4 ms·

The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching do

The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli, stop following them. (It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055 https://news.ycombinator.com/item?id=48364055.)

zuzululu 5mo ago
Not really seeing the issue you are raising. Seems like a pretty nuanced thread.
aeternum 5mo ago
Yes, I think given that misinfo this was probably the right decision by S&P, everyone would be saying I told you so and screaming about providing exit liquidity. My prediction is that this will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs. Only time will tell.
- JumpCrisscross 5mo ago
  > given that misinfo this was probably the right decision by S&P The misinformation was almost certainly not taken into account, and it shouldn’t have been. > everyone would be saying I told you so and screaming Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine. > will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.
- nothercastle 5mo ago
  They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.
  - philistine 5mo ago
    Exactly. There is this undercurrent of The End Times everywhere, that this is it. This is the end of ... everything that was. When in fact it is not the end times, and the people at those indexes want to exist longer than SpaceX.
    - aeternum 5mo ago
      Index investors often believe that indexes work well because they average everything out. The reality is something like 96% of public companies underperform treasuries. ref: https://paretoinvestor.substack.com/p/why-96-of-stocks-are-dead-weight https://paretoinvestor.substack.com/p/why-96-of-stocks-are-d...
      - imtringued 5mo ago
        That blog post is garbage and fails to accurately convey the paper it is based on. >I rely on the Center for Research in Securities Prices (CRSP) monthly stock return database, which contains all common stocks listed on the NYSE, Amex, and NASDAQ exchanges. Of all monthly common stock returns contained in the CRSP database from 1926 to 2016, only 47.8% are larger than the one-month Treasury rate in the same month. In fact, less than half of monthly CRSP common stock returns are positive. When focusing on stocks’ full lifetimes (from the beginning of the sample in 1926 or first appearance in CRSP through the 2016 end of the sample or delisting from CRSP), just 42.6% of common stocks, slightly less than three out of seven, have a buy-and-hold return (inclusive of reinvested dividends) that exceeds the return to holding one-month Treasury Bills over the matched horizon. More than half of CRSP common stocks deliver negative lifetime returns. The single most frequent outcome (when returns are rounded to the nearest 5%) observed for individual common stocks over their full lifetimes is a loss of 100%. >Individual common stocks tend to have rather short lives. The median time that a stock is listed on the CRSP database between 1926 and 2016 is seven and a half years. To assess whether individual stocks generate positive returns over the full ninety years of available CRSP data, I conduct bootstrap simulations. In particular, I assess the likelihood that a strategy that holds one stock selected at random during each month from 1926 to 2016 would have generated an accumulated 90-year return (ignoring any transaction costs) that exceeds various benchmarks. In light of the well-documented small-firm effect (whereby smaller firms earn higher average returns than large, as originally documented by Banz, 1980) it might have been anticipated that individual stocks would tend to outperform the value-weighted market. In fact, repeating the random selection process many times, I find that the single stock strategy underperformed the value-weighted market over the full ninety years in ninety six percent of the simulations. The single-stock strategy underperformed the one-month Treasury bill over the 1926 to 2016 period in seventy three percent of the simulations. >The fact that the overall stock market generates long term returns sufficiently large to be referred to as a puzzle, while the majority of individual stocks fail to even match Treasury bills, can be attributed to the fact that the distribution of stock returns is positively skewed. Simply