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> Truly a brilliant deal for everyone involved. Except for people who have pensions/investments in whole market class investments who become exposed to an over
by noir_lord 5mo ago
> Truly a brilliant deal for everyone involved.
Except for people who have pensions/investments in whole market class investments who become exposed to an over valued company with a propped up value.
- benl 5mo agoIf whole market means whole market, then such investments are exposed to companies who are fairly valued, companies who are massively overvalued, and companies who are massively undervalued, and the whole range in between. If you want to start picking and choosing which companies are overvalued and which are undervalued, don’t invest in whole market funds. But most people are not good at that!
- ericd 5mo agoAlso, there’s a long history of companies that people yell about being overvalued being the drivers of index returns, because one of the major drivers is growth rate, whereas retail investors tend to look mostly at current state.
- nibbleyou 5mo agoI don't understand this logic. Does whole market mean scamming companies too?
- tony69 5mo agoYes. That’s what passive investing is. You give money to the passive fund, the passive fund buys the market. No regard to price or any other metric.
- matwood 5mo agoFun fact, both Enron and Lehman Brothers were in the S&P 500 when they went bankrupt. So yes, the whole market or even the market of the largest companies, includes some that may not be great companies. The beauty of the index is you don't have to know or care, since it'll take care of itself over time.
- derektank 5mo ago>The beauty of the index is you don't have to know or care, since it'll take care of itself over time As long as there are active investors in the market conducting price discovery. Which there always will be, just pointing out that someone has to care, even if you don’t
- worik 5mo ago> As long as there are active investors in the market conducting price discovery. Which there always will be, Passive funds dominate ow, don't they?
- derektank 5mo agoDepends on what you consider passive, I think index funds specifically are only 20% but if you add other low cost ETFs it’s probably about half the market. I don’t think there’s any way to know for sure at what point passive funds become distortionary, but it should be self correcting to some degree. If active funds are able to provide a substantially better return than passive funds, even with management fees, people will migrate back to them.
- bouncing_bolete 5mo ago> it'll take care of itself over time At least until it doesn't. If this spacex venture succeeds because it got propped up by index funds, then that's a decent indicator that more will follow. It stands to reason that active investing will be more valuable as a result
- u1hcw9nx 5mo agothe problem: The Nasdaq 100 and FTSE Russell made a rule change that allows SpaceX to enter index without mormal time for price discovery. Most index funds have rebalance day just 5 days after IPO. S&P also made rule change for S&P Total Market Index and Dow Jones US Total Stock Market Index, but left SP500 intact. Nothing wrong with SpaceX or Anthropic getting into indexes with fair rules, this rule change is pure creed+corruption.
- benl 5mo agoThose funds are not whole market funds. But there are things to say about your point too. I’ve commented on that in other threads.
- l23k4 5mo ago[flagged]
- nativeit 5mo agoAre there really 10-100x undervalued companies listed on indexes that haven’t been noticed?
- benl 5mo agoYes. There are probably a dozen or more across the SP500 and Russel 2000 that will 10-100x in the next 5-10 years. The trick is to be able to identify them!
- baobabKoodaa 5mo agoThere's a difference between "will go 10x in the next 10 years" vs "is 10x undervalued right now".
- FuckButtons 5mo agoLaying the blame for the transparent financial manipulation we are observing at the feet of regular people (who are putting their savings into their pension funds, a system that we incentivize because of its pro social outcomes) and saying they should just opt out because they should know better, is at best callous, most people should not have to think about that issue at all.
- benl 5mo agoYou seem to have misunderstood my comment.
- deleted 5mo ago[deleted]
- rdiddly 5mo agoThe key there is "whole market." This is still a tiny sliver of the whole market and most people's exposure to it is minimal. Still a wealth extraction move ultimately, but like many other such moves, the few pull just a little from each of the many. Nobody individually goes broke, but the whole class gets slightly poorer. It takes a village to raise a billionaire!
- ryoshu 5mo agoTrillionaire
- deleted 5mo ago[deleted]
- deadbabe 5mo agoIf you want to play “active investor” and pick and choose what companies you invest in, don’t be surprised when you underperform the whole market. SpaceX could rise to be a major winner that makes people a lot of money. And then what? You missed out and underperform the whole market.
- nrclark 5mo agoOK, but SpaceX is not printing money out of thin air. And neither does the stock market. Somebody will be left holding the bag eventually.
- tasuki 5mo ago> Somebody will be left holding the bag eventually. I think so too. I also thought that about Facebook: IPO around 40, swiftly down to 20 - I was laughing about stupid retail getting wrecked. Now it's around 600...
- pqtyw 5mo agoMaybe you are right, maybe not.. However Facebook as an example seems entirely irrelevant, though? It was valued 15 P/S ratio at IPO and went down to 10 a year after the IPO. You'd have a point if Facebook IPO at $400 instead of $40. But it took it 10 years to reach that. SpaceX IPO price already has many years of extremely high growth priced in. Comparing it to Facebook's or Google's IPOs is like apples to oranges.
- amoss 5mo ago
- bko 5mo agoSo your contention is what? This will crash? Surely you'll be shorting the stock right?
- matthewdgreen 5mo agoA company can have poor fundamentals compared to its stock price, and also have an enormous P/E multiple if it has committed investors. We've seen this with multiple meme stocks and Tesla. I have no doubt SpaceX will fly high for a while and people will make a lot of money, but I don't think the company is going to make $320bn/year in AI services (with 74% profit) by 2030 as the S-1 suggests. At some point the market price will coincide with real earnings.