Unless you think that I can make up whatever arbitrary list of stocks I feel like, and call it an index, and create an ETF that tracks it, and still call that an index fund. Yes, you can. Whether or not the index makes sense for whatever one's investing goals may be is irrelevant.
    - bagacrap 7mo ago
      Then what does "index" even mean? Is Cathy Woods an index?
      - lotsofpulp 7mo ago
        In this context, I would take any list of rules that dictates buying securities to be an index. For example, a fund buys an equal number of shares of every publicly listed company. Or a fund buys securities that trade with a ticker symbol starting with the letter C. Based on that definition, one could refer to a Cathie Wood index fund to be composed of whatever she decides to buy and a bagacrap index fund to be composed of whatever bagacrap chooses to buy.
        bagacrap 7mo ago
markisus 7mo ago
I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?) But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.
- nieve 7mo ago
  https://en.wikipedia.org/wiki/Index_fund https://en.wikipedia.org/wiki/Index_fund
- MPSimmons 7mo ago
  If you are a financial brokerage and you want to offer the S&P 100 or the NASDAQ 100, you can't just do that. You have to license that - https://www.spglobal.com/spdji/en/custom-indices/solutions/ https://www.spglobal.com/spdji/en/custom-indices/solutions/ I imagine, though I don't know, that the requirement to use the index name and contents also dictates allocation.
- bagacrap 7mo ago
  Bingo. No sane investor holds QQQ because there is no academic theory behind why it should exist. Why is a stock better if it's listed on NASDAQ instead of NYSE? Can any investor answer this question? Doubt it. If you are into factor investing and you like large cap growth, you buy something like VUG. Most people should just stick with SP500 or total market. However, QQQ had a really good last 15 years and lots of investors hold it because they are chasing returns and because the marketing worked. (The managers of QQQ are legally obligated to spend X% of the fees collected on advertising the ETF, ha ha ha.)
  - maest 7mo ago
    > No sane investor holds QQQ There's more than $1T tracking Nasdaq 100, so that's an ignorant statement.
    - 7mo ago
Veserv 7mo ago
To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% ownership of the old company and are contractually required to buy 20% ownership of the new company. However, the newly added company only released 5% of its shares to the public and the founder kept hold of the remaining 95%. Those fund managers are contractually obligated to buy 20% of the newly added company, but only 5% is available. Like a short squeeze, where the squeezer buys and holds supply so there are not enough purchasable shares to cover the shorts (obligated ownership), this is a financial divide by zero. To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want. That is the scheme described: how to short squeeze retirement funds who do not even have shorts for fun and profit. Note that this is a minor variation on my post on the same underlying topic here: https://news.ycombinator.com/item?id=47392325 https://news.ycombinator.com/item?id=47392325
- bryanlarsen 7mo ago
  Yes, when SpaceX gets added to the index, it's going to skyrocket for just that reason. The other reason why SpaceX stock is going to skyrocket is because of the "infinite potential". After all, Elon is going to be God-Emperor of Mars, and how much is a piece of that worth? The OP knows this and wants a window to profit from this squeeze. For the general public index owners, the sooner it's added to the index the better, minimizing the time that traders can front run this squeeze ahead of them. Perhaps better it's not added to the indices at all, but as long as it's inevitable, the sooner the better.
  - wredcoll 7mo ago
    Being added to the index is literally the only thing causing "the squeeze" according to this description though so how does that benefit either the author or the index holder? If the stock was added to the index at a normal period then all the shares would be available.
jongjong 7mo ago
It's so bad. I could write a series of books about all the problems with the current system. There are so many. These index funds are a mechanism for monopolization of 'the market' and it affects real people and it suppresses other markets through the perverse incentive structures it creates. For example, I launched a crypto project back in 2019 which had its own decentralized exchange but ran into all sorts of hurdles with US regulations and also, the leaders of the community I was involved in were actively suppressing and slandering my project and propping up their biggest competitor's tech instead! All under the nose of regulators who approved all of it! I couldn't believe my eyes and neither could the community. But eventually it's like everyone started assuming that corruption and suppression was normal. It's insane but it's like everyone is working to satisfy the big money and nothing else matters. Truth is suppressed, companies collaborate with their competitors and with regulators to deliver inferior goods and services to people while limiting