put, large positive returns to a few stocks offset the modest or negative returns to more typical stocks. https://obj.portfolioconstructionforum.edu.au/articles_perspectives/Portfolio-Construction-Forum-HB_Do-Stocks-Outperform-Treasury-Bills.pdf https://obj.portfolioconstructionforum.edu.au/articles_persp... Compare this to the blog post: >The implication is devastating for index fund orthodoxy: When you own a broad market index, you’re mathematically forcing yourself to hold the 96.6% of stocks that create no value while simultaneously diluting your exposure to the 3.4% that generate all returns. The professor just told you that investing in any individual stock is a terrible decision and that investing in more stocks means having greater exposure to the stocks that do net a return, creating a puzzle, where diversification doesn't reduce yields, in fact it did the opposite: it increases the yields. There's also a general fallacy that any index (directly referred to as index orthodoxy) has to be a "broad market index", when in reality there are many competing indices. If someone came up with an index that would follow any investment strategy the blog post suggests and it turns out to work reliably, then people would switch part of their portfolio to that index. "Index othrodoxy" would prevail, because people just need a better index rather than abandoning the idea of an index altogether. It's also difficult to reconcile with the fact that after fees, most active funds have failed to net higher returns to their investors. This random blog post is basically delivering an active investment strategy on a silver platter that will make fund managers and the people investing into it rich, is this believable? Consider that it's written in a "shocking" AI style, trying to sell you something. Funnily enough, the ad in the middle of the blog post "The U.S. Treasury collapse is HERE!" is incompatible with the premise of the article, that 96% of stocks are worse than treasuries. >But even if we use the more moderate 80/20 framing, the strategic implication is identical: If 80% of market returns come from 20% of stocks, why would you construct a portfolio that treats all five hundred stocks in the S&P 500 equally? The thing is, you don't have to do that, like at all. There are indices like the S&P 500 Pure Value and S&P 500 Enhanced Value that are known to outperform the regular S&P 500. The problem is that they have done so over the long term and long term really means long term. There have been decades where they underperform. Also, the article is three times as long as it needs to be, it's clearly AI generated. Edit: Invesco renamed their ETF to S&P 500 Concentrated QVM.
- yfg2 5mo ago
  lol what You can just wait for the price to drop post ipo as it usually does if you actually want to invest.
stubish 5mo ago
What was the common misconception?
- JumpCrisscross 5mo ago
  > What was the common misconception? That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic). The top comment and most of its subthreads are run-of-the-mill alarmism.
  - throw0101a 5mo ago
    > The top comment and most of its subthreads are run-of-the-mill alarmism. Worth considering: * https://en.wikipedia.org/wiki/Prevention_paradox https://en.wikipedia.org/wiki/Prevention_paradox And the rules for the NASDAQ 100 were changed, as were MSCI and CRSP: * https://www.schwab.com/learn/story/some-indexes-accelerate-entry-massive-ipos https://www.schwab.com/learn/story/some-indexes-accelerate-e...
    - JumpCrisscross 5mo ago
      Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change. The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500. The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees by switching target funds.
      - willis936 5mo ago
        As they should have. The rules were in flight with a layover time measured in days on assets that are managed on the timescale of years. There was a legitimate reason to act urgently. It's easy to make claims in hindsight but the information on hand it was 100% the right call to protect your investments. This is not misinformation. Misinformation is saying the proposed rule change and their proximity to trillion dollar IPOs introduced no risk. Please do not spread such misinformation.
