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 .)
SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
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Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#42Long listen but a very thorough and nuanced discussion by a bunch of smart investment / finance guys in Canada. No click-bait-sky-is-falling content.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#43Earlier quoted context omitted.
It seems to me like there's a fair amount to be concerned about, I wouldn't consider myself an expert on finance by any means so if you have some explanation of why it's not that bad I'd love to hear it. Two other indices changed their rules to allow these companies specifically. Pensions and retirement funds rely on these indices to have continual, stable growth. Often the people whose money is being invested don't…
> Two other indices changed their rules to allow these companies specifically One of which is the NASDAQ 100, marketed for decades as a tech-focused index. > Pensions and retirement funds rely on these indices to have continual, stable growth Pensions build their own benchmarks. About 10 to 20% of retirement assets follow these indices directly for a variety of purposes. The S&P 500 aims for continuous large-cap grow…
So you are happy with this outcome, but also so upset at the people that evangelized your preferred policy position that you think HN readers should cut them from the information diet?
Seems most likely that the public outcry actually influenced this outcome, so I don't see why the nuances of alarmism about it (imminent decision vs fait accomplit) should nix an entire information source.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#44The 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 .)
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?
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#45This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the po…
> sensible thing to do is to create a new index with the new rules It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market. The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sens…
The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performance and minimal trading days just don't give investors confidence and, like it or not, investment decisions are made based on the index. If you want to argue against passive investment, well, good luck with that.
I think a lot of people have this weird idea that what we need is some theoretically unfettered market for "true" price discovery when it's actually regulations like this that create markets. It's like a libertarian brain worm.
I don't think anybody wants these mega-companies out of the index, specifically. They just don't see why rules that exist for a reason should be suspended when the net effect of that is that investors have less information and there is a lot of forced purchasing. If you have confidence in your IPO, let the market decide what it's worth without trying to fix the price because what they seem to want is for insider lock-ups to end about the time we'd otherwise be getting normal price discovery. Kinda weird.
Investor confidence needfs to be managed by creating a stable, regulated market.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#46Earlier quoted context omitted.
> 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.
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.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#47This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the po…
> sensible thing to do is to create a new index with the new rules It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market. The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sens…
It seems entirely reasonable to say: "if we make a certain decision, we correlate both our reputation and a nontrivial portion of the U.S. economy with the whims of one of the most volatile personalities in industry, and we should likely pay attention to this trial balloon that shows such anticipatory fear of the decision that we might lose our reputation as an index altogether."
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#48Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#49This seems a sensible thing to do. If you change the rules on how things end up on your index, you force everyone using that index to reevaluate it. Your index is now perceived as more volatile (and probably is), and all the finance people need to reevaluate the risk of their index funds and decide if it is now 'growth', 'high growth' or whatever bucket it belongs in based on the new risk profile. And then all the po…
The longer major indexes exclude these companies, the further the index strays from representing the market, and the worse they do their core job of tracking it.
It's not the index's fault that market is pushing out overpriced and unprofitable companies.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#50Earlier quoted context omitted.
> sensible thing to do is to create a new index with the new rules It depends. Indices aren’t funds. They aren’t meant to balance investor interests. They’re meant to communicate some metric about the market. The S&P tells you how big companies are doing in an index optimized to balance representation against trading cost. So in 2005, float was taken into account for weighting (versus just market cap). This made sens…
The market cap of the S&P 500 according to Google is ~$65T. Anthropic, OpenAI and SpaceX could well amount to $4T+ in market cap. That's ~6% of the entire index. It's like adding another NVidia. That's a big deal. The rules around index inclusion exist for a reason. Too much control in one person's hands (which SpaceX has), too small a float (so you don't get price discovery), lack of a history of financial performan…