their opportunities and dialing up surveillance and control. At this stage, if I ever get the option to vote for a communist government, I would definitely take it. Unofficially, we already have the worst form of communism now except the proceeds of the loot are distributed unequally and with a massive constant psyop running to convince people that what they get or don't get is a result of their own actions. At least if we make communism official, we can shut down that psyop, acknowledge that the system is a controlled monopoly money machine and essentially just handing out money selectively and that the current criteria are arbitrary. Once people accept the reality that the system has become an automated machine (since at least a decade) and that entrepreneurship and leadership has become redundant, then we can start thinking about fair distribution of the resources which the machine produces. The self-made people are not self-made, they are system-selected. Homeless people are not all lazy or incompetent; they are system-unselected. They didn't become homeless because they were crazy; they became crazy because they were made homeless. They became crazy trying to make sense of what happened to them. They couldn't figure it out because many if them did nothing wrong. They just got caught in a mental loop trying to fix stuff that they couldn't fix because it wasn't in their control. Their fate was always in the hands of the system. I think the worst part is that some people who were given favorable treatment by the machine actually do believe that they earned their place. They don't know what it feels like to have all the algorithms suppressing their work and opportunities. They think their privileged treatment by algorithms is normal and same as everyone else.
debbiedowner 7mo ago
Tsla is 1.4T market cap, so it's almost like *ELON-stock is going to double in 1 day. It will go from 4% to 8% of qqq in 1 day. It'll happen a week or a month after IPO date though? It took fb/meta 1 year and then it entered as 1% qqq. TSLA entered 3 years after IPO so probably a small percentage. Tsla is 2% vti (2T AUM). QQQ is 400B AUM. So add those two and you get $56B of purchasing. This seems like the amount they want to raise via IPO in total in the news, so the banks who do the IPO can sell it all guaranteed. But people will want to buy it before it gets into the passive funds... So... Post inclusion market cap will be higher than we expect?
danieltanfh95 7mo ago
Really the same mechanics with crypto
- xrd 7mo ago
  I came here to say this, too. I remember hearing "500M market cap!" and then realizing that was because one person created a new token with 1M coins, bought one themselves for $500, and then started screaming "$500M market cap!" Technically it is true, but it really takes the "greater fool" theory to new heights.
runako 7mo ago
This is not a prediction. SpaceX is looking at an IPO in the range of $1.75T on revenues of ~$16B. That's ~100x revenue (let's ignore the net for the moment). How have recent IPOs done when they went out in the neighborhood of 100x revenue?
dweez 7mo ago
So sounds like this will be a great short candidate after the index re-weighting.
- bagacrap 7mo ago
  What, QQQ or SpaceX? Either way, no, high frequency trading firms are going to beat you to the punch. And shorting elons other company, just because it's over valued by traditional metrics, didn't work out that great for most traders.
  - dweez 7mo ago
    This is a slightly tongue-in-cheek way of saying that if you believe a security is severely mispriced then there is a straightforward way to express that opinion.
    - bagacrap 7mo ago
      Shorting is really not that straightforward. It is a avery advanced topic because it mandates the use of leverage. Many (most) investors are long-only, especially the ones being taken advantage of here.
      - Retric 7mo ago
        > especially the ones being taken advantage of here. This is a great argument why buying an index is a poor choice for a long term investor. You can avoid a great deal of shenanigans by randomly purchasing stocks and holding them for 50 years. Even a 0.02% annual fee costs you 1% of your long term returns over that timescale. But there’s tradeoffs to everything.
        bagacrap 7mo ago
        Index investing is a great choice for a long term investor who cares about simplicity, which should be the vast majority of them. Actually the best thing about holding individual stocks is probably the increased opportunities for TLH, but the nightmare of holding and managing hundreds of securities in your account is very seldom worth what you save on fees or deferred taxes.
SilverElfin 7mo ago
Funny how all this rule making happens so quickly for friends and family members and donors of the Trump administration. Just like it recently did for SpaceX when they got approval for launching 1 million satellites. The corruption is so out in the open, but it is happening all the time - and there are other controversies already like the Epstein files, ICE, Iran, etc - so these go unnoticed. Our political system is broken.
- cindyllm 7mo ago
  [dead]
IAmGraydon 7mo ago
