6 ms·

More accurately, Sarbox is keeping 96% of Americans away from some crazy volatility -- they are missing out on MSFTesque price appreciation as well as potential

More accurately, Sarbox is keeping 96% of Americans away from some crazy volatility -- they are missing out on MSFTesque price appreciation as well as potential bankrupcy of countless new public companies.

JonFish85 13y ago
That's what gets lost in this, in my opinion. Certainly there is a big upside that is missed out on, the article makes a good point. But at the same time, SOX burdens companies to have to meet very strict reporting policies, which ultimately is good for the average investor(s) (in my opinion). Not to beat a dead horse, but how did Enron work out for the average Joe/Jane?
- pmarca 13y ago
  Scott's point is that Enron was a giant, long-established public company. Sarbox may have helped prevent the next Enron, with an unanticipated side effect of all but killing IPOs and growth in the public market. It's like passing a law to prevent the next giant cruise ship from hitting an iceberg, and accidentally killing rowboats in the process.
hga 13y ago
Erm, have you guys heard of things like index funds? There are plenty of ways to play the game and not take too much risk from one company.
- joshu 13y ago
  "Erm," IPOs aren't usually added to index funds till much later.
  - hga 13y ago
    That's why I said "things like index funds", and many NASDAQ index funds would or could be IPO company origin weighted. It's the principle; at the opposite end, put your money for this sort of thing into 12 or 20 companies. OK, with a minimum reasonable investment of 100 shares that's a lot of money, but individuals can still do it.
    - hkmurakami 13y ago
      I wonder if such a fund would actually outperform other sectors.
      - prostoalex 13y ago
        FPX does seem to have a good record compared to S&P 500. http://bit.ly/1aeNQee http://bit.ly/1aeNQee
  - pmarca 13y ago
    Total market funds pick them up quickly.
- _delirium 13y ago
  Have delayed IPOs really moved the needle on index funds? Not a rhetorical question; it's possible they have. The markets being indexed are so huge I'm somewhat skeptical that companies IPOing later will make any difference in the returns of a passive index investor, though. And that's even assuming that earlier tech IPOs would outperform the rest of the market; they might make the index funds perform worse if that's not true!
  - hga 13y ago
    Don't know, I'm focusing more on the non-existant IPOs than the spare handful of eventual, delayed ones. That's where the terrible damage has been done. Looking at Facebook and Microsoft helps to quantify a very small portion of the total damage, but for many it'll be more convincing that the not visible per se absence of IPOs.
  - pmarca 13y ago
    Number of US public companies in 1997: 8800. Number today: 4100. Total stock market index fund return adjusted for inflation between 1997 and today: 0%.
    - _delirium 13y ago
      And if you add the year 2003 to those two cherry-picked years, do you still see a correlation between total stock-market returns and number of public companies?
      - muzz 13y ago
        Agreed. Here's the data in chart form, it looks nothing like total stock-market return (the 2008 collapse and subsequent rebound is nowhere to be found, etc): http://blogs-images.forbes.com/sageworks/files/2012/05/PublicCompanies1990_2011.png http://blogs-images.forbes.com/sageworks/files/2012/05/Publi...
    - cj 13y ago
      How do you figure 0%? S&P 500 has increased 124% since 1997, not adjusted for inflation. Google finance graph: http://bit.ly/1d7JXnm http://bit.ly/1d7JXnm

JonFish85 13y ago

That's what gets lost in this, in my opinion. Certainly there is a big upside that is missed out on, the article makes a good point. But at the same time, SOX burdens companies to have to meet very strict reporting policies, which ultimately is good for the average investor(s) (in my opinion). Not to beat a dead horse, but how did Enron work out for the average Joe/Jane?

pmarca 13y ago
Scott's point is that Enron was a giant, long-established public company. Sarbox may have helped prevent the next Enron, with an unanticipated side effect of all but killing IPOs and growth in the public market. It's like passing a law to prevent the next giant cruise ship from hitting an iceberg, and accidentally killing rowboats in the process.

hga 13y ago

Erm, have you guys heard of things like index funds? There are plenty of ways to play the game and not take too much risk from one company.

joshu 13y ago
"Erm," IPOs aren't usually added to index funds till much later.
- hga 13y ago
  That's why I said "things like index funds", and many NASDAQ index funds would or could be IPO company origin weighted. It's the principle; at the opposite end, put your money for this sort of thing into 12 or 20 companies. OK, with a minimum reasonable investment of 100 shares that's a lot of money, but individuals can still do it.
  - hkmurakami 13y ago
    I wonder if such a fund would actually outperform other sectors.
    - prostoalex 13y ago
      FPX does seem to have a good record compared to S&P 500. http://bit.ly/1aeNQee http://bit.ly/1aeNQee
- pmarca 13y ago
  Total market funds pick them up quickly.
_delirium 13y ago
Have delayed IPOs really moved the needle on index funds? Not a rhetorical question; it's possible they have. The markets being indexed are so huge I'm somewhat skeptical that companies IPOing later will make any difference in the returns of a passive index investor, though. And that's even assuming that earlier tech IPOs would outperform the rest of the market; they might make the index funds perform worse if that's not true!
- hga 13y ago
  Don't know, I'm focusing more on the non-existant IPOs than the spare handful of eventual, delayed ones. That's where the terrible damage has been done. Looking at Facebook and Microsoft helps to quantify a very small portion of the total damage, but for many it'll be more convincing that the not visible per se absence of IPOs.
- pmarca 13y ago
  Number of US public companies in 1997: 8800. Number today: 4100. Total stock market index fund return adjusted for inflation between 1997 and today: 0%.
  - _delirium 13y ago
    And if you add the year 2003 to those two cherry-picked years, do you still see a correlation between total stock-market returns and number of public companies?
    - muzz 13y ago
      Agreed. Here's the data in chart form, it looks nothing like total stock-market return (the 2008 collapse and subsequent rebound is nowhere to be found, etc): http://blogs-images.forbes.com/sageworks/files/2012/05/PublicCompanies1990_2011.png http://blogs-images.forbes.com/sageworks/files/2012/05/Publi...
  - cj 13y ago
    How do you figure 0%? S&P 500 has increased 124% since 1997, not adjusted for inflation. Google finance graph: http://bit.ly/1d7JXnm http://bit.ly/1d7JXnm