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S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

arstechnica.com

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Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#201

Post by kgwgk »

JumpCrisscross wrote: post #94
kgwgk wrote: post #61

Earlier quoted context omitted.

It’s true that S&P 500 is not the most popular US equities benchmark for pension funds. Russell is the preferred provider - and they will include SpaceX 5 days after the IPO.

> S&P 500 is not the most popular US equities benchmark for pension funds. Russell is the preferred provider Where are you getting this from? Basically zero pension funds automatically track any single index. (There seems to be a misconception equating pension funds with retirement funds in general. Pension funds are, on the whole, remarkably sophisticated investors. Many pensions funds were private shareholders of t…

>> S&P 500 is not the most popular US equities benchmark for pension funds. Russell is the preferred provider

> Where are you getting this from?

At least it seems correct for a subset that may or may not be representative: “This report intends to provide insights into the overall and asset class benchmarks selected by the 50 largest U.S. public defined benefit plans. [.. ] the Russell 3000 index was most frequently cited to measure U.S. equity performance.”

https://www.nasra.org/Files/Topical%20Reports/Investment/P&I...

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#202

Post by throw0101a »

frozenseven wrote: post #96
LinguaBrowse wrote: post #42

Earlier quoted context omitted.

I’ve moved my S&P 500 investments to the Equal Weight index to reduce my exposure to AI. Quite aside from SpaceX, I think the large-cap tech companies are making some uncomfortably large bets on AI and any major upset could cause a domino effect. But as so many ETFs have a significant stake in large-cap US tech stocks (the top 10 holdings of the iShares MSCI World ETF is entirely comprised US Big Tech, making up 20%…

[flagged]

> The greatest tech revolution by far and people on this site are trying to movie their money away from it. I hope y'all will do an honest retrospective in a year or so.

It does not necessarily follow that it being a technological revolution also means that it is a good investment—at least, perhaps, at this point in time. Railroads were a tech revolution, but a lot of them—and their investors—went bankrupt once the hype subsided and the overbuilding stopped. Once consolidation happened after their crash then railroads became a stable investment.

There are numerous examples of this in history, starting with (at least) canals; see Perez:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#203

Post by SlinkyOnStairs »

Allybag wrote: post #77
wg0 wrote: post #63

This is very smart of these folks because for just three companies, they can't ruin the trust and impeccable reputation they have built over the years. This decision alone is worth several trillion dollars.

Well, it might be a good decision but I think the possibility of Standard and Poor one day being worth trillions of dollars more than if they had included three companies a year or two earlier than when they inevitably join the index is absolutely zero.

Their job, EXPLICITLY, isn't to maximize returns.

People don't buy the S&P 500 because they buy the index because it spreads risk. That they won't get maximum returns is the intended risk tradeoff they want.

That people consider the S&P 500 as a vehicle for "maximum money" is precisely why it should be considered in a bubble. And why actions like the NASDAQ's fast-track exceptions are so concerning.

The moment you start making exceptions to the rules because "gotta push the stock index higher", it's game over for the entire economy.

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#205

Post by root-parent »

zhivota wrote: post #30

Big relief for me. As a passive investor, I want the indices to follow the same passive strategy they always have, and specifically not make exceptions for specific companies like SpaceX wanted. Plenty of ways to get exposure to that stock without it going into the indices it is not qualified for.

This thread should be marked as dupe. But ChrisArchitect seems very picky...

Previously: "SpaceX, Other Mega IPOs Denied Fast Index Entry by S&P" - https://news.ycombinator.com/item?id=48405718

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#206

Post by antasvara »

tialaramex wrote: post #179
matwood wrote: post #161

Earlier quoted context omitted.

It also used to require 15 railroads, but the market moved on. They held tight on the profitability requirement with TSLA and missed a huge part of the growth. They may continue to hold the line on that going forward. But, if the AI companies grow their market caps, it's going to be hard to point to the S&P 500 as representing the most significant companies in the US market when trillions in market cap end up no repr…

It becomes moot if even some of the companies crash. If you try to say it works if some of them crash because some of them didn't you actually get that XKCD "Nobody has won the US Presidential Election without..." silliness. "OK, the rule should be you have to be profitable OR have an HQ in a city with two vowels in its name". Did it really used to require that you own "15 railroads" ?