Silicon Valley is mostly made up of schemes designed to defraud investors disguised as the hottest new tech startups. Elon recognized this sometime around 2020 (likely starting with his foray into the world of the crypto pump/dump) and decided to skip the formalities and go straight to the fraud, no apologies. That's been his business model ever since. His companies are just a vehicle for this now.
kmeisthax 7mo ago
Any Canadians in the room should remember this as the exact mechanism by which Nortel Networks became astronomically huge. Any time Nortel got more valuable, index funds tracking the Toronto Stock Exchange (TSE) loaded up on Nortel, amplifying the price increase. This gave the company massive amounts of capital to buy other companies with, which generated more headlines, which brought in more investor capital, which brought more index funds in. In fact, at one point Nortel was so valuable it made the TSE too homogenous to legally index, at least until Nortel lobbied Canada to change the rules regarding diversified index funds. If you aren't Canadian (like me) you can watch this Bobbybroccoli video that explains it very well: https://www.youtube.com/watch?v=I6xwMIUPHss https://www.youtube.com/watch?v=I6xwMIUPHss Spoiler alert for the Bobbybroccoli video, but it turns out this trick doesn't work forever. And when Nortel inevitably crashed it left a good chunk of Canadians as bagholders. And looking at the stock market over the past few years, where basically all the the growth is seven companies, I'm starting to wonder if we're finally seeing America's answer to the Nortel fiasco. (No, Lucent doesn't count, even though they're literally America's counterpart to Nortel. The key factor that made Nortel a problem was the lack of diversity in the Canadian market. Lucent crashed and burned in a field of hundreds of growing big-cap stocks, Nortel was an extremely big fish in a tiny pond.)
- deleted 7mo ago
  [deleted]
riffraff 7mo ago
Does the author realize the ai slop image does not make any sense? I get the allure of AI images for blogging, but for Pete's sake review what you're publishing or don't do it.
- rob74 7mo ago
  Yeah, the funnel should go into the duck's bill of course - is it still so hard to get AI image generators to respect such small but decisive details in your prompt? TIL that foie gras is made out of duck livers as well, not only geese. Not that I'm more likely to eat any now that I know that, but anyway...
newzino 7mo ago
[dead]
maest 7mo ago
Lmao inclusion after 15 days is going to throw off the waiting curve on index arb desks. The market usually prepositions a lot of volume pre-add, so much that the add day is usually a non-event. But they usually have a quarter or more to preposition. 15 days is going to cause so much volatility and chaos. And the funny thing is, the index arb desks can't really opt out of this - you can't arb all names except one in the index. What a shitshow this would be if the rules pass as presented by Nasdaq. Also, does Nasdaq think it's worth killing the reputation of their index for the spacex listing? An index is just a list that everyone agrees on following. Losing public trust in this list could mean the end of Nasdaq 100 as a serious contender. There are many alternatives that could easily take its place.
- mlrtime 7mo ago
  Very few here know what a index arb desk is and they won't care. And those desks [should] have quants that are paid a lot of money to figure this out. If they don't, they will get eaten, as they should. source: Worked on a ETF trade desk.
- iSnow 7mo ago
  >Also, does Nasdaq think it's worth killing the reputation of their index for the spacex listing? If I had to guess, they are banking on the meme-factor. Tesla is already seriously overvalued IMO b/c it's the first real meme-stock. Now, they are learning lessons from the FTX-invented low-float meme-tokens in crypto and replicate the model in stocks. The story around SpaceX with it's valid successes makes for a very good meme-stock. So, they hope that people actually want SpaceX exposure no matter what and do not understand how cancerous those low-flow/high-FDIV launches are.
finalhacker 7mo ago
rule wrecked, big one first, just like us gov current did.
edlebert_f 7mo ago
[flagged]
throwaway2037 7mo ago
> Assume SpaceX IPOs at a $1.75 trillion valuation. Clickbait or ragebait? I'm not really sure which one is appropriate here. Or maybe both? Like Aramco before their IPO with wild post-IPO valuation claims, I am sure that SpaceX will IPO with a market cap far below this estimate. Also, will the NASDAQ 100 index really fall apart if they make exception for the richest IPO valuation in US history? No. There, I said it out loud. We also survived the Alibaba IPO, and their financial structure is infinitely more shady/unreliable! Ditto for OpenAI and NASDAQ 100, which will follow shortly after. The "problem" of a single org deciding the composition of stock indices has been argued ad nauseam for the last two decades in financial media. A lot of sweat (and pearl clutching) for little gain/clarity!
kristianp 7mo ago
See also https://substack.com/@georgenoble/note/c-226667679 https://substack.com/@georgenoble/note/c-226667679 , which should be clearer as it has an example scenario spelled out.