insane_dreamer 5mo ago
S&P wasn't fait accompli, but the NASDAQ 100 was
- JumpCrisscross 5mo ago
  > S&P wasn't fait accompli, but the NASDAQ 100 was Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.
  - dogwalker5000 5mo ago
    The fact that a fast track was even considered is controversial IMHO. People flipping out, especially if their retirement is tied up with those indices, is to be expected. No one wants to be a bag holder for billionaire insiders.
    - loeg 5mo ago
      You're making a similar mistake treating it as fait accompli that SpaceX will tank between IPO and some future date, but that isn't a given either.
      - XorNot 5mo ago
        SpaceX is not worth $1 trillion, when most of that valuation is based on xAI being worth far more then their already dominant position in the space launch business.
      - gopher_space 5mo ago
        It's more about sidestepping the waves of market manipulation.
      - insane_dreamer 5mo ago
        sure it's not a given, but I certainly am not confident enough that it won't happen to bet my money in it, which I would automatically be doing if it was admitted to the SP500
karp773 5mo ago
What's the urgency to bend the rules? It is not like SpaceX is banned for good. It will be included as soon as it meets the requirements.
- JumpCrisscross 5mo ago
  > What's the urgency to bend the rules? If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund. Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.
  - WarmWash 5mo ago
    Yeah, but is SpaceX actually worth $1T or does Elon just think that because of how Tesla investors value Tesla?
    - queuebert 5mo ago
      Historically a $1T market cap with a PE of 20.0 would be achievable with a $50B/yr profit. That seems easily achievable eventually for SpaceX, as it has actual hardware and services and IP.
      - SwellJoe 5mo ago
        It's years away from $50B/year profit, if it ever gets there. The IPO valuation is insane.
        duttish 5mo ago
        Plus they now also have to compensate for the giant money fire called xai and the nazi cuddle huddle X/Twitter. The valuation is insane and the very low float plus short timeframe for actual price discovery just seems built to extract money from index investors. They can follow the same rules as everyone else.
mapt 5mo ago
Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli. Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get rolled back if powerful and widespread public dissent makes itself known, as it did in this case. When they don't really care about the issue, they might cancel it at the first sign that anyone has an issue. We can't know their degree of insistence just based on outcomes in these cases.
- JumpCrisscross 5mo ago
  > the doom pitches as a necessary political backlash It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers. There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.
tasty_freeze 5mo ago
Do you think that all the alarm had any effect on the blocking of the rule change? Is the right time to complain about a possible change is after it has been decided?
- loeg 5mo ago
  I don't think doom and gloom on HN had any effect, no.
  - lokar 5mo ago
    It was much broader then HN
- JumpCrisscross 5mo ago
  > Do you think that all the alarm had any effect Nope. S&P management probably wanted the rule changes passed.
protocolture 5mo ago
>if ... YouTuber... stop following them. Great advice.
nobodyandproud 5mo ago
Wrong. HN has been speculating on how wealth would be extracted from 401k and IRAs at least since the November elections in 2024. Far before any influencers even thought this would be a thing. I thought forced cryptocurrency funds, but it turned out to be something else.
golden-face 5mo ago
Oh come on Jump, how can you deny it's not shady? I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.
- JumpCrisscross 5mo ago
  > how can you deny it's not shady? It wasn't. It's dumb. But that's different from shady. At the end of the day, the market never priced in the S&P making this decision because the default understanding was a public consultation by S&P goes nowhere. Influencers ran with a consultation being a fait accompli and now anyone saying otherwise is licking billionaire balls.
l23k4 5mo ago
[flagged]

