5 ms·

Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always bas

by collabs 4mo ago

Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.

BoredPositron 4mo ago
It's inherently about him because he is the one behind these changes.
bsenftner 4mo ago
It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.
- dabidab 4mo ago
  This. People are locked in their 401k and penalized when taking it out says a lot about what it is. People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.
  - brianwawok 4mo ago
    And your proposed alternative? Please provide at least 50 years of historic returns
    - nemomarx 4mo ago
      If I could pick from any possible retirement plan, I'd want in on the UK pension system that's guaranteed to beat inflation and earnings growth. Until the money runs out, at least!
      - georgeecollins 4mo ago
        You can buy i-bonds in the US. You are limited in how much though. They are pegged above CPI. You never hear about them because no one makes money on it. And maybe it isn't that great of an investment.
      - sam1714 4mo ago
        Because it's not an actual investment and can't run out. Like US Social Security and many other national schemes, the UK is pay-as-you-go. Money coming in is immediately paid out. Any funds lying around are supposed to be for temporary imbalances, but became significant due to a major demographic imbalance: the Baby Boom.
        onraglanroad 4mo ago
        But they're not significant. The National Insurance Fund is supposed to keep a minimum overfund of £24B (at current spending). It's now at £79B. It's significantly overfunded.
    - chadgpt3 4mo ago
      Historic returns do not predict future returns.
  - coredog64 4mo ago
    A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.
    - georgeecollins 4mo ago
      I have had jobs with good 401ks and terrible ones. The terrible ones usually have some bond/ saving option. When you leave the job you stick the money in a full service brokerage IRA. The problem is when you are at the same job for too long.
  - BurningFrog 4mo ago
    You can move your 401k money between several funds at any time.
    - chasd00 4mo ago
      Exactly right, there's even ones so conservative they market themselves as cash equivalent. Basically zero gain/loss in those funds. If you're so worried then go login to your 401k and change it.
      - dabidab 4mo ago
        “Basically zero gain/loss in those funds” Right so what’s the point then? Doesn’t that prove the point: zero gain/loss with a 10% withdrawal penalty to boot.
  - the_gastropod 4mo ago
    > …says a lot about what it is Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it. (There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)
    - dabidab 4mo ago
      I mean put it in context of the OP. People putting retirement funds in a pile of companies that often have little impact on local communities they live in. They’re changing laws to fast-track sketchy IPOs, putting hard earned money at risk why? So we can send people on a death-mission to Mars? Point being, they are doing what they will with other people’s money and won’t suffer the consequences. Removing the checks and balances is exactly how financial disasters happen.
skinfaxi 4mo ago
These are indices created by private entities. They are free to change their rules are they not? Maybe this is the wake up call to the risks of concentrated passive investment vehicles the public needed.
- throwway120385 4mo ago
  If you think it's a wakeup call about passive investment I think you're asking the wrong question. The vast majority of people do not want to become experts in the financials of 800 different companies in order to maximize their account return on investment over the next 20 years. It's a part time job to do that. Some people do that successfully but most people recognize that they won't. Passive investment was supposed to be a tool for those people. If you ignore all of that, then sure they can just change the rules whenever they like. But that totally ignores the reason a lot of these rules exist in the first place. In my book we're about to get a taste of why we don't want private enterprise responsible for this stuff in the first place.
  - daveshistory 4mo ago
    Exactly all this. The whole idea of passing investing is "hardly any of us know better than the market as a whole." If you don't agree with that, then you don't agree with passive investing. Which, whatever. Live your life. But the story is not about all indices being wrong, the story is about index management being corrupted. Like bond ratings on mortgages in the run-up to 2008.
  - s1artibartfast 4mo ago
    If you dont like it, you need to choose something else. I dont know how people can keep throwing money at the thing they dont like and then complain it isnt doing what they want. "Im too busy to spend 30 minutes to move my retirement somewhere I trust" just doesnt cut it.
    - throwway120385 4mo ago
      I'm not arguing for myself, I'm arguing for the tens of millions of people who do not understand this system, are not aware of how it works, and are constantly pressured through employer plans, tax deferment, and other aspects of the system to choose the path of least resistance and put their money into a 401k. For a system to work properly it has to account for all of the users and not the top 5% or 1% of the users.
cmrdporcupine 4mo ago
"It's a big club... and you ain't in it." No, they absolutely don't fear prison (but they should). It's just the aggregate behaviour of a group of people optimizing for short term profit and self-enrichment over everything and without any need for long-term careful planning because for various reasons they are pursuing the short term at all costs.
throwway120385 4mo ago
This was always the endgame of moving away from managed pensions to 401k's. First you get everyone's retirement income into the stock market, and then you use the stock market to take it all away from them.
ashdksnndck 4mo ago
I believe the (apparently AGI-pilled?) folks running the indices are more afraid of the public’s pitchforks in the scenario where the AI stocks go public at $3T value, then increase to $30T before the index rules dictate they buy in. Hence the rule change to prevent that from happening.
- Eisenstein 4mo ago
  Changing the rules for a speculative investment is the type of things to get pitchforks, not sticking by them.
  - ashdksnndck 4mo ago
    For a moment step into the theory of mind of the AI believer. That’s the common mindset in finance today. You believe that AI is displacing white collar work, and soon with robots it will displace physical work. Your personal job is to help set the rules for stocks to be included in the index. You believe that the point of indices is for passive investors to automatically be invested in the diversified set of top public companies (weighted by market cap). During previous economic shifts, where companies went public early and were already in the index during their growth phase, passive investors broadly benefited from that growth. These new AI companies have stayed private much longer, meaning that the index has missed the opportunity to “buy low” and build up a stake so far. You believe that the owners of the leading AI companies stand to become owners of most wealth. Furthermore, that we are at an inflection point where the value of these companies rises so rapidly that delays in index investment will set in stone a permanent inequality, where early tech VC and other private funds own a huge portion of the economy. The few-$T downside risk of AI bubble popping this year feels to you like a minor concern compared to index funds being shut out of this wealth due to some arbitrary rules, which have been changed before and can be changed again. Delaying investment in these huge public companies feels like a more dangerous decision than buying in when they become public. In short, there are two possible stories here: 1) Wall Street is AGI-pilled and thinks AI companies will be worth many trillions of dollars 2) Wall Street expects the AI bubble to pop and is trying to make the public into bag holders by selling a few hundreds of billions of dollars in the IPO I think the second story actually doesn’t hold together, because Wall Street is making a bunch of correlated bets. The IPO cash is just one more source of capital, and much of it going to be used to make investments which are also correlated bets.
nradov 4mo ago
The people in charge of stock markets are mostly not the same as the people who create stock indexes. Those are run by different companies.