Nasdaq's Shame

425 points by imichael 7mo ago

readthenotes1 7mo ago

Two things I learned in this article: 1. Garage 2. Buy SpaceX on Day 1.

zug_zug 7mo ago
I learned: sell all my Nasdaq etfs prior to June.
- tartoran 7mo ago
  The problem is that it's very hard to avoid if you have a pension plan, and millions of Americans will subsidize Elon Musk without knowing. This is really messed up.
  - MPSimmons 7mo ago
    Honestly, they're probably subsidizing Elon already via Tesla, but the super disturbing part here is what the author nails when he says the tail is wagging the dog. Indices should reflect market investment, they shouldn't drive it like this.
  - bagacrap 7mo ago
    What pension plan invests in QQQ specifically? And "pension" in the US usually implies defined-benefits, meaning you don't actually care what it invests in. If you're talking about defined-contribution retirement plans like 401k, you are very unlikely to be invested in QQQ without consciously making that decision on your own.
Groxx 7mo ago
Garage -> Gavage?
- tartoran 7mo ago
  Yes, probably a typo. gavage American [guh-vahzh, ga-vazh] / gəˈvɑʒ, gaˈvaʒ / forced feeding, as by a flexible tube and a force pump.

mcs5280 7mo ago

It's a small club and you ain't in it

tartoran 7mo ago

Obligatory video from Patrick Boyle https://www.youtube.com/watch?v=8rS3fTbC7TE https://www.youtube.com/watch?v=8rS3fTbC7TE Edit: someone posted it on HN, there's already a thread for it : https://news.ycombinator.com/item?id=47388640 https://news.ycombinator.com/item?id=47388640

alecco 7mo ago
I don't see him even bothering to link to the original research (AFAIK Reuters and expanded by this thread's substack post who links to Reuters). His video description is all about self-promotion. And from the bits I've seen he posts it like he made the finding. That's not neighborly. I mean, it seems he is a decent content producer and presenter, but if we incentivize ripping off original research things will go bad. https://www.reuters.com/business/finance/elon-musks-spacex-weighs-nasdaq-listing-after-seeking-early-index-entry-sources-2026-03-10/ https://www.reuters.com/business/finance/elon-musks-spacex-w...

paultopia 7mo ago

Uh, can someone explain this to me like I’m 5, but somehow still have money invested in index funds? It makes me sound like my invested-in-vanguard-total-market-indexes-and-fidelity-target-date-funds money is going to be mechanically dumped into Elon Stock because of FinanceWord FinanceWord FinanceWord gobbledgook FinanceWord but is that the correct reading?

skybrian 7mo ago
Good question. I don't know, but I'll point out that different indexes have different rules, so someone would need to check if a change to the rules for Nasdaq indexes affects the others you mention. (Perhaps they follow what Nasdaq does somehow?)
konaraddi 7mo ago
My understanding: It depends on what index the fund is tracking. QQQ tracks the Nasdaq-100 so QQQ is vulnerable. VT tracks the FTSE Global All Cap Index so VT is not directly affected by Nasdaq’s choices but is still exposed to some extent because spacex is likely going to be in the aforementioned FTSE index, Nasdaq’s actions impact spacex’s market cap, and thus Nasdaq’s actions impact spacex’s position in the aforementioned FTSE index which in turn affects VT’s composition (to a smaller extent than QQQ’s). EDIT: to be clear the above are just examples with two funds (QQQ and VT)
- mpercival531 7mo ago
  FTSE Russell is proposing changes similar to Nasdaq, with the consultation ending 18 March.
- the__alchemist 7mo ago
  VIFAX?
  - konaraddi 7mo ago
    I think it’d be a rinse and repeat of the line of thinking for VT but more exposure than VT. From VIFAX fund’s description on vanguard: > The fund offers exposure to 500 of the largest U.S. companies

paseante 7mo ago

[flagged]

nly 7mo ago
Simple solution is to not invest in funds that track NASDAQ indices. There are plenty of other funds out there that track other indices from other providers.
- mlyle 7mo ago
  Diversifying away from NASDAQ-tracking index as a component of my investments will be extremely tax costly. Maybe more costly than the gavage (as the NASDAQ/SpaceX folks seem to be betting). And most people won't even be informed that this is happening. Large markets need to be run in the public interest...
- donkyrf 7mo ago
  This is not a simple solution if one purchased QQQ a decade or two ago.
- paseante 7mo ago
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- paseante 7mo ago
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0xsn3k 7mo ago
this account is obviously an LLM...
- deaux 7mo ago
  The comment is indeed, the account as a whole hasnt seemed to be in the past.
  - InitialLastName 7mo ago

kleene_op 7mo ago

Does this only affect money invested after June 15th, or does this also devalues money invested before this date? If you don't invest anymore money in the index during the interim rebalancing period refered to by the author, then one should be alright. Right? It's really expensive to get all your marbles out, I'd rather not do it if I don't have to.