zuzululu 5mo ago

Not really seeing the issue you are raising. Seems like a pretty nuanced thread.

aeternum 5mo ago

Yes, I think given that misinfo this was probably the right decision by S&P, everyone would be saying I told you so and screaming about providing exit liquidity. My prediction is that this will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs. Only time will tell.

JumpCrisscross 5mo ago
> given that misinfo this was probably the right decision by S&P The misinformation was almost certainly not taken into account, and it shouldn’t have been. > everyone would be saying I told you so and screaming Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine. > will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.
nothercastle 5mo ago
They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.
- philistine 5mo ago
  Exactly. There is this undercurrent of The End Times everywhere, that this is it. This is the end of ... everything that was. When in fact it is not the end times, and the people at those indexes want to exist longer than SpaceX.
  - aeternum 5mo ago
    Index investors often believe that indexes work well because they average everything out. The reality is something like 96% of public companies underperform treasuries. ref: https://paretoinvestor.substack.com/p/why-96-of-stocks-are-dead-weight https://paretoinvestor.substack.com/p/why-96-of-stocks-are-d...
    - imtringued 5mo ago
      That blog post is garbage and fails to accurately convey the paper it is based on. >I rely on the Center for Research in Securities Prices (CRSP) monthly stock return database, which contains all common stocks listed on the NYSE, Amex, and NASDAQ exchanges. Of all monthly common stock returns contained in the CRSP database from 1926 to 2016, only 47.8% are larger than the one-month Treasury rate in the same month. In fact, less than half of monthly CRSP common stock returns are positive. When focusing on stocks’ full lifetimes (from the beginning of the sample in 1926 or first appearance in CRSP through the 2016 end of the sample or delisting from CRSP), just 42.6% of common stocks, slightly less than three out of seven, have a buy-and-hold return (inclusive of reinvested dividends) that exceeds the return to holding one-month Treasury Bills over the matched horizon. More than half of CRSP common stocks deliver negative lifetime returns. The single most frequent outcome (when returns are rounded to the nearest 5%) observed for individual common stocks over their full lifetimes is a loss of 100%. >Individual common stocks tend to have rather short lives. The median time that a stock is listed on the CRSP database between 1926 and 2016 is seven and a half years. To assess whether individual stocks generate positive returns over the full ninety years of available CRSP data, I conduct bootstrap simulations. In particular, I assess the likelihood that a strategy that holds one stock selected at random during each month from 1926 to 2016 would have generated an accumulated 90-year return (ignoring any transaction costs) that exceeds various benchmarks. In light of the well-documented small-firm effect (whereby smaller firms earn higher average returns than large, as originally documented by Banz, 1980) it might have been anticipated that individual stocks would tend to outperform the value-weighted market. In fact, repeating the random selection process many times, I find that the single stock strategy underperformed the value-weighted market over the full ninety years in ninety six percent of the simulations. The single-stock strategy underperformed the one-month Treasury bill over the 1926 to 2016 period in seventy three percent of the simulations. >The fact that the overall stock market generates long term returns sufficiently large to be referred to as a puzzle, while the majority of individual stocks fail to even match Treasury bills, can be attributed to the fact that the distribution of stock returns is positively skewed. Simply put, large positive returns to a few stocks offset the modest or negative returns to more typical stocks. https://obj.portfolioconstructionforum.edu.au/articles_perspectives/Portfolio-Construction-Forum-HB_Do-Stocks-Outperform-Treasury-Bills.pdf https://obj.portfolioconstructionforum.edu.au/articles_persp... Compare this to the blog post: >The implication is devastating for index fund orthodoxy: When you own a broad market index, you’re mathematically forcing yourself to hold the 96.6% of stocks that create no value while simultaneously diluting your exposure to the 3.4% that generate all returns. The professor just told you that investing in any individual stock is a terrible decision and that investing in more stocks means having greater exposure to the stocks that do net a return, creating a puzzle, where diversification doesn't reduce yields, in fact it did the opposite: it increases the yields. There's also a general fallacy that any index (directly referred to as index orthodoxy) has to be a "broad market index", when in reality there are many competing indices. If someone came up with an index that would follow any investment strategy the blog post suggests and it turns out to work reliably, then people would switch part of their portfolio to that index. "Index othrodoxy" would prevail, because people just need a better index rather than abandoning the idea of an index altogether. It's also difficult to reconcile with the fact that after fees, most active funds have failed to net higher returns to their investors. This random blog post is basically delivering an active investment strategy on a silver platter that will make fund managers and the people investing into it rich, is this believable? Consider that it's written in a "shocking" AI style, trying to sell you something. Funnily enough, the ad in the middle of the blog post "The U.S. Treasury collapse is HERE!" is incompatible with the premise of the article, that 96% of stocks are worse than treasuries. >But even if we use the more moderate 80/20 framing, the strategic implication is identical: If 80% of market returns come from 20% of stocks, why would you construct a portfolio that treats all five hundred stocks in the S&P 500 equally? The thing is, you don't have to do that, like at all. There are indices like the S&P 500 Pure Value and S&P 500 Enhanced Value that are known to outperform the regular S&P 500. The problem is that they have done so over the long term and long term really means long term. There have been decades where they underperform. Also, the article is three times as long as it needs to be, it's clearly AI generated. Edit: Invesco renamed their ETF to S&P 500 Concentrated QVM.
yfg2 5mo ago
lol what You can just wait for the price to drop post ipo as it usually does if you actually want to invest.

stubish 5mo ago

What was the common misconception?