The commenter is likely referring to the original S&P 90, which mandated a certain number of stocks in different sectors. At the time those numbers were 50 industrials, 20 utilities, and 15 railroads. The breakdown shifted as the economy changed until the 80's when they did away with sector quotas in favor of rules closer to today (basing allocation on market cap).

Regardless, the S&P 500 also excludes a company like Microstrategy (the company that holds Bitcoin) from their index, had excluded Robinhood for a wile due to missing the profit requirements, and so on. It was never "meant" to cover the 500 largest companies by market cap, and has generally resisted pressure to change that.

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#207

Post by etempleton »

frozenseven wrote: post #106
Saline9515 wrote: post #103

Earlier quoted context omitted.

Have you heard of the dot com bubble?

Yes, I've heard of it. And I say that there's no bubble and the AI market is greatly undervalued.

By what metric would you consider the AI market undervalued?

How do you value the AI market? Sometimes inventions change the world and companies struggle to make money. Airlines and the entire aerospace struggle to make money but no one can doubt airplanes are one of the biggest changes an inventions in human history.

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#208

Post by chongli »

Marha01 wrote: post #195
lelanthran wrote: post #149

Earlier quoted context omitted.

> The greatest tech revolution by far and people on this site are trying to movie their money away from it. I hope y'all will do an honest retrospective in a year or so. I see this sentiment often, and think it is short-sighted: 1. The tech fails at the goal - profitability is what we see for any tech that augments humans, which isn't anywhere close to satisfying the trillions in debt, busting the market and bleeding…

> The tech succeeds at the goal - humans are mostly not needed anymore other than for menial low-paid work. Economy slows, then almost completely stops. Economy slows or stops when AI robots are producing goods and services for much lower cost than human workers? Perhaps, but I think the obvious next development would be massive deflation: even on welfare or UBI, you would be able to afford the same quantity of goods…

Who is going to have the income to pay taxes to support that enormous welfare state that covers the needs of 99% of the population? The AI company owners? Why would they allow that? Presumably, if they own all the robots in the world, that includes the military drones.

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#209

Post by gizajob »

JumpCrisscross wrote: post #95
energy123 wrote: post #80

Earlier quoted context omitted.

and Meta saying they want to issue. Combined with the IPO scramble there's a lot of dilution and raising hitting the same sector in a very short period of time. Can the public markets pony up the cash in the short timeframe? It seems investors said no, or at least the uncertainty was high enough that they trimmed the risk.

> Can the public markets pony up the cash in the short timeframe? Yes, very easily, American households alone plop a few hundred billion to over a trillion dollars into the stock market every quarter. Whether investors want to is another question. (The answer, at least to the tune of $75bn for SpaceX, seems to be yes.)

I thought most of those households was massively in debt?

Re: S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

#210

Post by etempleton »

SkiFire13 wrote: post #41
kortilla wrote: post #32

Earlier quoted context omitted.

> That is essentially a wealth transfer to the rich. They don't need it. These are not valid arguments. The companies that get added to the S&P are always owned in some fraction by rich people. SpaceX is obviously majorly owned by Elon, but it’s also owned by regular employees, a bunch of private investors and other funds that regular people invest in. > They're not profitable. Right > When they prove they're worth t…

> SpaceX is obviously majorly owned by Elon, but it’s also owned by regular employees, a bunch of private investors and other funds that regular people invest in. Is it really owned by them if Elon retains most of the voting rights anyway?

Effectively it is solely owned by Elon and other people have an equity stake. This is another huge risk. You have to trust Elon not to get distracted and decide to hard pivot to something else.

Look at Tesla and their hard pivot to humanoid robots. He is all in on robots which about a dozen other companies already make and are largely unprofitable in making. He is betting AI rapidly improves in a way that allows robots to become rapidly more useful and there is zero evidence that is feasible in the next 5 - 10 years.

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