konaraddi 7mo ago
QQQ rebalances on a schedule. Existing holders are affected because the fund’s underlying composition will change.
- stanislavb 7mo ago
  This. If you are invested in a Nasdaq index (e.g. QQQ), it will have to sell some of the tail and buy the necessary weighted percentage of Snake Oil. Apart from you buying snake oil, you will realise some extra capital gains/loses due to the rebalancing.
- sethops1 7mo ago
  And to be clear it's not just QQQ; countless retirement target date funds have a Nasdaq component. That's the real target of this grift, your retirement fund.
bagacrap 7mo ago
Right, you are trapped if you are holding QQQ in a taxable account and have substantial gains, so you should do nothing with the shares you already have. But no, ceasing to invest in it will not save you. The rebalancing discussed in the article happens internally with you already invested dollars. But do take this moment to realize QQQ never made sense to invest in, and put your future dollars somewhere else. There are plenty of funds that overweight large cap tech but track an index that doesn't care which exchange the stock is listed on.

yieldcrv 7mo ago

Transparent enough, just trade it based on the new weightings and price direction of the underlying SpaceX The index will have cheaper options contracts than SpaceX while disproportionately subject to the same volatility That’s the biggest and most egalitarian wealth creation engine in history, aside from some government moves this administration with the currency and commodities This is only controversial because A) you’re too married to indexing and told too many people to do it B) you consider indexing to be sacrosanct for some reason, and consider inclusion to be a reward when it means nothing. this is a symptom of prosperity preaching

siavosh 7mo ago

Anyone know if vanguards VTI is immune from such practices?

cholmon 7mo ago
VTI just tracks the CRSP US total stock index, see https://investor.vanguard.com/investment-products/etfs/profile/vti https://investor.vanguard.com/investment-products/etfs/profi... The CRSP index itself adds new companies within 5 days of their IPO, see https://www.crsp.org/what-owning-the-market-really-means/ https://www.crsp.org/what-owning-the-market-really-means/ > The CRSP US Total Market Index, by contrast, adds all IPOs ranging from mega caps to small caps—accounting for 98% of the market—within the first five trading days of the stock’s listing. So it sounds like SpaceX will show up in VTI sooner than in the Nasdaq100, even with their new "fast entry" rule.
- gruez 7mo ago
  The actual scheme described in the OP requires the multiplier to work, though. Otherwise it's just like any other company that's tightly held, in which case only the free float counts and the scheme unravels.
  - stockresearcher 7mo ago
    Yes. As long as the free float is at least 10%, it will get the fast track into VTI. According to their methodology guide, they use free float for weights and total shares for ranking. So this IPO would be a mega cap with a tiny weight. Totally the opposite of what a manipulator would want! https://www.crsp.org/wp-content/uploads/guides/CRSP_Market_Indexes_Methodology_Guide.pdf https://www.crsp.org/wp-content/uploads/guides/CRSP_Market_I... I know that a lot of Vanguard funds track CRSP indexes. Right about now is when I wish they had and ETF that tracks this one: https://www.crsp.org/indexes/crsp-us-total-market-ex-mega-cap-index/ https://www.crsp.org/indexes/crsp-us-total-market-ex-mega-ca...
- BoggleOhYeah 7mo ago
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femto 7mo ago

Why can't an index fund compute and track their own objective index, thus ignoring any distortion introduced by the Nasdaq?

tverbeure 7mo ago
Because when I buy QQQ expect it to track the Nasdaq-100, not something else.
bagacrap 7mo ago
Vast majority of index funds do not track NASDAQ 100.
- wredcoll 7mo ago
  This is the detail I'd really like to know more about
  - bagacrap 7mo ago
    The top 3 most popular index fund ETFs track S&P500, which doesn't really pull this kind of shenanigan. Only QQQ tracks the NASDAQ 100 and it's in 5th place by assets under management. You should probably read a book about index investing if you are going to invest.
    - nighthawk454 7mo ago
      Yeah, but the S&P500 is hugely concentrated in MAG7, which are all Nasdaq listed. So when they all get sold to buy SpaceX, you can bet your butt something's gonna happen to a S&P500 ETF.
      - deleted 7mo ago
        [deleted]
      - bagacrap 7mo ago
        SPY is somewhat concentrated in mag7 (or the other 93 stocks in QQQ), but only a small percent of mag 7 are owned via QQQ, which has 400B aum. (Mag 7 is 19T.) The bottom line is all this fuckery is a tiny blip for most investors. It's far more concerning to me the societal harm that will come from further enriching Elon.

drgo 7mo ago

Let them eat foie gras! It was only a matter of time before they started manipulating index funds too.

