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>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people sho
by vannevar 4mo ago
>All that an inclusion of these new companies would accomplish is a bailout of their stockholders by pension funds and ETFs where millions of regular people shoulder all the downside risk.
Carvana is the poster child for this. It's astonishing that a company with a history of shady practices, and that has yet to offer a convincing explanation for why it is not a scam, is part of the S&P 500.
- rtpg 4mo agowhat's the argument for it being a scam?
- hnav 4mo agoshady debt offloading onto its sibling financing entity, which is run by Carvana CEO's father, a man convicted of fraud
- maest 4mo ago> a man convicted of fraud Most practitioners in the field see that as a very strong signal of future fraud.
- rubyfan 4mo agoAt that level they call it financial engineering.
- ChrisMarshallNY 4mo ago> financing entity, which is run by … a man convicted of fraud I didn’t think that was allowed.
- hnav 4mo agoCommander in chief got convicted in NY before being re-elected, I think everything's allowed these days.
- vannevar 4mo agoThey're an outlier in the industry in terms of profit per car. But they don't actually get revenue from selling cars, their revenue comes from selling car loans. So they're making the additional margin on the financing. They are also famous for not turning down loan applications. So putting the pieces together, it seems like they are selling high risk loans at a healthy profit. Which brings up the question of who is buying those loans. They don't disclose the buyers, but claim that those buyers are not controlled by Carvana or its parent. Given the history of fraud, it's hard to take those claims at face value. The suspicion is that they are selling the loans to family-controlled shell companies and leveraging the stock to finance the scheme.
- infecto 4mo agoThis is how many businesses operate. You have still not provided example of fraud or scam behavior.
- vannevar 4mo agoIf "many businesses" operate this way, then "many businesses" are committing fraud. You can't publicly claim to be selling loans to an unrelated company when in fact you control that company.
- infecto 4mo agoThe latter has not been proven and the former is pretty normal for business. We will see how it plays out in the court and markets.
- l23k4 4mo agoAh, so you'd like the passive broad market index which contains the 500 biggest good companies? Do tell us if you find one I guess.
- Animats 4mo agoThat's what "value funds" do.
- clbrmbr 4mo agoBut do they historically beat the S&P 500?
- epolanski 4mo agoYes, but not in the last decade or so. In any case, it's been only in the last years that we have had an explosion of a huge variety of funds with low fees, so some of these product strategies need to be retro fitted for a time they did not exist.
- infecto 4mo agoPlease cite funds that beat passive indexes over long periods of time.
- iririririr 4mo agowhy go that far? herbalife moto is probably "we're a pyramid scheme scam" and they are 45% vs sp500 25% for last 12mo. you'd better of investing scam500 than sp500 nowadays.
- cik 4mo agoWhenever someone says nowadays, they're highlighting recency bias. The goals of holding a broad market ETF are diversification leading to sleeping well over the long term (at least to me).
- vkou 4mo agoHow well do SCAM500 stocks do over a time period that includes two recessions, compared to SP500 ones? I've no doubt that the short-term gains during a bull market on all sorts of garbage are significant.
- baobabKoodaa 4mo agoCrime pays. But when you go that far, why stop at investing in scams? Surely you can make money faster by robbing old ladies at knifepoint?
- bregma 4mo agoIt's a matter of latency vs. throughput.
- iririririr 4mo agothe discussion is Old Ladies At Knife Point LLC being in the stock exchange and in indexes.
- notahacker 4mo agoHerbalife has decades of profits from selling wannabe Herbalife distributors a dream of financial independence they'll never achieve though, which might be unethical but is a bit less likely to lose your pension fund money than a company accused of getting 73% of its earnings from a deal with a convicted fraudster...
- infecto 4mo agoPlease elaborate why caravan is a scam?
- john_strinlai 4mo agohttps://en.wikipedia.org/wiki/Carvana#Controversy https://en.wikipedia.org/wiki/Carvana#Controversy "In January 2025, short-selling investment firm Hindenburg Research published a report titled "Carvana: A Father-Son Accounting Grift For The Ages," in which it disclosed a short position against the company. The report alleged that Carvana's financial turnaround was a "mirage" propped up by accounting manipulation and lax loan underwriting." "A class-action securities fraud lawsuit is proceeding against Carvana, its founders, executives, and underwriters in the United States District Court for the District of Arizona." (i have no opinion on the matter, just functioning as your google)
- infecto 4mo ago[flagged]
- vannevar 4mo ago>...if they indeed are running a ponzi it would be surprising it could last so long. There's a practice in the loan industry called "pretend and extend," which basically means endlessly extending credit to lendees who are behind to avoid acknowledging the loss. Remember, in Carvana's case the loan buyer only exists to take on debt, not be a going concern. I think much of the market actually realizes Carvana is a scam, they just see that it is a relatively sustainable one as long as the government doesn't step in. And they don't see that happening, particularly with the current administration.
- kmbfjr 4mo agoMadoff’s scheme ran for nearly 15 years, starting in earnest possibly 20 years before that. I think “long” is very relative to the scam. Carvana has been written about in the WSJ in glowing articles, that now have shifted to a questioning tone. This may be that inflection point.
- boringg 4mo agoIm pretty sure Enron was in there in the past as well - 7th largest by revenue... that would make Carvana seem like nothing. To answer your question honestly though -- the inclusion is mechanical based on criteria not policing based on opinion. Carvana being a history of shady practices is your opinion... (I would agree with you)
- vannevar 4mo agoMy opinion, yes. But if someone said they had invented anit-gravity, then showed you a bowling ball "floating" but with a sheet covering any potential support, you'd be pretty suspicious. And if they refused to remove the sheet, and had previously been convicted of fraud, you'd probably be extremely suspicious. But it would still only be your opinion until the sheet was removed.
- sokoloff 4mo agoBut what if your dad had a closely-related sheet company that you regularly transacted with but isn’t public because he was barred for life from giving public demonstrations but owned tons of shares in your demonstration and sold millions of dollars worth on a daily basis? Surely then it would ease your suspicions…