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Regarding S&P: That is my acute concern. For individual investors, they can be removed by taking an a short position corresponding to the stock's index weight.

Regarding S&P: That is my acute concern. For individual investors, they can be removed by taking an a short position corresponding to the stock's index weight. (I do this for TSLA). More broadly, it exposes people who only use index funds or don't have shorting in their tool box (passive investors for example) to big risk.

twiceaday 5mo ago
Tesla is currently 2.2% of S&P 500. If it halves, losing $800,000,000,000 usd market cap, the index will go down by 1.1%. What big risk?
- cmiles8 5mo ago
  1.1% is about 15% of the typical returns for a year in the S&P500, from a single stock. Folks and funds invest here for diversity precisely to limit such impacts. It’s a big risk and that’s why there’s a big fuss right now to keep these guys out of the index.
- re-thc 5mo ago
  > What big risk? Tesla doesn't drag everyone else down. >50% of the S&P 500 is involved with these AI providers. There will be a cascading effect.
SlinkyOnStairs 5mo ago
The risk is no longer a single company with a dumb CEO tanking. Now the risk is a massive stockmarket wide collapse. Over a third of the S&P 500 is AI heavy tech stocks. With how reliant Nvidia is on AI compute sales, there's a real risk that at least 7% of the market disappears instantly, and everything else will hurt massively as well. You can't hedge against that. There's a good chance this will have contagion solely from the sheer size of a dotcom style crash in our current stock market. Pension funds would start selling off their unrelated assets to cover their losses. Nevermind any secondary concerns; How balls deep private equity and private credit are in AI. How useless the current US administration is at both economic and monetary policy.
- deleted 5mo ago
  [deleted]
- the__alchemist 5mo ago
  Those are great points. Regarding > You can't hedge against that: Not by shorting individual stocks, but you can by deleveraging in general. Stop using margins or options, hold a larger portion of your money outside the blast zone like account balance (hopefully with interest), bonds, international.

twiceaday 5mo ago

Tesla is currently 2.2% of S&P 500. If it halves, losing $800,000,000,000 usd market cap, the index will go down by 1.1%. What big risk?

cmiles8 5mo ago
1.1% is about 15% of the typical returns for a year in the S&P500, from a single stock. Folks and funds invest here for diversity precisely to limit such impacts. It’s a big risk and that’s why there’s a big fuss right now to keep these guys out of the index.
re-thc 5mo ago
> What big risk? Tesla doesn't drag everyone else down. >50% of the S&P 500 is involved with these AI providers. There will be a cascading effect.

SlinkyOnStairs 5mo ago

The risk is no longer a single company with a dumb CEO tanking. Now the risk is a massive stockmarket wide collapse. Over a third of the S&P 500 is AI heavy tech stocks. With how reliant Nvidia is on AI compute sales, there's a real risk that at least 7% of the market disappears instantly, and everything else will hurt massively as well. You can't hedge against that. There's a good chance this will have contagion solely from the sheer size of a dotcom style crash in our current stock market. Pension funds would start selling off their unrelated assets to cover their losses. Nevermind any secondary concerns; How balls deep private equity and private credit are in AI. How useless the current US administration is at both economic and monetary policy.

deleted 5mo ago
[deleted]
the__alchemist 5mo ago
Those are great points. Regarding > You can't hedge against that: Not by shorting individual stocks, but you can by deleveraging in general. Stop using margins or options, hold a larger portion of your money outside the blast zone like account balance (hopefully with interest), bonds, international.