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Matt Levine's take was essentially that if you're in the index fund game, you want the market. You don't pick and choose what parts of the market you want--that
by dehrmann 4mo ago
Matt Levine's take was essentially that if you're in the index fund game, you want the market. You don't pick and choose what parts of the market you want--that's active management. SPCX mostly isn't an issue because most indices include the float in the weight, so it isn't really even a $1T company.
- wetpaws 4mo ago[dead]
- skizm 4mo agoTo the same point I also don't want the index itself picking and choosing which companies to apply which rules to.
- Zigurd 4mo agoExcept they did pick and choose SPCX and did special favors by giving them a multiplier on the float and an exceedingly short interval before including it in indices.
- richwater 4mo agoThe only index that I know that float multiplied is Nasdaq which no one should even be investing in via their 401k anyway. Shitty index. Most consumers are utilizing some type of fund that tracks the CSRP, which float adjusts with no multiplier.
- dehrmann 4mo agoIt's not even the Nasdaq Composite, It's the Nasdaq 100. And yes, the Nasdaq 100 is a shitty index because Nasdaq vs. NYSE is a bit of an arbitrary, tradition-based way to get tech exposure. It's missing NYSE tech companies (Oracle, Dell, Spotify, Uber) but gets some non-tech like Costco and Pepsi. It'd be like only dating iPhone users. It's sort of a rough proxy for something, but you're better off choosing what you actually care about.
- rtlfe 4mo agoDepends which index. S&P isn't giving them anything special. https://finance.yahoo.com/markets/stocks/articles/spacex-faces-delay-p-500-100109864.html https://finance.yahoo.com/markets/stocks/articles/spacex-fac...
- sethops1 4mo agoOkay then why is SPCX going to be weighted 3x its actual float in the Nasdaq? A rule made just for SPCX.
- breatheoften 4mo agoThat's absolutely insane -- how the hell did anyone think that was a good idea under these circumstances ... This is an absolute scam -- why does it make sense for an index's buying volume requirement to be based on the implied value of shares that can't even be bought or sold ...?
- drsalt 4mo agoit's not a scam if no one gets hurt
- lesuorac 4mo agoHonestly, I'm not sure most people get "hurt" in scams. Think of the generic which cup has the ball scam? Like no American sailor falling for that overseas is going homeless from that event. But I mean do you want to live in a neighborhood with only broken windows?
- akkartik 4mo agoTIL about float for stock, thanks.
- darth_avocado 4mo agoThe problem isn’t that you’re invested in the index. The problem is that the index decided it wanted to change its rules to include companies that are not profitable. I still remember the days when you needed to be profitable for x quarters and have a minimum amount of float to be listed in an index. That changed overnight and we all know why.
- kyleee 4mo agoCan someone make an etf that uses the older more conservative criteria for inclusion?
- awesome_dude 4mo agoCan they? Yes, anyone can. Will they... that's a different question
- kevin_nisbet 4mo agoAnd even if there are new ETFs like this, will ETF customers bother to move at enough scale. It's like the old quote for buying IBM, no one get's fired for returning the benchmark, so if it's the benchmark adjusting the way they do things there is lots of inertia.
- skue 4mo agoNo need. There are already plenty of them that track the S&P — which notably decided NOT to change its rules. Feel like many of these articles were either prewritten, lazy, or have intentionally omitted the non-impact that S&P opting to not change its rules has had, just so the headline and lede could be as sensational as possible.
- akg_67 4mo agoIndex licensing might be an issue.
- electriclove 4mo agoS&P 500 did not change its rules right?
- lesuorac 4mo agoYeah but Matt Levine is wrong. 1) Index funds and ETFs are highly active. They're just low-cost due to largely algorithmic decisions but at all of the edge cases manual _active_ decisions are made. IIRC, in this podcast Vanguard goes into detail about all of the active decisions they do [1]. It's long because uh, they do a lot. 2) You're in the index fund game because "you liked that index". There are literally thousands of ETFs. Saying "you want the market" is just wrong, you wanted a specific slice of the market and if the ETF changes the slice under you then that feels like a bait and switch. [1]: https://www.youtube.com/watch?v=hQVz_VGJNnY https://www.youtube.com/watch?v=hQVz_VGJNnY