bagacrap 7mo ago
To be fair, QQQ is not really an index fund. Unless you think that I can make up whatever arbitrary list of stocks I feel like, and call it an index, and create an ETF that tracks it, and still call that an index fund. Vanguard is probably the most principled when it comes to passive index tracking, and they do not have an ETF that tracks the NASDAQ 100 (or any fund that focuses on a single stock exchange for some inexplicable reason).
- lotsofpulp 7mo ago
  >Unless you think that I can make up whatever arbitrary list of stocks I feel like, and call it an index, and create an ETF that tracks it, and still call that an index fund. Yes, you can. Whether or not the index makes sense for whatever one's investing goals may be is irrelevant.
  - bagacrap 7mo ago
    Then what does "index" even mean? Is Cathy Woods an index?
    - lotsofpulp 7mo ago
      In this context, I would take any list of rules that dictates buying securities to be an index. For example, a fund buys an equal number of shares of every publicly listed company. Or a fund buys securities that trade with a ticker symbol starting with the letter C. Based on that definition, one could refer to a Cathie Wood index fund to be composed of whatever she decides to buy and a bagacrap index fund to be composed of whatever bagacrap chooses to buy.
      - bagacrap 7mo ago

markisus 7mo ago

I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?) But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.

nieve 7mo ago
https://en.wikipedia.org/wiki/Index_fund https://en.wikipedia.org/wiki/Index_fund
MPSimmons 7mo ago
If you are a financial brokerage and you want to offer the S&P 100 or the NASDAQ 100, you can't just do that. You have to license that - https://www.spglobal.com/spdji/en/custom-indices/solutions/ https://www.spglobal.com/spdji/en/custom-indices/solutions/ I imagine, though I don't know, that the requirement to use the index name and contents also dictates allocation.
bagacrap 7mo ago
Bingo. No sane investor holds QQQ because there is no academic theory behind why it should exist. Why is a stock better if it's listed on NASDAQ instead of NYSE? Can any investor answer this question? Doubt it. If you are into factor investing and you like large cap growth, you buy something like VUG. Most people should just stick with SP500 or total market. However, QQQ had a really good last 15 years and lots of investors hold it because they are chasing returns and because the marketing worked. (The managers of QQQ are legally obligated to spend X% of the fees collected on advertising the ETF, ha ha ha.)
- maest 7mo ago
  > No sane investor holds QQQ There's more than $1T tracking Nasdaq 100, so that's an ignorant statement.
  - 7mo ago

Veserv 7mo ago

To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% ownership of the old company and are contractually required to buy 20% ownership of the new company. However, the newly added company only released 5% of its shares to the public and the founder kept hold of the remaining 95%. Those fund managers are contractually obligated to buy 20% of the newly added company, but only 5% is available. Like a short squeeze, where the squeezer buys and holds supply so there are not enough purchasable shares to cover the shorts (obligated ownership), this is a financial divide by zero. To get the remaining 15%, which they are contractually obligated to acquire, they must purchase from the founder. As they are in violation of their contract if they fail to acquire the remaining 15%, the founder now has complete control to dictate any price they want. That is the scheme described: how to short squeeze retirement funds who do not even have shorts for fun and profit. Note that this is a minor variation on my post on the same underlying topic here: https://news.ycombinator.com/item?id=47392325 https://news.ycombinator.com/item?id=47392325

bryanlarsen 7mo ago
Yes, when SpaceX gets added to the index, it's going to skyrocket for just that reason. The other reason why SpaceX stock is going to skyrocket is because of the "infinite potential". After all, Elon is going to be God-Emperor of Mars, and how much is a piece of that worth? The OP knows this and wants a window to profit from this squeeze. For the general public index owners, the sooner it's added to the index the better, minimizing the time that traders can front run this squeeze ahead of them. Perhaps better it's not added to the indices at all, but as long as it's inevitable, the sooner the better.
- wredcoll 7mo ago
  Being added to the index is literally the only thing causing "the squeeze" according to this description though so how does that benefit either the author or the index holder? If the stock was added to the index at a normal period then all the shares would be available.