by collabs 4mo ago

BoredPositron 4mo ago

It's inherently about him because he is the one behind these changes.

bsenftner 4mo ago

It was never safe, he's exposed the system's design was never intended to be safe for anyone but those in charge.

dabidab 4mo ago
This. People are locked in their 401k and penalized when taking it out says a lot about what it is. People should honestly read Killing the Sacred Cows it’s an eye-opener for anyone invested in 401k.
- brianwawok 4mo ago
  And your proposed alternative? Please provide at least 50 years of historic returns
  - nemomarx 4mo ago
    If I could pick from any possible retirement plan, I'd want in on the UK pension system that's guaranteed to beat inflation and earnings growth. Until the money runs out, at least!
    - georgeecollins 4mo ago
      You can buy i-bonds in the US. You are limited in how much though. They are pegged above CPI. You never hear about them because no one makes money on it. And maybe it isn't that great of an investment.
    - sam1714 4mo ago
      Because it's not an actual investment and can't run out. Like US Social Security and many other national schemes, the UK is pay-as-you-go. Money coming in is immediately paid out. Any funds lying around are supposed to be for temporary imbalances, but became significant due to a major demographic imbalance: the Baby Boom.
      - onraglanroad 4mo ago
        But they're not significant. The National Insurance Fund is supposed to keep a minimum overfund of £24B (at current spending). It's now at £79B. It's significantly overfunded.
  - chadgpt3 4mo ago
    Historic returns do not predict future returns.
- coredog64 4mo ago
  A "401(k)" is not a monolithic entity. In practice, most employers offer a choice of funds, with the most popular being a year-targeted fund that rebalances between equities and bonds as you get closer to retirement. Having said that, you can probably dump your entire portfolio into government bonds, small cap stocks, or euro futures.
  - georgeecollins 4mo ago
    I have had jobs with good 401ks and terrible ones. The terrible ones usually have some bond/ saving option. When you leave the job you stick the money in a full service brokerage IRA. The problem is when you are at the same job for too long.
- BurningFrog 4mo ago
  You can move your 401k money between several funds at any time.
  - chasd00 4mo ago
    Exactly right, there's even ones so conservative they market themselves as cash equivalent. Basically zero gain/loss in those funds. If you're so worried then go login to your 401k and change it.
    - dabidab 4mo ago
      “Basically zero gain/loss in those funds” Right so what’s the point then? Doesn’t that prove the point: zero gain/loss with a 10% withdrawal penalty to boot.
- the_gastropod 4mo ago
  > …says a lot about what it is Doesn’t it say that it’s a retirement fund, intended to be saved until retirement age? The 10% penalty is little more than a wrist slap level deterrent, too. It’s usually like ~1 year of returns. Not a huge deal if you need to dip into it. (There’s plenty to criticize about the whole 401k system of retirement accounts. But these criticisms seem misguided)
  - dabidab 4mo ago
    I mean put it in context of the OP. People putting retirement funds in a pile of companies that often have little impact on local communities they live in. They’re changing laws to fast-track sketchy IPOs, putting hard earned money at risk why? So we can send people on a death-mission to Mars? Point being, they are doing what they will with other people’s money and won’t suffer the consequences. Removing the checks and balances is exactly how financial disasters happen.