JumpCrisscross 5mo ago
> What was the common misconception? That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic). The top comment and most of its subthreads are run-of-the-mill alarmism.
- throw0101a 5mo ago
  > The top comment and most of its subthreads are run-of-the-mill alarmism. Worth considering: * https://en.wikipedia.org/wiki/Prevention_paradox https://en.wikipedia.org/wiki/Prevention_paradox And the rules for the NASDAQ 100 were changed, as were MSCI and CRSP: * https://www.schwab.com/learn/story/some-indexes-accelerate-entry-massive-ipos https://www.schwab.com/learn/story/some-indexes-accelerate-e...
  - JumpCrisscross 5mo ago
    Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change. The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500. The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees by switching target funds.
    - willis936 5mo ago
      As they should have. The rules were in flight with a layover time measured in days on assets that are managed on the timescale of years. There was a legitimate reason to act urgently. It's easy to make claims in hindsight but the information on hand it was 100% the right call to protect your investments. This is not misinformation. Misinformation is saying the proposed rule change and their proximity to trillion dollar IPOs introduced no risk. Please do not spread such misinformation.

insane_dreamer 5mo ago

S&P wasn't fait accompli, but the NASDAQ 100 was

JumpCrisscross 5mo ago
> S&P wasn't fait accompli, but the NASDAQ 100 was Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.
- dogwalker5000 5mo ago
  The fact that a fast track was even considered is controversial IMHO. People flipping out, especially if their retirement is tied up with those indices, is to be expected. No one wants to be a bag holder for billionaire insiders.
  - loeg 5mo ago
    You're making a similar mistake treating it as fait accompli that SpaceX will tank between IPO and some future date, but that isn't a given either.
    - XorNot 5mo ago
      SpaceX is not worth $1 trillion, when most of that valuation is based on xAI being worth far more then their already dominant position in the space launch business.
    - gopher_space 5mo ago
      It's more about sidestepping the waves of market manipulation.
    - insane_dreamer 5mo ago
      sure it's not a given, but I certainly am not confident enough that it won't happen to bet my money in it, which I would automatically be doing if it was admitted to the SP500

karp773 5mo ago

What's the urgency to bend the rules? It is not like SpaceX is banned for good. It will be included as soon as it meets the requirements.

JumpCrisscross 5mo ago
> What's the urgency to bend the rules? If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund. Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.
- WarmWash 5mo ago
  Yeah, but is SpaceX actually worth $1T or does Elon just think that because of how Tesla investors value Tesla?
  - queuebert 5mo ago
    Historically a $1T market cap with a PE of 20.0 would be achievable with a $50B/yr profit. That seems easily achievable eventually for SpaceX, as it has actual hardware and services and IP.
    - SwellJoe 5mo ago
      It's years away from $50B/year profit, if it ever gets there. The IPO valuation is insane.
      - duttish 5mo ago
        Plus they now also have to compensate for the giant money fire called xai and the nazi cuddle huddle X/Twitter. The valuation is insane and the very low float plus short timeframe for actual price discovery just seems built to extract money from index investors. They can follow the same rules as everyone else.

mapt 5mo ago

Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli. Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get rolled back if powerful and widespread public dissent makes itself known, as it did in this case. When they don't really care about the issue, they might cancel it at the first sign that anyone has an issue. We can't know their degree of insistence just based on outcomes in these cases.

JumpCrisscross 5mo ago
> the doom pitches as a necessary political backlash It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers. There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.

tasty_freeze 5mo ago

Do you think that all the alarm had any effect on the blocking of the rule change? Is the right time to complain about a possible change is after it has been decided?

loeg 5mo ago
I don't think doom and gloom on HN had any effect, no.
- lokar 5mo ago
  It was much broader then HN
JumpCrisscross 5mo ago
> Do you think that all the alarm had any effect Nope. S&P management probably wanted the rule changes passed.

protocolture 5mo ago

>if ... YouTuber... stop following them. Great advice.

nobodyandproud 5mo ago

Wrong. HN has been speculating on how wealth would be extracted from 401k and IRAs at least since the November elections in 2024. Far before any influencers even thought this would be a thing. I thought forced cryptocurrency funds, but it turned out to be something else.

golden-face 5mo ago

Oh come on Jump, how can you deny it's not shady? I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.

JumpCrisscross 5mo ago
> how can you deny it's not shady? It wasn't. It's dumb. But that's different from shady. At the end of the day, the market never priced in the S&P making this decision because the default understanding was a public consultation by S&P goes nowhere. Influencers ran with a consultation being a fait accompli and now anyone saying otherwise is licking billionaire balls.

l23k4 5mo ago

[flagged]