jongjong 7mo ago

It's so bad. I could write a series of books about all the problems with the current system. There are so many. These index funds are a mechanism for monopolization of 'the market' and it affects real people and it suppresses other markets through the perverse incentive structures it creates. For example, I launched a crypto project back in 2019 which had its own decentralized exchange but ran into all sorts of hurdles with US regulations and also, the leaders of the community I was involved in were actively suppressing and slandering my project and propping up their biggest competitor's tech instead! All under the nose of regulators who approved all of it! I couldn't believe my eyes and neither could the community. But eventually it's like everyone started assuming that corruption and suppression was normal. It's insane but it's like everyone is working to satisfy the big money and nothing else matters. Truth is suppressed, companies collaborate with their competitors and with regulators to deliver inferior goods and services to people while limiting their opportunities and dialing up surveillance and control. At this stage, if I ever get the option to vote for a communist government, I would definitely take it. Unofficially, we already have the worst form of communism now except the proceeds of the loot are distributed unequally and with a massive constant psyop running to convince people that what they get or don't get is a result of their own actions. At least if we make communism official, we can shut down that psyop, acknowledge that the system is a controlled monopoly money machine and essentially just handing out money selectively and that the current criteria are arbitrary. Once people accept the reality that the system has become an automated machine (since at least a decade) and that entrepreneurship and leadership has become redundant, then we can start thinking about fair distribution of the resources which the machine produces. The self-made people are not self-made, they are system-selected. Homeless people are not all lazy or incompetent; they are system-unselected. They didn't become homeless because they were crazy; they became crazy because they were made homeless. They became crazy trying to make sense of what happened to them. They couldn't figure it out because many if them did nothing wrong. They just got caught in a mental loop trying to fix stuff that they couldn't fix because it wasn't in their control. Their fate was always in the hands of the system. I think the worst part is that some people who were given favorable treatment by the machine actually do believe that they earned their place. They don't know what it feels like to have all the algorithms suppressing their work and opportunities. They think their privileged treatment by algorithms is normal and same as everyone else.

debbiedowner 7mo ago

Tsla is 1.4T market cap, so it's almost like *ELON-stock is going to double in 1 day. It will go from 4% to 8% of qqq in 1 day. It'll happen a week or a month after IPO date though? It took fb/meta 1 year and then it entered as 1% qqq. TSLA entered 3 years after IPO so probably a small percentage. Tsla is 2% vti (2T AUM). QQQ is 400B AUM. So add those two and you get $56B of purchasing. This seems like the amount they want to raise via IPO in total in the news, so the banks who do the IPO can sell it all guaranteed. But people will want to buy it before it gets into the passive funds... So... Post inclusion market cap will be higher than we expect?

danieltanfh95 7mo ago

Really the same mechanics with crypto

xrd 7mo ago
I came here to say this, too. I remember hearing "500M market cap!" and then realizing that was because one person created a new token with 1M coins, bought one themselves for $500, and then started screaming "$500M market cap!" Technically it is true, but it really takes the "greater fool" theory to new heights.

runako 7mo ago

This is not a prediction. SpaceX is looking at an IPO in the range of $1.75T on revenues of ~$16B. That's ~100x revenue (let's ignore the net for the moment). How have recent IPOs done when they went out in the neighborhood of 100x revenue?

dweez 7mo ago

So sounds like this will be a great short candidate after the index re-weighting.

bagacrap 7mo ago
What, QQQ or SpaceX? Either way, no, high frequency trading firms are going to beat you to the punch. And shorting elons other company, just because it's over valued by traditional metrics, didn't work out that great for most traders.
- dweez 7mo ago
  This is a slightly tongue-in-cheek way of saying that if you believe a security is severely mispriced then there is a straightforward way to express that opinion.
  - bagacrap 7mo ago
    Shorting is really not that straightforward. It is a avery advanced topic because it mandates the use of leverage. Many (most) investors are long-only, especially the ones being taken advantage of here.
    - Retric 7mo ago
      > especially the ones being taken advantage of here. This is a great argument why buying an index is a poor choice for a long term investor. You can avoid a great deal of shenanigans by randomly purchasing stocks and holding them for 50 years. Even a 0.02% annual fee costs you 1% of your long term returns over that timescale. But there’s tradeoffs to everything.
      - bagacrap 7mo ago
        Index investing is a great choice for a long term investor who cares about simplicity, which should be the vast majority of them. Actually the best thing about holding individual stocks is probably the increased opportunities for TLH, but the nightmare of holding and managing hundreds of securities in your account is very seldom worth what you save on fees or deferred taxes.