skinfaxi 4mo ago

These are indices created by private entities. They are free to change their rules are they not? Maybe this is the wake up call to the risks of concentrated passive investment vehicles the public needed.

throwway120385 4mo ago
If you think it's a wakeup call about passive investment I think you're asking the wrong question. The vast majority of people do not want to become experts in the financials of 800 different companies in order to maximize their account return on investment over the next 20 years. It's a part time job to do that. Some people do that successfully but most people recognize that they won't. Passive investment was supposed to be a tool for those people. If you ignore all of that, then sure they can just change the rules whenever they like. But that totally ignores the reason a lot of these rules exist in the first place. In my book we're about to get a taste of why we don't want private enterprise responsible for this stuff in the first place.
- daveshistory 4mo ago
  Exactly all this. The whole idea of passing investing is "hardly any of us know better than the market as a whole." If you don't agree with that, then you don't agree with passive investing. Which, whatever. Live your life. But the story is not about all indices being wrong, the story is about index management being corrupted. Like bond ratings on mortgages in the run-up to 2008.
- s1artibartfast 4mo ago
  If you dont like it, you need to choose something else. I dont know how people can keep throwing money at the thing they dont like and then complain it isnt doing what they want. "Im too busy to spend 30 minutes to move my retirement somewhere I trust" just doesnt cut it.
  - throwway120385 4mo ago
    I'm not arguing for myself, I'm arguing for the tens of millions of people who do not understand this system, are not aware of how it works, and are constantly pressured through employer plans, tax deferment, and other aspects of the system to choose the path of least resistance and put their money into a 401k. For a system to work properly it has to account for all of the users and not the top 5% or 1% of the users.

cmrdporcupine 4mo ago

"It's a big club... and you ain't in it." No, they absolutely don't fear prison (but they should). It's just the aggregate behaviour of a group of people optimizing for short term profit and self-enrichment over everything and without any need for long-term careful planning because for various reasons they are pursuing the short term at all costs.

throwway120385 4mo ago

This was always the endgame of moving away from managed pensions to 401k's. First you get everyone's retirement income into the stock market, and then you use the stock market to take it all away from them.

ashdksnndck 4mo ago

I believe the (apparently AGI-pilled?) folks running the indices are more afraid of the public’s pitchforks in the scenario where the AI stocks go public at $3T value, then increase to $30T before the index rules dictate they buy in. Hence the rule change to prevent that from happening.

Eisenstein 4mo ago
Changing the rules for a speculative investment is the type of things to get pitchforks, not sticking by them.
- ashdksnndck 4mo ago
  For a moment step into the theory of mind of the AI believer. That’s the common mindset in finance today. You believe that AI is displacing white collar work, and soon with robots it will displace physical work. Your personal job is to help set the rules for stocks to be included in the index. You believe that the point of indices is for passive investors to automatically be invested in the diversified set of top public companies (weighted by market cap). During previous economic shifts, where companies went public early and were already in the index during their growth phase, passive investors broadly benefited from that growth. These new AI companies have stayed private much longer, meaning that the index has missed the opportunity to “buy low” and build up a stake so far. You believe that the owners of the leading AI companies stand to become owners of most wealth. Furthermore, that we are at an inflection point where the value of these companies rises so rapidly that delays in index investment will set in stone a permanent inequality, where early tech VC and other private funds own a huge portion of the economy. The few-$T downside risk of AI bubble popping this year feels to you like a minor concern compared to index funds being shut out of this wealth due to some arbitrary rules, which have been changed before and can be changed again. Delaying investment in these huge public companies feels like a more dangerous decision than buying in when they become public. In short, there are two possible stories here: 1) Wall Street is AGI-pilled and thinks AI companies will be worth many trillions of dollars 2) Wall Street expects the AI bubble to pop and is trying to make the public into bag holders by selling a few hundreds of billions of dollars in the IPO I think the second story actually doesn’t hold together, because Wall Street is making a bunch of correlated bets. The IPO cash is just one more source of capital, and much of it going to be used to make investments which are also correlated bets.

nradov 4mo ago

The people in charge of stock markets are mostly not the same as the people who create stock indexes. Those are run by different companies.