Baffling number of total-paywall links on the front page here these days.
SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
201–210 of 542 posts
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#202Earlier quoted context omitted.
To a first approximation, yes, the index funds all need to buy the stock on the same day. An unexpected surge of buying like this should lead to a big price hike. But everyone knows it's happening, so you'd expect every hedge fund and proprietary firm in the world to buy the day before the index funds buy, and sell into the price hike. So in fact the price hike will be a day earlier than expected. But wait, anyone sm…
0.8% of drag is a lot when you can do basically the same thing by not strictly following the index. There are funds from Dimensional and Avantis that are basically just index funds but with a bit more leeway to avoid these obvious pitfalls, and from what I saw they do perform approximately 0.5% better per year.
0.8% is substantial indeed, but if i understand correctly, it’s 0.8% on that one stock, so much less on the index itself.
Those funds that perform better probably take a higher management fee that might cancel out the gain. May be worth it to have a smoother return though.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#203Earlier quoted context omitted.
And where did the ad hominem part arise?
It's all empty words. > a very thorough and nuanced discussion > bunch of smart investment / finance guys > No click-bait-sky-is-falling content. The middle one is the ad-hominem puffery. The rest isn't quite exactly 100% 'of the person's, but still doesn't give me any actual leads into what the content is: its just empty puffery.
> vacuous empty comments
> saying sweet nothings
> empty puffery
By definition the only ad-hominem comments to be seen anywhere above.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#204Earlier quoted context omitted.
It’s important to note that index funds will eventually get in, so it’s not like 401k will never be holding these stocks. It would be silly to assume that the stock is going to tank that much on day 1, on the asumption that there are not enough investors to buy the big three IPOs that are coming out this year. There is plenty of money in the market, and everyone knows index funds will buy these stocks when the compan…
To a first approximation, yes, the index funds all need to buy the stock on the same day. An unexpected surge of buying like this should lead to a big price hike. But everyone knows it's happening, so you'd expect every hedge fund and proprietary firm in the world to buy the day before the index funds buy, and sell into the price hike. So in fact the price hike will be a day earlier than expected. But wait, anyone sm…
>This all costs the index funds, because every dollar of profit for the other firms is a dollar out of the pocket of the end investor.
This is so wrong I'm not sure you understand common sense economics and by economics I don't mean anything you can find in a text book. If I invest nothing, the other investors or traders can still make a profit without costing me anything.
Opportunity costs are never real costs. If I have $10, and the traders do weird things with the prices and I don't spend the $10 on anything, I still have $10. The traders failed to cost me.
You're also ignoring the underlying issue which is that the valuation of SpaceX on the open market is different than the valuation it could get from forcing index funds to buy in early. If the stock is worthless then short sellers will make money, but short selling only works if the short sellers don't get squeezed. If the passive funds buy two weeks in, then early traders know that they can sell to a greater fool at inflated prices. Any short seller who is trying to discover the true price will stay back and short directly after the indexes have bought. That's the perfect moment for them. They want the post IPO hype and bull market, only for the stock to collapse within a year.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#205Earlier quoted context omitted.
S&P500 is not a total market index. It tracks a specific kind of large firm, with certain filters. Fast tracking means that the market likely wont have enough time to find the settled price (especially with the knowledge that passive funds are about to buy), and including a mispriced thing does not necessarily make the benchmark more accurate.
Those filters for S&P 500 inclusion criteria have changed many times. They are not sacred nor set in stone. The question is, do those filters, which were designed for GAAP profitable traditional companies & discriminate against fast growing cash-flow-reinvesting startups that prioritize growth over profit, unnecessarily exclude major players in the U.S. stock market? The S&P inclusion criteria reward companies that p…
> Under current rules, these fast-growing companies would be excluded from the S&P500 for potentially years, until they reach 12 months of profitability.
> And you are vastly overstating the effect of S&P500 fast tracking, the plan was to reduce it from 12 months to 6 months; which is more than enough time for the market to find a price.
They might never reach 6 months of profitability, let alone 12 months.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#206Earlier quoted context omitted.
> 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…
> marketed for decades So why change? You're not building a case for why this change is needed. Is there even another Nasdaq 100 company like SpaceX? Probably not because it would be an obvious point of discussion. So now we need to add a new 'thing' to our definition of tech, then change our funds to adopt our new definition. To what end, with this haste? > The NASDAQ 100 has seen practically no net outflows Is it a…
> So why change? You're not building a case for why this change is needed
It has changed loads of times. Nobody noticed any time. Including this one. (Look at flows into and out of related funds.)
> Is there even another Nasdaq 100 company like SpaceX?
Right now? No. Including SpaceX. By the end of the year? Probably a few.
> Is it a fund or just an index? If an index, what are you monitoring when you cite 'no outflows'?
Covered assets. Indices license their indices. Funds pay that royalty.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#207Those mega IPOs are the latest grift to unload overpriced shares before the whole AI tulip bubble explodes in everyone's face. The insiders know it, which is precisely why those IPOs are happening right now. Employees and VCs don't want to be holding the bag. small-time investors will be. Also, SpaceX is going to unlock more and more on their float at around the same time most indexes will have to buy it. It has been…
They are happening now because the entire space narrative is dependent on SDI, sorry Golden Dome, as a massive heist of taxpayer money for the militarization of space (nobody believes in economic civilian space compute). Like SDI it’s bullshit but like SDI it works at robbing everyone blind. That relies on Trump in power.
No?
No one believes the Golden Dome will get built. No one is valuing space on that basis either.
Even SpaceX's IPO isn't valued based on space launch and that's the problem.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#208Earlier quoted context omitted.
> Who would want to invest in a benchmark fund with arcane(the literal term as opposed to mundane) rules that were privately decided? There are lots of rules-based funds. S&P is transparently committee based. It’s why dual-class new entrants are banned, but Google and Berkshire are grandfathered in. There is a genuine debate on rules versus committees in the index world. But S&P has stuck to its guns as a bastion of…
> Everyone picking the S&P 500 over its competitors chooses that. I'm fairly confident most people deciding to allocate to s&p trackers have no idea about rules-based vs committee-based governance. They just pick the default. And that default can quickly change if the S&P starts making weird/unpopular decisions in a highly publicized situation.
> most people deciding to allocate to s&p trackers have no idea about rules-based vs committee-based governance. They just pick the default
A lot of retail goes into S&P lookalikes. And at the end of the day, they've consistently picked one over the other.
> that default can quickly change if the S&P starts making weird/unpopular decisions in a highly publicized situation
Unlikely. Nobody has dropped NASDAQ 100-tracking funds. If anything, these guys will see long-term net inflows due to this move. S&P probably would have if they’d changed rules—this was an econometric, not business, decision.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#209Earlier quoted context omitted.
Maybe you know this already, but this reads like exactly the kind of reasoning that people looking back at irrational market euphorias point to as a sign things were about to go awry.
The purpose of a benchmark is to reflect the market. If the US economy is pumping out high-growth but overpriced & unprofitable companies via IPOs, at unreasonable valuations, the benchmark should reflect that. It's not S&P's fault this is happening.
On the contrary. There are many benchmarks, some small subset of which are intended to reflect the whole market.
There are indices for every little thematic and niche corner or strategy or idea, there are broad-as-possible indices, and there are indices with requirements like listed age and profitability.
Re: SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P
#210Earlier quoted context omitted.
>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.
why 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.
Whenever 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).