SilverElfin 7mo ago

Funny how all this rule making happens so quickly for friends and family members and donors of the Trump administration. Just like it recently did for SpaceX when they got approval for launching 1 million satellites. The corruption is so out in the open, but it is happening all the time - and there are other controversies already like the Epstein files, ICE, Iran, etc - so these go unnoticed. Our political system is broken.

cindyllm 7mo ago
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IAmGraydon 7mo ago

Silicon Valley is mostly made up of schemes designed to defraud investors disguised as the hottest new tech startups. Elon recognized this sometime around 2020 (likely starting with his foray into the world of the crypto pump/dump) and decided to skip the formalities and go straight to the fraud, no apologies. That's been his business model ever since. His companies are just a vehicle for this now.

kmeisthax 7mo ago

Any Canadians in the room should remember this as the exact mechanism by which Nortel Networks became astronomically huge. Any time Nortel got more valuable, index funds tracking the Toronto Stock Exchange (TSE) loaded up on Nortel, amplifying the price increase. This gave the company massive amounts of capital to buy other companies with, which generated more headlines, which brought in more investor capital, which brought more index funds in. In fact, at one point Nortel was so valuable it made the TSE too homogenous to legally index, at least until Nortel lobbied Canada to change the rules regarding diversified index funds. If you aren't Canadian (like me) you can watch this Bobbybroccoli video that explains it very well: https://www.youtube.com/watch?v=I6xwMIUPHss https://www.youtube.com/watch?v=I6xwMIUPHss Spoiler alert for the Bobbybroccoli video, but it turns out this trick doesn't work forever. And when Nortel inevitably crashed it left a good chunk of Canadians as bagholders. And looking at the stock market over the past few years, where basically all the the growth is seven companies, I'm starting to wonder if we're finally seeing America's answer to the Nortel fiasco. (No, Lucent doesn't count, even though they're literally America's counterpart to Nortel. The key factor that made Nortel a problem was the lack of diversity in the Canadian market. Lucent crashed and burned in a field of hundreds of growing big-cap stocks, Nortel was an extremely big fish in a tiny pond.)

deleted 7mo ago
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riffraff 7mo ago

Does the author realize the ai slop image does not make any sense? I get the allure of AI images for blogging, but for Pete's sake review what you're publishing or don't do it.

rob74 7mo ago
Yeah, the funnel should go into the duck's bill of course - is it still so hard to get AI image generators to respect such small but decisive details in your prompt? TIL that foie gras is made out of duck livers as well, not only geese. Not that I'm more likely to eat any now that I know that, but anyway...

newzino 7mo ago

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maest 7mo ago

Lmao inclusion after 15 days is going to throw off the waiting curve on index arb desks. The market usually prepositions a lot of volume pre-add, so much that the add day is usually a non-event. But they usually have a quarter or more to preposition. 15 days is going to cause so much volatility and chaos. And the funny thing is, the index arb desks can't really opt out of this - you can't arb all names except one in the index. What a shitshow this would be if the rules pass as presented by Nasdaq. Also, does Nasdaq think it's worth killing the reputation of their index for the spacex listing? An index is just a list that everyone agrees on following. Losing public trust in this list could mean the end of Nasdaq 100 as a serious contender. There are many alternatives that could easily take its place.

mlrtime 7mo ago
Very few here know what a index arb desk is and they won't care. And those desks [should] have quants that are paid a lot of money to figure this out. If they don't, they will get eaten, as they should. source: Worked on a ETF trade desk.
iSnow 7mo ago
>Also, does Nasdaq think it's worth killing the reputation of their index for the spacex listing? If I had to guess, they are banking on the meme-factor. Tesla is already seriously overvalued IMO b/c it's the first real meme-stock. Now, they are learning lessons from the FTX-invented low-float meme-tokens in crypto and replicate the model in stocks. The story around SpaceX with it's valid successes makes for a very good meme-stock. So, they hope that people actually want SpaceX exposure no matter what and do not understand how cancerous those low-flow/high-FDIV launches are.

finalhacker 7mo ago

rule wrecked, big one first, just like us gov current did.

edlebert_f 7mo ago

[flagged]

throwaway2037 7mo ago

> Assume SpaceX IPOs at a $1.75 trillion valuation. Clickbait or ragebait? I'm not really sure which one is appropriate here. Or maybe both? Like Aramco before their IPO with wild post-IPO valuation claims, I am sure that SpaceX will IPO with a market cap far below this estimate. Also, will the NASDAQ 100 index really fall apart if they make exception for the richest IPO valuation in US history? No. There, I said it out loud. We also survived the Alibaba IPO, and their financial structure is infinitely more shady/unreliable! Ditto for OpenAI and NASDAQ 100, which will follow shortly after. The "problem" of a single org deciding the composition of stock indices has been argued ad nauseam for the last two decades in financial media. A lot of sweat (and pearl clutching) for little gain/clarity!

kristianp 7mo ago

See also https://substack.com/@georgenoble/note/c-226667679 https://substack.com/@georgenoble/note/c-226667679 , which should be clearer as it has an example scenario spelled out.