4 ms·
It is adversely selected, but it's not debt, it's equity, so price action can go real fast and nobody will be burned except folks who soberly-or-not opted into
by curuinor 6mo ago
It is adversely selected, but it's not debt, it's equity, so price action can go real fast and nobody will be burned except folks who soberly-or-not opted into this. Everyone _knows_ Elon is the way he is, so nobody will be _surprised_ at things. No surprise, no crisis.
- robertjpayne 6mo agoThey're going to force a S&P500 index listing on IPO day so we're all going to be forced to baghold this regardless of if we want to or not unless you've got $0 in any major retirement fund.
- drivebyhooting 6mo agoOh yes, thanks for reminding me. I’m going to cash out the 401(k).
- ambicapter 6mo agoYou’ll pay massive penalties on that, another option is options (heh) but I’m not finance-literate enough to know how to pull it off.
- drivebyhooting 6mo agoI’ve made my peace with the “massive penalties”. I benefited from employer match in the past. I want the money now, not when I retire.
- scuff3d 6mo agoYou gotta do what you think is best, but I hope for future you's sake you decide to not pull the money out. Or if you do you have other retirement plans. I'm trying to help my parents now their at retirement age and am seeing first hand what not planning for your future looks like. They hit retirement with nothing but a small social security check every month. Not even enough to cover rent in most places. I don't know how much you have in your 401k, but it will be worth literally hundreds of thousands more if you pull it out when you retire. You aren't just paying the penalties now, you're paying for potentially decades of compounding.
- drivebyhooting 6mo agoRetirement plan is rappelling accident before dotage.
- scuff3d 6mo agoWell can't argue with that lol But if by some tragedy you don't die young, your older self is gonna be pissed at younger you for costing him hundreds of thousands of dollars.
- abtinf 6mo agoYou can just reallocate away from an index fund.
- aaronblohowiak 6mo agoOnly penalties if you withdraw from 401k. Most 401k plans have some kind of moneymarket, bond fund, or similar
- kvuj 6mo agoYou could just buy deep out of money SP500 puts expiring in 1+ year. That way you would be "insured" against the bubble popping. The thing is, every dollar you spend on insurance is a dollar (and its interest) you lose. Furthermore, we don't know when it will pop. 1 year? 5 years? The more reasonable solution is probably gradually reduce exposure to US markets by selling SP500 shares and turning to Europe and emerging markets ETFs. No need to cash out 401k.
- timmmmmmay 6mo agoYou should backtest this strategy over the last 20 years before you make serious decisions off of the vibe from internet comments
- kvuj 6mo ago20 years is not enough. If you just look at the past 20 years, the US has had exceptional returns compared to the rest of the world. The thing is, historically, high PE ratios like what we're seeing in the US do not correlate with short term returns that are as high. Expected future returns decrease as the PE ratios go up in a pretty linear fashion. https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/guide-to-the-markets/guide-to-the-markets-slides-us/equities/gtm-peratio/ https://am.jpmorgan.com/us/en/asset-management/institutional...
- ai_slop_hater 6mo agoWhat's the point of backtesting? Does backtesting say anything about the future?
- unsnap_biceps 6mo agoThe point of backtesting is to allow you to do what you want to do with a veneer of being data driven.
- alasdair_ 6mo agoWhy 20 years? Just because we know, post hoc, the usa outperformed other places in the last 20 years, in no way means the next 20 years will be the same. If you want a different point to backtest from, try Japan in the 80s and early 90s
- glitchc 6mo agoMy money's all in Bitcoin pats himself on the back
- btown 6mo agoThe question is, is everyone integrating a special SpaceX correction in their algorithmic trading? Because if a dip in the index due to SpaceX causes old algorithms to think it’s a more structural issue (well, more than it is), and sell on that indicator, will that cause a cascade?
- itemize123 6mo agoobviously no. if algos work in china, it will work with spacex
- plorkyeran 6mo agoSo far they're only getting fastracked into Nasdaq 100, not S&P 500.
- furyofantares 6mo agoWhat are you basing this on? I'm not an expert but it looks to my like 80% of my allocation won't be tracking spacex, because it's mid cap or small cap etc, and the 20% that's in the vanguard growth index might? I assume whoever sets the rules for the fund could change the rules to say companies must be listed for X months if they want to avoid this, right? And I can change my allocation. edit: Actually wait, isn't it only nasdaq 100 that's tracking it early, after 15 days rather than 3 months of trading? So 0% of my 401k is exposed to buying it quickly after IPO already, I think.
- geertj 6mo agoSo far only Nasdaq has changed its rules and will allow fast entry in 15 trading days. S&P has not changed its rules, not yet at least. Total indexed capital of Nasdaq is 1.4T vs 16T in the S&P500. Stated reason for fast tracking is that the indices are supposed to be a broad representation of the market, and leaving a 2T company out would be a significant tracking error. I do agree that the optics of this aren’t great, and it’s rather easy to be cynical about motives.
- rendang 6mo agoIf your retirement fund is an IRA you can invest it in any stock you want. For a 401k you probably have some fund options that are not exposed to the S&P500, like emerging markets or fixed income
- tananaev 6mo agoI did a bit of research on this some time ago and it's not as bad as I originally thought. Index funds would need to count only liquid float of the company. So if Space X total valuation is 2 trillion, but float is 5%, then they need to count it as 100 billion for the purposes of index weight. Still more than I want, but not catastrophic.
- bickfordb 6mo agoMaybe this already exists, but it would be great if one of the major index ETFs omitted all the firms with problematic board governance like there is at Tesla, SpaceX.
- mandevil 6mo agoS&P500 had a rule from 2017 to 2023 that prevented companies with dual classes of shares (the sort that allow them to maintain founder control- like what GOOG and META did) that went public after the rule was instituted from ever being in the index. To be clear, META and GOOG were both in the index, but it was to prevent new companies from coming along and doing it. (I think it was related to SNAP going public?) They removed it largely because investors wanted higher returns, and the tech companies that had such dual classes (1) were doing really well, and the S&P ended up caving on that rule. 1: Perennial hot button around here Palantir did this in a more extreme fashion than most. The three founders F class shares will always be at 49.9999% of the votes and the early investors B class shares have 10 votes each as compared to the publicly traded A class shares 1 votes.
- yowlingcat 6mo ago401k rollovers into IRA aren't that hard these days and you could always use that IRA to have a more customized strategy, more specifically direct indexing of a major fund minus key ticker symbols you don't want exposure to. Of course, that all presumes that you won't regret excluding this long term.
- Ifkaluva 6mo agoFriendly reminder that SpaceX is going straight to the index—Elon agitated for it. The 401k of everybody in America is serving as a bailout fund for X and now cursor, and whatever other trash he hovers up
- raw_anon_1111 6mo agoThey are going straight to the Nasdaq. Most index investors are invested in the S&P 500
- abtinf 6mo agoNasdaq is an exchange. S&P 500 is an index. S&P 500 includes companies from multiple exchanges. Like Nvidia, which lists on Nasdaq.
- scarface_74 6mo agoNasdaq 100… https://www.morningstar.com/funds/spacex-ipo-how-index-funds-will-adapt https://www.morningstar.com/funds/spacex-ipo-how-index-funds... > Nasdaq was the first to consider a rule change that would grant mega IPOs like SpaceX early admission to its flagship Nasdaq-100 index. The exchange and index provider began a consultation period in February to assess the viability of and industry response to a proposed “fast entry” rule. The change was approved on March 30 and will be effective on May 1.